FUNDING DOUBTS ABOUT HSR PROJECT

Analysts say government can’t add another burden to its finances

THE government will not be able to fully fund the Kuala Lumpur-Singapore high-speed rail (HSR) project, not with a RM1.5 trillion debt hanging around its neck, said some transport specialists.

They also raised doubts about the private sector’s ability to fund the HSR and overall viability of the project given that it may cost more than RM120 billion eventually.

However, the government has assets like land that can be possibly swapped with those to be acquired for the project, they added.

Transport analyst Dr Rosli Azad Khan said the government cannot fund the HSR project, not with a RM1.5 trillion debt hanging around its neck. There is also the 1Malaysia Development Bhd debt, he added.

“I cannot see how a project that may cost more than RM120 billion in the coming years can be funded based on the current government debt.”

Rosli said the low passenger volume between both cities could pose a problem for the HSR.

He pointed out that the air passenger traffic between Kuala Lumpur and Singapore stood at about four million last year.

“Even if we were to assume all four million were to switch to the HSR, at similar airfares, the revenue won’t be enough to pay for the yearly operation cost, let alone the capital costs.

“The government is saying that the private sector should be funding it but this project is not financially viable. I can’t see how the returns (return on investment) can be achieved with such low passenger volume.”

On Jan 15, seven local and international consortia comprising 31 firms submitted request for information proposals for the HSR project.

A report by the Singapore “Straits Times” had said the project was unlikely to get off the ground if it was fully funded by the private sector.

Quoting sources, it stated that fresh bidders for the project had requested for government funding in their proposals.

Among the bidders, Malaysian Resources Corp Bhd, Berjaya Land Bhd and IJM Corporation Bhd had announced that they were in a consortium with †Keretapi Tanah Melayu Bhd.†

Tourism and transport business consultant Y.S. Chan said consortia are eager to build the track, stations and supply all the equipment necessary to operate the HSR and gain additional revenue from a variety of cost-saving measures.

However, they need strong support from the federal and state governments, particularly on land matters.

“The government may not have the money for funding, but land acquired for the HSR could be swapped with government-owned land elsewhere or exchanged in tripartite agreements. Land acquisition would be too costly for the private sector. In any case, the government would be the eventual owner of the land and stations.”

He said it is a fact that the HSR revenue will not be enough to cover the operating costs. Therefore, the operator will require some kind of subsidy from the government.

“But this will be a few years down the road. Meanwhile, relevant parties in the public and private sectors will be planning and gearing up to make full use of the HSR, starting as a catalyst for growth along the rail corridor and boosting the economy through its efficiency and appeal. The net result is a gain for our country,” he added.

Malaysian Institute of Economic Research economist Dr Shankaran Nambiar opined that the government will not add a substantial burden to its finances by taking on the project.

He said the government is trimming its expenditure and raising revenue, even from previously unexplored sources.

“Neither would the government want to increase its risk exposure, especially in view of the traffic that is difficult to ascertain in the initial years. It is unlikely that the government would want to add to its existing contingent liabilities,” he added.

I can’t see how the returns (return on investment) can be achieved with such low passenger volume.

DR ROSLI AZAD KHAN Transport analyst

Land acquisition would be too costly for the private sector. In any case, the government would be the eventual owner of the land and stations.

Y.S. CHAN Tourism and transport business consultant

Neither would the government want to increase its risk exposure, especially in view of the traffic that is difficult to ascertain in the initial years.

DR SHANKARAN NAMBIAR Malaysian Institute of Economic Research economist