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Belt and Road initiatives in Asian countries – The rail connection

Belt and Road initiatives in Asian countries – The rail connection
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Image: Pan Asia High Speed Rail – Kunming-Singapore courtesy Wikipedia

Part 1

By Charles F. Moreira, Editor

Whilst Malaysia’s continued participation in China’s One Belt, One Road (Belt & Road) initiative remains in doubt under Malaysia’s recently elected Pakatan Harapan government, our neighbours to the north – Thailand and Laos continue to participate in Belt & Road seriously and with enthusiasm for the economic benefits it can bring to them.

As of right now, further construction work on the East Coast Rail Link (ECRL) is suspended pending review and possible renegotiation of its cost, following a stop work order received by its stakeholders from the Ministry of Finance on 3 July 2018.

The ECRL is a 668 km long high-speed rail link between Port Klang on the west coast of the Malaysian peninsula to Pengkalan Kubur in Kelantan on the east coast, passing through 21 stations in Selangor, Pahang, Terengganu and Kelantan along the way, including connections to Kuantan, Kemaman and Kertih ports on the South China Sea.

According to an infographic by the Chartered Institute of Building – Global Construction Review, the ECRL will connect with Malayan Railways’ (KTM’s) East Coast Line from Gemas, Johor to Tumpat, Kelantan and also KTM’s service from Gemas to Johor Baru and Singapore.

Unlike the ECRL which runs along the coast from Kota Bharu to Kuantan, KTM’s East Coast Line runs mostly inland through stations such as Gua Musang which is deep inland, except for its terminus station Tumpat, which is on the coast.

The ECRL would also have been connected to the Kuala Lumpur – Singapore High Speed Rail (HSR), which on 28 May 2018, Malaysia’s new Prime Minister Tun Dr. Mahathir announced was cancelled. He cited that the project was too expensive and that Malaysia did not stand to gain much from it, since it would only cut travel time between the two cities by one hour.

However, there are issues at stake with the HSR’s cancellation, since Singapore had already invested Sin$250 million (RM742 million) on the project as of the end of May. Its cancellation will involve Malaysia having to pay compensation to Singapore for pulling out of the joint project.

On 10 July 2018, Channel News Asia reported Tun Dr. Mahathir saying “As far as the Singapore government is concerned, we have not given them full notice yet, but they know what we want to do.”

The day before, Singapore’s Transport Minister Khaw Boon Wan told Singapore’s parliament that Malaysia’s government had not replied to official questions with regards to Malaysia’s position on HSR project, sent through diplomatic channels on 1 June 2018, which left Singapore with no option but to continue with her end of the HSR agreement and that Singapore is expected to spend another Sin$40 million on the project between August and December 2018.

Minister Khaw said that Singapore would exercise her rights to compensation from Malaysia if the HSR project is cancelled.

Expected to have been completed in 2026, if it goes ahead, the HSR is expected to stimulate economic development around the seven stations from Bandar Malaysia, Putrajaya, Seremban, Melaka to Muar, Batu Pahat and Iskandar Puteri, before crossing to Singapore.

Also planned is the northern high-speed rail corridor running along the North-South Expressway, with stations at Tanjung Malim, Tapah, Ipoh, Taiping and terminated at Butterworth.

However, right now, most of west coast besides the Gemas to Johor Bahru stretch is already served by KTM’s Electric Train Service (ETS) with stations upgraded for these fast trains, so the Kuala Lumpur – Singapore HSR could well be redundant, especially for passenger travel, especially when an ETS train can travel from KL Sentral to Butterworth in four hours and 15 minutes and form KL Sentral to Gemas in two hours and 30 minutes.

To get round this contention with Singapore over the HSR’s cancellation, Malaysia could just extend ETS train service all the way to Woodlands or along the proposed HSR route and hopefully satisfy Singapore.

