Japanese study says Malaysia can earn US$1.59 billion annually with HSR

It is the best of five possible scenarios drawn by Japanese researchers

MALAYSIA could make US$1.59 billion (RM6.5 billion) yearly from the Kuala Lumpur-Singapore high-speed rail (HSR) project in 2030, more than double the US$641 million per year Singapore would earn from it, a study by researchers from Japan’s Institute of Developing Economies (IDE) showed.

The figure is the best of five possible scenarios given by IDE director Satoru Kumagai and overseas research fellows Kazunobu Hayakawa and Ikumo Isono in their paper, “Potential Economic Impact of the Kuala Lumpur-Singapore High Speed Rail”, which was published by the ISEAS–Yusof Ishak Institute in Singapore.

They said the full economic impact was dependent on the quality of supporting infrastructure (feed roads to stations and customs and immigration clearance) and policies (non-tariff barriers in services). The report said the project was likely to accelerate the structural transformation of the Malaysian economy towards services.

The 350km rail project is aimed at connecting and reducing the travel time between Kuala Lumpur and Singapore.

The agreement to implement the project was signed in 2016, but its fate was cast into limbo after Prime Minister Tun Dr Mahathir Mohamad said it was unnecessary and would be dropped.

However, he later clarified that the project was not scrapped but postponed.

A key concern of the government was that the economic benefit from the project would not commensurate with the cost, estimated to be around US$13 billion to US$15 billion.

Under the first scenario, the HSR consists of domestic stops from Kuala Lumpur to Iskandar, Johor, a shuttle service from Iskandar to Singapore and an express service from Kuala Lumpur direct to Singapore. The scenario assumes a 50 per cent reduction in non-trade barriers for the service sector.

Under this scenario, Malaysia stands to make US$1.9 billion from the services sector.

However, other sectors, such as electronics and manufacturing, are negatively impacted by the HSR, bringing the figure down to US$1.59 billion.

The next best scenario is for the HSR to go directly from Kuala Lumpur to Singapore, with one stop in Iskandar. Under this set up, Malaysia would make US$1 billion a year and Singapore (US$88 million).

The researchers said Malaysia would benefit more for a HSR with domestic stops compared to one that connected to Singapore exclusively.

“The regions that have no stations tend to be negatively affected by the project. If the HSR stops only at Kuala Lumpur and Singapore, then Johor is negatively affected by the development.

“If the HSR stops only at Kuala Lumpur, Singapore and Johor, then states such as Malacca and Negeri Sembilan will be negatively affected.

“Thus, the specifications of HSR’s express/local services need to be carefully planned,” they said.

Under the first scenario, the HSR connects Kuala Lumpur and Iskandar, with five stops — Putrajaya, Seremban (Negeri Sembilan), Ayer Keroh (Malacca) and Muar and Batu Pahat (both in Johor).