Malaysia Reviews China-backed Rail Link, Scraps Bullet-Train Project

Hadi Azmi
Kuala Lumpur
180529-MY-Mahathir-1000.jpg Malaysian Prime Minister Mahathir Mohamad (center) attends iftar, a fast-breaking event during Ramadan, in Kuala Lumpur, May 29, 2018.

Malaysia’s new government says it wants to renegotiate terms for a China-backed multibillion-dollar rail link project and has scrapped a planned high-speed rail link to Singapore, citing “huge” costs and a lack of return on investment.

Prime Minister Mahathir Mohamad, who pulled off a stunning electoral victory this month, said his government’s decision to cancel plans to build a bullet-train line between Kuala Lumpur and Singapore was final.

“It's not beneficial,” Mahathir, 92, told reporters Monday. “It's going to cost us a huge sum of money, we'll make no money at all from this operation.”

And, in a weekend interview, Mahathir said his government would renegotiate terms of a $14 billion East Coast Rail Link (ECRL) – one of the signature projects of his predecessor, former Prime Najib Razak – which would span 688 km (430 miles) and connect the South China Sea at the Thai border in the east with strategic shipping routes of the Straits of Malacca in the west.

Those moves, he said, would cut about a fifth of Malaysia’s national debt and liabilities.

“We are renegotiating the terms,” Mahathir told the business and investment weekly The Edge, explaining that doing away with mega projects could reduce the country’s national debts by $50 billion. “The terms are very damaging to our economy.”

The country’s new leader made the twin moves days after the new finance minister, Lim Guan Eng, said Kuala Lumpur’s liabilities had ballooned to 1 trillion ringgit (U.S. $251.7 billion), or more than 80 percent of the nation’s Gross Domestic Product.

Najib’s former economics minister, Rahman Dahlan, on Tuesday slammed Mahathir’s decision to discard the bullet-train project, known as High Speed Rail (HSR), as “short-sighted,” saying it would deny the country of 209 billion ringgit (U.S. $50 billion) in gross national income and the opportunity to generate some 70,000 jobs.

“It is too simplistic for the prime minister to say that the project would not be beneficial because it’s going to cost our country a huge sum of money and it will make no money at all from the operation,” Rahman said in a statement.

Rahman quoted a Japanese-funded study showing that the bullet-train line would have delivered an annual 4 billion ringgit (U.S. $1 billion) economic gain for Malaysia.

He also questioned the 110 billion ringgit (U.S. $27.7 billion) figure cited by the prime minister for the project, arguing that it greatly differed from the 50 billion (U.S. $12.6 billion) to 70 billion ringgit (U.S. $17.7 billion) cost that the governments of Singapore and Malaysia had estimated in early 2018.

Responding to Rahman’s statement, Mahathir said the former minister should back up his statement with facts.

“Show me the proof. Do not just say it,” said Mahathir told reporters Tuesday night after performing prayers with officers at the Federal police headquarters.

Mahathir said Singapore would soon be formally informed of his decision about the 350-km (218-mile) bullet-train line, which was expected to slash travel time to 90 minutes from the current the five or more hours by road.

The project, signed on Dec. 13, 2016, was aimed at providing an alternative to the Singapore-Kuala Lumpur air route, which recorded 30,537 flights between the two cities in 2017, making it the world’s busiest, according to the World Economic Forum.

“With such large yearly passenger numbers, there would have been a strong case for the financial viability for the project,” Rahman said.

He said the train stations in between that were relatively less developed than Kuala Lumpur or Singapore would stand to gain from development, mimicking the economic advantages experienced by smaller towns in Taiwan and Japan when the two countries built bullet-train lines.

In an interview with the Financial Times on Monday, Mahathir said that “the move was necessary to “avoid being declared bankrupt.”

“We need to do away with some of the unnecessary projects, for example the high-speed rail, which is going to cost us 110 billion ringgit (US$28 billion) and will not earn us a single cent. That will be dropped,” Mahathir said. .

Mahathir’s decision would impact construction companies from Japan, South Korea, Europe and China that have expressed interest in bidding for the project, which was targeted to begin operating in 2026.

Anthony Dass, chief economist at AmBank, told BenarNews he agreed with the government's decision to scrap the project.

“How long would it take for this project to break even?” he said in a phone interview. “I think it will take a long term. And this had yet to take in other costs, such as maintenance.”


Add your comment by filling out the form below in plain text. Comments are approved by a moderator and can be edited in accordance with RFAs Terms of Use. Comments will not appear in real time. RFA is not responsible for the content of the postings. Please, be respectful of others' point of view and stick to the facts.