Pan-Asian High Speed Rail network

Back to the ECRL, more importantly, it could be a part of the Pan-Asian High Speed Rail network, a Belt & Road project comprised of three main routes from Kunming, China to Bangkok, Thailand; the Eastern route via Vietnam and Cambodia; the central route via Laos, and the western route via Myanmar.

The Pan-Asian High Speed Rail Network will be a network of different sovereign Asian nation’s respective railways interconnected to each other, with the possibility that each nation’s trains can run on another’s tracks, depending upon whether the member nations can standardise on their equipment and technology, much like in Europe where trains can seamlessly run between different countries on their respective rail tracks.

ECRL suspended

Work on the ECRL’s first phase began with a ground-breaking ceremony in Kuantan on 9 August 2017.

The project’s three phases are from Kota Bharu to the Integrated Transport Terminal (ITT) in Gombak, next from Kota Bharu to Pengkalan Kubur in Kelantan and from ITT Gombak to Port Klang in Selangor.

Due for completion before 2024, the ECRL would have cost RM55 billion, financed by a loan from China, repayable over 20 years at a below-market interest rate.

Officially begun on 9 August 2018, Malaysia had already raised RM55 billion for the ECRL, with 85% of the loans provided by the Export-Import Bank of China and the rest from Islamic bonds. The project was about 15% completed when it was suspended.

However, The Sun Daily of 9 July 2018 reported that Malaysia Rail Link Sdn Bhd (MRL), the East Coast Rail Link (ECRL) project owner, had reaffirmed that the project was suspended, with all construction work on the project put on hold during this suspension period.

Earlier on 3 July 2018, both MRL and project contractor China Communications Construction Company (CCCC) and China Communications Construction Company (M) Sdn Bhd (CCCCM) had received an instruction from the Ministry of Finance to suspend all engineering, procurement, construction and commissioning (EPCC) work on the project.

According to The Star of 8 July 2018, over 200 locals, including contractors, engineering consultants and suppliers will be affected by this suspension.

However, they will not lose their jobs just yet but will continue with work to ensure that all safety and environmental requirements imposed by relevant authorities were observed and complied with at all times, as well as work to minimise any damage or deterioration to existing ECRL construction sites during the suspension period.

According to the progress report of the East Coast Railway Project in Bentong Station as of April 19, the project directly created more than 2,000 jobs for the country, and the ratio of local to foreign employees, including at all branches of CCCC was 70%.

It had been planned for the project to recruit up to 2,873 local employees in 2018.

The training programme was jointly implemented by the CCCC, MRL and Pahang University of Malaysia, funded to the tune of RM23 million by CCCC to promote the ECRL project and Malaysia’s rail transit.

Well, it looks like all these are on hold for now.

Industry and commerce groups want ECRL

Earlier on 18 September 2017, Enterprise TV cited a report by the Chinese language paper Oriental Daily News as saying that representatives of several Chinese associations and societies on the east coast of the Malaysian peninsula were positive about the economic growth which the ECRL would bring to their part of Malaysia.

Meanwhile, the representatives of the Chinese associations and societies interviewed by Oriental Daily News believe that the ECRL could drive the industries and trades on the east coast, including manufacturing and tourism by bringing unlimited business opportunities for local businesses and improve the competitiveness of these states as well.

President of Kelantan Chinese Assembly Hall Oie Poh Choon believes that the ECRL will drive Kelantan’s economy and it will connect both ends of the state and in turn Kelantan’s people and traders, though he had some concern as to whether the people will end up having to bear the cost of the loan repayment and urged the government to have plans to boost its income once the project is completed so it can pay off the loan sooner.

The President of the Terengganu Chinese Chamber of Commerce Lau Wan Cheong believes that the ECRL will benefit industries and trades such as services, property, tourism and manufacturing by bringing in unprecedented business opportunities, and further improve the competitiveness of Terengganu, with prospects of future benefits when goods can be exported from Terengganu directly to China and other countries.

