We’re pretty sure you’ve heard that our Prime Minister Tun Dr. Mahathir pulled out the Kuala Lumpur – Singapore High-Speed Rail (HSR) project. But there are several things you need to know why did Tun M pull out from the project!
Facebook user, Radzi Tajuddin has brought to our attention a deep insight on the HSR project and our national fund!
Ever since 2007 a company, YTL with Siemens technology has proposed to the government to build a high-speed rail project between KL and Singapore. The 350 km track with the train speed of 300 km/h.
How much is the cost? RM8 billion.
But the Economic Planning Unit (EPU) rejected this project due to its high financial commitment.
10 years later, the same project was reintroduced and we were informed that the cost was RM70-80 billion.
Whether the cost has risen by tenfold or the former government inflated the cost of a project for a particular purpose which leads us to a simple question: How do they manage the country’s finances and economy?
Despite it all, the KL-Singapore HSR project has its benefits. In fact, almost all projects can be justified for approval… on paper.
For example, the East Coast Rail Link (ECRL) project. Uses only the basis that cargo freight from the East Coast is 60 million metric tons per year by 2025, BOOM, the project received approval although the load rate is only 6 million tonnes across Malaysia.
So is the HSR project.
Picture for illustration purpose only | Source: The Lens
HSR will develop rural areas such as Ayer Keroh, Muar, and Batu Pahat. Increasing travelers, local industries (furniture, etc) have a wider market, spill-over projects in the area will be built and property values will increase.
HSR will shorten travel time. If by air transport, the time taken from ‘door to door’ is 4 hours, with the HSR it’s expected to take only 2 hours.
HSR will boost economic activity and resource sharing and talent among the two cities. This will make things easier for KL workers and businessmen to work in Singapore, vice versa. Many more Singaporean companies will operate in KL on cost factors.
This is all true and there is merit.
However, every good must have bad too. The negative impact from the HSR project should also be taken into consideration.
Firstly, HSR will have a direct impact on the aviation industry.
The KL-Singapore route is the world’s busiest route with 30,500 flights a year.
When said busiest, it means ‘lucrative’. Roughly the economic value generated for the route is around RM2 billion to RM3 billion (fares, parking charges, maintenance, airport taxes, etc).
It involves almost 10 carriers with KL-Singapore slots. Among them are MAS (state-owned) and AirAsia (Malaysia-owned).
Any loss of ‘revenue’ on this busiest route to HSR will definitely affect companies, workers, vendors, and governments.
Are we willing to ‘disturb’ or disrupt the economic activity on the route?
Secondly, the cost HSR is too expensive.
How is a project 10 years ago cost RM8 billion but now RM100 billion including interest rates? The average cost of building HSR is around RM60 million – RM100 million per kilometer.
With a ‘price tag’ of RM100 billion and 350 km long, the KL-Singapore HSR project makes the cost per km of RM285 million. It is a very high cost. While the topography of the land along the KL-Singapore route does not require construction across the mountains and ranges as in Europe or China.
The cost of labor and raw materials is also not as expensive as in America and other developed countries.
This leads us to the third thing – are we able to finance the HSR project?
By spending (owing) RM100 billion, we will roughly be paying RM250 million a month for 30 years. A very high number is more likely to take into account the current state debt position.
Some analysts, experts, critics and former Finance Ministers can ignore government debt rates of RM1 trillion. They can hide behind the definition and terms of debt that are applicable.
But the definition is, in fact, the government has paid almost RM7 billion 1MDB debt since 2017 (The same value as BR1M payment per year to 7 million households).
And … the amount of debt repayment will continue to increase and be paid by the government as this is an example in which debt-guarantees cannot afford their own debts until the government has to intervene.
Other than the existing debt, there are other mega-projects such as MRT 2 (RM32 billion), LRT 3 (RM9 billion), Pan Borneo (RM29 billion) and West Coast Highway (RM4.6 billion) in progress.
This has not included the upcoming super mega-projects such as ECRL (RM66 billion), MRT 3 (RM50 billion), Melaka Gateway (RM15 billion) and Kuantan Industrial Park (RM8 billion).
All these commitments alone amount to RM213 billion which is the same as the government budget for one year.
Do we have enough money to cover everything? Or are we going to continue to owe money to the world bank? Or are we going to charge a new tax on the people to pay the debt?
While we know more than half of the Malaysian workers earn below RM2,000 a month. Those who have a job, don’t have enough salary.
The unemployment rate among graduates is 11% the worst compared to Thailand, Vietnam, and Indonesia. There are many more figures/stats that require the government to spend on improving the well-being of the people.
So it comes back to the question, should we spend RM100 billion for the HSR project? What do you think?