7 Jan 2020
BRI-Backed Malaysia Rail Link Back on Track After Funding Agreement
Postponed following domestic financial concerns, the East Coast Rail Link is now scheduled to arrive in 2026.
Work is now set to resume on the East Coast Rail Link (ECRL), the long-gestating Belt and Road Initiative (BRI) project that will ultimately directly connect the east and west coasts of Peninsular Malaysia by a dedicated train service for the first time. Originally given the go-ahead in 2016, the development has been dogged by Malaysia's domestic financial woes, which led to the plan officially being put on hold in July 2018.
As originally conceived, the ECRL directly aligned with the aims of the BRI, China's ambitious international infrastructure development and trade facilitation programme, while also delivering on Malaysia's own commitment to revitalising its underdeveloped east-coast region and upgrading the transportation links between its cities, towns and rural areas. Although work on the project officially commenced in August 2017, this initial progress was swiftly derailed by a financial scandal that rocked the Malaysian government of the day.
In early 2018, the long-simmering 1MDB scandal, which had seen billions of dollars of public money siphoned out of Malaysia, threatened to wreck the nation's economy. Charged with investigating the illicit activities of his predecessor and determined to restore the country's financial wellbeing, newly elected Prime Minister Mahathir Mohamad halted the project, as well as many others, while its viability and ongoing costs were reviewed.
At the time, Mahathir stated that the previously agreed interest repayments for the MYR65.5 billion (US$15.85 billion) project would be unmanageable, given that the country was now saddled with MYR1 trillion of unanticipated national debt. As a result, the project was formally suspended, with no likely date given for its resumption.
There then followed nine months of heated renegotiation between the Chinese and Malaysian governments, which resulted in a revised and somewhat slimmed-down ECRL financing road map being unveiled in April last year. The following November, updated route details were released for the northernmost section, which runs through Kelantan and Terengganu states. This highlighted a reduction in the line to 640km from 688km, a decision that allowed for savings of MYR44 billion, a third of the previous total. In a revision to the initial schedule – and primarily to allow for the acquisition of land rights in the re-routed areas – it was also announced that that target completion date had been pushed back to December 2026 from June 2024.
As in the original ECRL plan, however, the construction cost is to be underwritten by a loan guarantee from the Export-Import Bank of China (EXIM Bank), while a higher level of participation by local contractors was written into the new agreement. This will involve them working closely with China Communications Construction Company (CCCC), China's state-owned infrastructure development giant, which remains the lead developer on the project.
According to figures provided by the Malaysian government, the construction cost has now dropped to MYR68.7 million per kilometre from MYR95.5 million per kilometre. This is due to a number of changes made to the initial proposals, including shortening the overall length of the railway, removing the northern extension that would have run from Kota Bharu to Pengkalan Kubor near the Malaysian-Thai border, and re-routing some of the planned elevated sections to allow them to run at ground level.
As of November last year, about 12.86% of the project was said to have been completed. Once finished, the single-gauge electric railway will connect Port Klang on the west coast, the country's largest container port, with Putrajaya, its administrative centre. It will also stop at several urban centres and ports along the eastern seaboard and offer a 160kph passenger service and a more sedate 80kph freight service.
For its part, CCCC has further committed to develop logistics hubs at each of the three interchange stations, as well as two industrial parks on the east and west coasts. It will also enter into a 50:50 joint-venture with Malaysia Rail Link Sdn Bhd, the national rail operator, to manage and maintain the ECRL once it comes online.
The one missing element of the revised plan – funding for the local contractors – finally fell into place late last year when the Small Medium Enterprise Development Bank Malaysia (SME Bank) announced it had set aside about MYR1 billion (US$240 million) for that specific purpose. This will now see such workers take on responsibility for up to 40% of the revised project.
Geoff de Freitas, Special Correspondent, Kuala Lumpur