“Although the construction work of the railway has just been launched, in fact three months ago Terengganu has already begun to feel the effect of the ECRL; contractors from China arrived three months ago and hired local workers as well as buying things locally, I believe the effect will be even greater in the near future. E-commerce is currently prevalent, once the ECRL is completed, it will be more convenient on the logistics; we hope the railway project will be completed as soon as possible to bring unlimited business opportunities to Terengganu,” Lau said.

According to Kuantan Port Authority director Datuk Seri Lee Jin Xian, transportation on the East Coast has always been relatively backward, with people in Kuantan having waited 30 years for a railway link to all places, so the ECRL will drive economic growth on the east coast.

“Especially next year, the Kuantan Port New Deep Water Terminal will be extended 16 to 18 meters deeper, capable of berthing ship with 200,000 tonnages. Kuantan Port is a free port as such it will bring more business opportunities to Kuantan and driving the logistics system of ASEAN countries,” Datuk Seri Lee said.

East Coast Chinese associations positive on benefits of ECRL

Barely a month later on 16 October 2016, we cited The Malaysian Insight of 11 October 2017 which reported that both Chinese and Malay commerce guilds welcome the ECRL for the same benefits it will bring to Kelantan state.

Both Kelantan’s Chinese and Malay commerce guilds said that the north western state’s economic potential had remained untapped due to the lack of highways and rail links and that the ECRL will greatly help small to medium businesses in the state by addressing a major lack of logistic facilities which has so far limited Kelantan’s ability to attract much-needed business investment.

According to Kelantan state’s financial statements, inward investments decline from RM18.52 million in 2014 to RM15.56 million in 2015.

Whilst tabling Kelantan’s 2017 state budget, Kelantan’s Chief Minister (Menteri Besar) Ahmad Yacob said that the state was dependent on revenue generated from forest products, which totalled RM172.96 million in 2016.

RM70 million of this revenue came from forestry premiums, RM30 million from timber production, RM22 million in payments to the Forestry Department and RM1.5 million from forestry licence fees.

Statistics Department figures show that Kelantan’s residents had amongst the lowest per capita incomes in April 2017 and despite Kelantan’s gross domestic product (GDP) having doubled between 2005 and 2015, Kelantan’s GDP per capita remains at one-third Malaysia’s national average.

Meanwhile, according to Wan Zulkifli Wan Abdullah of the Malay Chamber of Commerce and Industry, sustainable businesses in Kelantan are cosmetics & beauty products, as well as food.

“These two sectors are more stable and there is high demand for them compared with other sectors that have been affected by a weak economy”, Wan Zulkifli said.

So Kelantan’s economy needs a facility which can enable Kelantanese to get out of their low-income trap.

No ECRL, little investment

“When there are no good infrastructure links between Kelantan and Terengganu, it is risky to invest in the state because of the time needed to transport goods”, said Chinese Chamber of Commerce and Industry president Yap Heng Orr.

“With the ECRL, there definitely will be more outside investment at it is more profitable to open factories here due to the low cost of land and labour”, Yap added.

Yap is also confident that incoming investments thanks to the ECRL and the lower cost to open a factory in Kelantan compared to neighbouring states of the Malaysian peninsula, will create more jobs which will lead to higher incomes and rising standards of living for the Kelantanese.

As their incomes rise, so will their purchasing power, which will attract more retailers to set up shop in Kelantan and in turn, create even more income opportunities.

Fear of high transport costs

On the other hand, whilst optimistic about the benefits which the ECRL can bring to Kelantan, Wan Zulkifli of the Malay Chamber of Commerce and Industry is concerned that the fares and transport rates charged will be high.

“The ECRL will bring change and attract more investment. But we can’t really imagine how big of an impact it will have because we hear that its transport rates will be high”, said Wan Zulkifli.

https://www.enterprisetv.com.my/kelantan-business-wants-the-ecrl-for-its-economic-benefits/

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