This article first appeared in The Edge Malaysia Weekly, on January 11 - 17, 2016.
HALFWAY through our interview with MyHSR Corp Sdn Bhd CEO Mohd Nur Ismal Mohamed Kamal, a young aide makes his way into the office apologetically and hands his boss a stack of papers.
The reason for the interruption is important enough. According to the aide, Washington-based CG/LA, a market research and intelligence outfit, had ranked the Kuala Lumpur-Singapore High-Speed Rail — which is currently under the purview of MyHSR — the most important global infrastructure project.
The KL-Singapore HSR was at the top of the heap for a number of considerations, including the likely improvement in economic productivity after it kicks off, how it is aligned with the overall economic need and vision of the two countries and the high probability that it will create business opportunities and jobs.
After the aide leaves, Mohd Nur Ismal laughs and says, “And you don’t want us to do it?”
While it’s not true that we are against the project, many are concerned about the gargantuan sum budgeted for it.
“You can always question the way we do it, not whether we have to have it or not. Short-term headaches should not interfere with long-term growth. The project has huge implications for the country, for the future, so we have to make the right decisions,” Mohd Nur Ismal stresses.
In a nutshell, he says, the KL-Singapore HSR will change how we live, work and do business as the barriers to travel and trade fall and the effects of bringing the two cities closer together set in. While he cautions that he only has the authority to talk about the Malaysian side, where more than 90% of things have been agreed upon, Mohd Nur Ismal highlights that the proposed stops between KL and Singapore — Seremban, Melaka, Muar, Batu Pahat and Nusajaya — will enjoy exponential growth in the next 50 years.
“So, it’s not just about moving people, it’s not just about saving time. The growth impact in these areas will change forever,” he remarks.
Is it feasible?
While the KL-Singapore HSR project does have its merits, the main concern among Malaysians is its timing. Shouldn’t other projects be given priority?
For starters, the economic climate is turbulent with the price of crude oil just above US$30 per barrel, straining the government’s coffers considerably. Furthermore, the ringgit has edged closer to 4.40 against the greenback, our 17-year budget deficit looks unlikely to be reversed and, worse still, the federal government’s debt level is inching closer to a self-imposed ceiling of 55% of gross domestic product. At end-2014, federal government debt stood at RM582.8 billion or 54.5% of GDP.
More recently, Malaysians have been hard hit by subsidy cuts and a sharply rising cost of living.
While we are grappling with such woes, is a rail project that costs up to RM65 billion necessary, at least for now?
Mohd Nur Ismal declines to reveal the estimated cost of the rail project, noting that whatever numbers that are being bandied about are speculative. He stresses the need for the project to be built now despite the bleak market conditions.
“This is a long-term project, so the capital flow also happens across many years, so while the current fiscal conditions are challenging, over the years, hopefully things won’t be so bad. But should we stop investments during difficult times? So, it’s a decision we need to make but India has decided, Indonesia has decided, Thailand has more or less decided … If we postpone it, it would be a different (higher) cost later and in the meantime, countries like Indonesia, Thailand and India would have moved ahead,” he says.
There is also the fear that after spending billions of ringgit, we will end up with a half-baked project. For example, the three intra-city rail services (which have had to be bailed out), the loss-making Keretapi Tanah Melayu Bhd and the double-tracking rail project that cost more than RM20 billion have not had a significant impact on the economy.
The worry is that the KL-Singapore HSR may be added to the long list of expensive projects that have not had the desired effect.
“Well, we’ll just have to get it right,” says Mohd Nur Ismal, adding that that is why the negotiation and planning are still ongoing. “Certain decisions that were made in the past were the best at the time. We have to leave no stone unturned when we make our decisions. That’s why it’s taking so long. In terms of benefits, the project has many, no questions about that.”
But many feel the KL-Singapore HSR is unlikely to be a lucrative business and like most rail services, it may require capital injection from the government to sustain operations.
Mohd Nur Ismal, however, highlights the potential economic gains after the completion of the project.
“The reason the government will step in to cover any shortfall or even fund the entire project is the potential economic gains that will be generated after the project is completed. We have certain goals, certain aspirations for the country and this is very much one of the key things that will develop the aspirations.”
No rush to award the KL-Singapore HSR
Initially, work on the project was to commence in 2017 and completed by 2022. But that has changed. It was announced during a leaders’ retreat last year that the best option for Malaysia and Singapore was to crystallise plans into a bilateral agreement, after which the cost will be looked at.
“We have to come up with the best decisions for both countries, so that is of higher priority than sticking to a timeline. There is still a long way to go,” says Mohd Nur Ismal.
With civil engineering works accounting for more than half the cost of the project, China and Japan are racing neck and neck in offering their expertise and funding. A dark horse is South Korea while a bid from a European consortium is also likely to come through.
Against this backdrop, there is a rumour that Malaysia is in favour of the Chinese while Singapore is more for the Japanese or Europeans. This stems from the acquisition of Edra Global Energy Bhd by China General Nuclear Power Corp for RM9.83 billion and Iskandar Waterfront Holdings Sdn Bhd and China Railway Engineering Corp (M) Sdn Bhd buying 60% of Bandar Malaysia for RM7.41 billion.
But Mohd Nur Ismal rebuts the rumour, reiterating that MyHSR is still looking at the best option. He also dispels talk that Malaysia is in need of a joint guarantee from the Singapore government to issue bonds to fund the project.
“The idea of both governments co-guaranteeing has never come up. We will fund our own infrastructure and they will fund theirs,” he remarks.
So while the KL-Singapore HSR presents many advantages, warding off all sorts of speculation could prove to be tedious and even challenging for Mohd Nur Ismal.