The 688km project was suspended in July last year after Pakatan Harapan came into power in May
By MARK RAO / Pic By MUHD AMIN NAHARUL
THE renegotiation for the revival of the East Coast Rail Link (ECRL) could prove a double-edged sword for the government as the move could be perceived as contradictory to Pakatan Harapan’s earlier election pledge.
The rail project’s link to the state investment fund 1Malaysia Development Bhd (1MDB), which is under scrutiny, could further complicate any conciliation in the long run but immediate cost concerns will be the priority.
Institute for Democracy and Economic Affairs research executive Azam Wan Hashim said reviving the ECRL could be perceived as Pakatan Harapan backtracking on their election pledge to review and suspend controversial projects mooted by the former government.
“Politically, the move to revive the ECRL project may deal a blow to public’s confidence of the Pakatan Harapan’s ability to fulfil its promises in the manifesto,” Azam told The Malaysian Reserve (TMR).
At the same time, he said it would also be unrealistic for the Malaysian government to cancel the ECRL altogether after having already committed RM20 billion to the project.
“Before making this major decision, the government should present its fresh analysis to prove that further investment in ECRL will be beneficial for the Malaysian economy in the 10 to 20 years horizon which can be shown in the form of an increased revenue or cost cutting in transportation,” he said.
First approved on Oct 31, 2016, by the then Barisan Nasional-led administration, the 688km ECRL project was suspended in July last year after Pakatan Harapan came into power in May, after the revelation that the project cost ballooned 47% to RM80.92 billion from the initial price.
The decision to suspend it was also in line with the government’s election manifesto to review and subsequently terminate dubious projects undertaken by the previous administration, especially those backed by investments from China.
China’s state-owned China Communications Construction Co Ltd (CCCC) was originally brought on as the engineering, procurement, construction and commissioning (EPCC) contractor for the rail line from Port Klang to Pengkalan Kubor, Kelantan.
Prime Minister Tun Dr Mahathir Mohamad indicated earlier this year that the project could proceed on a smaller scale if China agrees to the move.
Azam said renegotiation efforts would no doubt help Malaysia reduce its debt burden while securing terms that are beneficial to the local economy.
“The ideal strategy would be to achieve this lower cost while simultaneously renegotiate to include more subcontracts to Malaysian firms which would contribute jobs to locals and growth to the economy,” Azam said.
Under the current arrangement, CCCC will undertake 70% of the project work, while the remaining 30% will be allocated to local contractors, he said.
“After stripping out the electrification and communication systems works, which are dominated by foreign companies, local companies will only be left with a small portion of the works.
“Apart from the immediate economic benefits, having greater Malaysian participation in the construction will improve the transfer of technology and knowledge to local firms,” Azam added.
Reports had also surfaced recently alleging that the original RM55 billion cost for the ECRL was inflated to help finance 1MDB’s debt obligations.
International Islamic University Malaysia economics professor Dr Mohamed Aslam Mohamed Haneef said investigations into 1MDB will involve protracted court hearings before the whole picture surrounding the state investment fund is revealed.
“Consequently, initial ECRL renegotiation is unlikely to factor in possible links to 1MDB though this is contingent on how long the period of suspension lasts,” he told TMR.
“At the end of the day, a cost-benefit analysis will be undertaken which will determine if the numbers are feasible to go ahead with the project.”
He said the government will have to weigh the future benefits of the ECRL against its cost and determine if the project will accomplish its intended goal.
Initially slated for commercial operations by 2024, the now suspended ECRL was touted to bring a host of economic benefits to the east coast states of Pahang, Terengganu and Kelantan.
For now, the future of the ECRL remains up in the air as Malaysia indicated it is open to negotiations, but is not presently engaged in discussions with China.