According to Fitch Solutions research on Wednesday (12 Feb), in the “short term”, Malaysia and Singapore will likely restart the Kuala Lumpur-Singapore High Speed Rail (HSR) between the two nations which have thus far been suspended nearly two years ago.
Despite the high cost which led to the project being deferred, the Fitch Group commented that the economic benefits of the Kuala Lumpur-Singapore HSR were too great to overlook and from a business standpoint there was also a strong case to be made.
The Fitch Group stated that decisions to suspend other major developments that would gain from HSR such as Bandar Malaysia, have been reversed by the Pakatan Harapan government.
“We also see scope for a reduction of overall project cost, which will go well with the Malaysian government as it seeks to reduce the financial burden of the project on its balance sheet,” Fitch Group noted.
The cost of the project increased markedly over the years, from RM43 billion at the time of announcement to an estimated RM110 billion when project faced suspension.
The endeavour of slashing the project costs touched upon by Fitch Macro Solution resonates with the PH administration’s goal, as the administration has started on working to trim the expenses since it came into power and realising the true extent of Malaysia’s financial state.
In addition to this, several transportation projects have also been renegotiated to reach discounted prices that will lighten Malaysia’s burden by tens of billions on paper. The project coverage includes the most recent Pan Borneo Highway as well as the East Coast Rail Link (ECRL), the Light Rail Transit line 3 (LRT3) and the MRT Sungai Buloh-Serdang-Putrajaya (MRT2).
Fitch Group also predicted that as part of the main government’s plan, HSR could be incorporated with the aim to support the local economy which has been negatively impacted by the Covid-19 virus outbreak and the US-China trade friction.
Previously, Malaysia Finance Minister Lim Guan Eng remarked that the government was designing a stimulus package to curb the impacts from both influences. Fitch Macro believes that this package will have funds to revive the HSR project.
“Even if that is absent, the revival of the project will bring about a heightened level of foreign direct investment, as well as construction activity, which could both feed through to economic growth.” Fitch Macro reported.
The HSR project was announced in 2010 with rail distance coverage of 350 kilometres between Singapore and Kuala Lumpur. It will also minimise travel time to only 90 minutes as opposed to 11 hours by regular train.
Malaysia and Singapore reached an agreement in September 2018 to delay the project which Malaysia wanted to cancel due to the high cost.
Project operation is now scheduled to commence in 2031, somewhat later than the initially decided 2026.