ECRL to contribute 2.7% to the economy upon completion in 2026

The ECRL is expected to generate more economic activities in other sectors hence shifting to a less govt-reliant economy

By SHAHEERA AZNAM SHAH

According to MIDF Amanah Investment Bank Bhd’s estimation, the resumption of the RM44 billion East Coast Rail Link (ECRL) project is expected to contribute 2.7% to Malaysia’s GDP upon completion in 2026, while compensation of employees and net operating surplus are projected to rise by 3.6% and 2.1% respectively.

“However, the full estimated GDP contribution will depend on the pace of spillover effects to other economic sectors,” it noted in a research note yesterday.

MIDF said the ECRL is expected to generate more economic activities in other sectors, hence shifting to a less government-reliant economy, in line with Prime Minister Tun Dr Mahathir Mohamad’s idea to downsize the public sector over a period of time through industrialisation amid increasing burden towards the nation’s financial health.

“This will reduce the government’s operating expenditure especially on the emoluments which accounted for the largest share of total expenditure at 30%.

It added that the project is expected to benefit the transportation, industrial and tourism activities in the country, particularly to these three states: Kelantan, Terengganu and Pahang.

“The transportation ratio of the ECRL is 70% freight and 30% passengers. Hence, industrial and tourism, as well as external activities, are predicted to benefit from the ECRL project,” it said.

MIDF said the ECRL project could potentially spur the country’s oil and gas (O&G) industry as it connects Malaysia’s financial hub to the O&G hub in the east.

“The ECRL is linking Malaysia’s financial hub in the west to the O&G hub in the east, while allowing passengers and goods to have an easier access from the west to the east and vice versa.

“It is also allowing for greater connectivity of goods from Port Klang to Kertih and Kemaman. Currently, the only mode of transportation from the west to the east is via road,” it said.

The research house pointed out that Port Klang will indirectly benefit from the increase in cargo throughput in Kuantan Port due to heightened connectivity.

“The combined world market share of major Chinese container lines such as Cosco Shipping Co Ltd and Evergreen Line stood at 17.7% as of April 14, 2019.

“We believe that Kuantan Port could still absorb the share of volumes from Chinese container lines which will increase its conventional and gateway container volume.

“Meanwhile, this may also serve as a buffer for gateway volumes in Port Klang — Northport and Westport, especially following the recalibration of shipping alliances in April 2017 which saw container volumes being relocated to Singapore,” MIDF noted.

In addition, the research house said the increase in cargo movement is expected to improve the utilisation rates of Malaysian ports.

“With more throughputs expected to be handled with the resumption of ECRL, especially at Kuantan Port and Port Klang, utilisation rates will increase.

“In the case of Westports (Holdings Bhd), the increase of utilisation rates to a level of around 75% would serve as a trigger point to start expanding new container terminals.

“Overall, we opine that both of these ports are set to benefit from the ECRL and help promote the economic growth, especially in east coast states, as they play a role in facilitating Malaysia-China trade,” it said.

As the ECRL has now been rerouted to pass through Negri Sembilan, MIDF said the changes would not heavily impact the flow of freight traffic.

“We still believe that travel time from Shenzhen, China, via Kuantan Port and ECRL to Port Klang could be reduced by slightly more than a day instead of passing by the Straits of Malacca,” it added.