KUALA LUMPUR (May 7): The RM44 billion East Coast Rail Link (ECRL) is expected to contribute 2.7% to Malaysia’s economic growth, says MIDF Research.
It said the boost for the growth is expected to kick-in from project inception until completion.
“However, the full estimated gross domestic product (GDP) contribution will depend on the pace of spillover effects to other economic sectors. In addition, compensation of employees and net operating surplus are projected to rise by 3.6 (per cent) and 2.1 per cent respectively.
“As the project requires machinery and transport equipment, our estimate shows imported commodities and consumption of fixed capital to increase by 3.3 (per cent) and 2.1 per cent respectively,” MIDF said in a research note today.
Moving forward, MIDF Research said the railway project would affect economic expansion through both direct and indirect medium in the long run, partly by jobs creation, opening-up new areas, foreign direct investment, increase external trade activities and strengthening domestic demand.
Since 70% of transportation would be for freight purposes, the research house expects the project to be a catalyst for industries and exporters in Malaysia.
“Plus, it gives Malaysia an advantage in international trade, due to the project’s strategic locations to China and ASEAN nations.
“On the other hand, improvement in transportation and connectivity will assist Malaysia in terms of better resources allocations, upgrade in productivity, increase in mobility and improving socio-economic developments economies which partly facilitate China’s Belt and Road initiative,” it said.
MIDF Research said the ECRL project would also generate more economic activities in other sectors, hence shifting to a less government-reliant economy, in line with Prime Minister Tun Dr Mahathir’s idea to downsize the public sector over a period of time through industrialisation, amid increasing burden towards the nation’s financial health.
“This will reduce government operating expenditure, especially on the emoluments which accounted for the largest share of total expenditure at about 30 per cent,” it added. — Bernama