THE derailed Kuala Lumpur-Singapore high-speed rail (HSR) project is gathering bromides again. It's almost like 2016 all over again. On July 19 that year, the two countries signed a memorandum of understanding to get the rail link real despite the prohibitive cost of the project.
When it became clear that there was not enough money in the public purse to see the HSR through, Malaysia cancelled it in 2021. The government is said to have paid Singapore RM320 million as compensation. A classic case of spending money to save money.
Sadly, this isn't the first time. If history is our guide, it won't be the last. It is not that the policymakers don't understand economics; they get misdirected by geopolitics. Now that millions of ringgit have been paid to Singapore, there is no point crying over spilt milk. It is better to milk another cow, so to speak.
And that "cow" isn't in the south, if analysts and experts are to be believed. They say it is in the north. What is more, they seemed to have spotted a whole "herd" of them to be "milked" from Kuala Lumpur to Kunming in China.
And even beyond. One such expert is Dr Rosli Khan, managing director of MDS Consultancy Group, a logistics and transport consultancy. He says the track north from Kuala Lumpur is a galaxy of countries and people: Thailand, Myanmar, Cambodia, Vietnam and China. A high-speed rail to the north is a freight and people proposition while the track to Singapore is mostly a people venture, says Rosli.
To a company, any venture is a risk-reward proposition. Rosli's cost estimates help. The 360km HSR is estimated to cost RM108 billion, amounting to RM280 million per km. The northbound Kuala Lumpur-Betong link comes in lower at RM200 million per km, as land acquisition costs are cheaper as the track passes through non-urban areas. Plus, the link beyond Betong is already borne by Thailand. Based on cost-on-cost basis alone, the northbound track is cheaper by RM38 billion.
This notwithstanding, Rosli generously assigns a revenue stream of RM3 billion for both. On this basis, the builders and operators of the HSR will take 36 years to recover their investment while those of the KL-Betong, 23 years. But can the HSR bring in a revenue of RM3b per year? Unlikely, says Rosli. Ridership isn't a profit-making business. Without freight, it's an incomplete commerce.
Japanese companies seem to discern this. On Friday, Kyodo News reported the withdrawal of a few Japanese firms from the revived HSR project, including the East Japan Railway Co, which would have put the celebrated Shinkansen bullet train on the Kuala Lumpur-Singapore track.
If Kyodo News is to be believed, the Japanese companies were all agreed on one thing: that the project would be too risky without any financial assistance from the Malaysian government. But Malaysian and a few foreign companies appear to be keen to go where the Japanese firms fear to tread. According to Business Times, more than five consortia are ready to bid. Are they expecting some form of government largesse?
The government has made it clear that the HSR will be 100 per cent private. The Japanese firms are withdrawing their interest on this basis. Are Japanese and Malaysian economics not the same? Watch this space.