ECRL not world’s costliest rail project

KUALA LUMPUR (Nov 9): The government yesterday denied claims that the RM55 billion East Coast Rail Link (ECRL) project could be the world’s costliest rail project.

“Every rail project has its own cost structure due to differing geographical conditions and infrastructure requirements,” said Minister in the Prime Minister’s Department Datuk Seri Abdul Rahman Dahlan (pictured). “Therefore, rail projects are not easily comparable and can differ considerably across projects.”

According to Abdul Rahman, a 57km rail project in Switzerland had cost US$11.9 billion (RM50 billion) or US$209 million per km to build. (Situated deep under the Alps, it is said to be the world’s longest and most expensive tunnelling project).

Another 177km rail line in Madrid-Valladolid, Spain, cost US$5.48 billion or about US$30 million a km, while a 48km rail project in Barcelona cost about US$8.12 billion or US$170 million per km, he said.

The 688km ECRL would cost RM80 million or US$19 million per km, he told a news conference.

It is not clear if the railway lines cited by the minister are of the same type as the ECRL, including on the matter of speed.

Abdul Rahman confirmed that Malaysia Rail Link Sdn Bhd (MRL), the RM2 company involved in the Malaysia-China joint-venture, is a special purpose vehicle (SPV). Even though the company has a built-up capital of RM2, it is wholly owned by the finance ministry, he said in response to concerns expressed by PKR lawmaker Mohd Rafizi Ramli on the matter on Monday.

Mohd Rafizi had also accused the government of not adhering to proper due process, claiming that massive projects such as the ECRL require Parliament’s approval, including the use of an SPV to undertake the venture.

Denying that there was a need to bring such matters to Parliament, Abdul Rahman said the proposal had been discussed in the cabinet and the National Economic Council.

“Those familiar with this project would know the East Coast Economic Region Development Council had proposed this ECRL since 2007 as a critical project to stimulate economic growth in this corridor where initial cost estimates had ranged from RM30 billion to RM70 billion then,” he said.

“The arrangement with the government of China will involve a financial framework of up to RM55 billion based on very favourable terms to Malaysia — and is via a 20-year low-interest soft loan by the Export-Import (Exim) Bank of China and [a] bond raising exercise.”

He also said since the said soft loan will be taken up by an SPV, it would not be categorised as part of the national debt, but a loan guaranteed by the Malaysian government.

He explained that guaranteeing the soft loan allows MRL to secure more favourable terms from its Chinese counterpart, China Communications Construction Co Ltd (CCCC).

 Abdul Rahman also clarified that the cost of the ECRL is RM55 billion, and not RM46 billion as mentioned in CCCC’s announcement.

“Initially, the plan was to build a 600km stretch that connects Tumpat to Gombak. But the government subsequently decided to extend the ECRL network to connect Port Klang as well, which will add another 88km — that’s why the expected cost goes up to RM55 billion,” he said.

This article first appeared in The Edge Financial Daily, on Nov 9, 2016. Subscribe to The Edge Financial Daily here.