THIS paper last asked: Is ECRL ON OR OFF? There was no definitive answer then nor is there one now. The East Coast Rail Link (ECRL) mystery is set to continue a little longer.
We are not surprised for two reasons.
One, negotiations between Malaysia and China are continuing behind closed doors. It would be foolish on the part of Malaysia to make public its negotiation strategy.
Two, the “game-changer” promise of the ECRL project is being examined with a fine-tooth comb by our negotiators.
It must be remembered that the ECRL was first said to cost RM55 billion.
Later, this grew to be RM81 billion.
Many economists are saying Malaysia may have to be prepared to pay more than RM100 billion when all is said and done.
Economist Kwame Jomo Sundaram is one who has vehemently argued against the project, saying that it may be the next 1MDB.
The project is no doubt pregnant with many uncertainties.
Given such a scenario, should Malaysia proceed with the project? Yes and no. The ECRL contract comes with a penalty clause, and the compensation for termination is not the run-of-the mill figure.
Unsurprisingly, no one is able to disclose the exact figure. It has, however, been reported to be RM22 billion.
How such a figure was arrived at by the contracting parties is anybody’s guess.
To say that the ECRL contract with China Communications Construction Company Ltd (CCCC) is lobsided is an understatement. Hence the Malaysian dilemma of on again, off again mystery.
One hopes China will be persuaded to look at the financial reality facing Malaysia.
A country that is laden with a debt close to RM1 trillion is in no position to pay RM20 billion as compensation, let alone RM81 billion.
The answer lies somewhere between compromise and compensation. By way of compromise, CCCC may want to agree to a more palatable price tag.
Based on the costing of the Sungai Buloh-Kajang MRT (SBK Line), the price tag should be less than ECRL’s original cost of RM55 billion.
This shouldn’t be difficult for China to agree to. After all, the way the contract is structured Malaysia seems to be bearing all the risks while rewards are heading the CCCC way.
These risks that Malaysia is bearing must be priced. To bring the contract price down even further, Malaysia may want to reduce both the trips and speed of the high-speed train. Even reducing the 28 train stations to 22 may save some money.
There may yet be other areas that Malaysia and China can explore together to arrive at a win-win solution.
A bitter pill for Malaysia to swallow will be ECRL’s operating cost. People who are familiar with the rail industry say running the ECRL as designed may set Malaysia back at least RM1 billion a year.
Here, too, China may want to show some magnanimity by agreeing to jointly operate the ECRL. This may just be the price China has to pay for continuing the project.