A long train running saga
The much maligned ECRL is set to be back on track under a cheaper and better deal.
THE communication lines seem to be clearer now and the right signals are flashing. It may be just a matter of weeks before the East Coast Rail Link (ECRL) is back on track.
Tun Daim Zainuddin, the Pakatan Harapan government’s chief negotiator for ECRL, has confirmed that the deal is almost done except for “tightening of the screws” where applicable.
The 688km passenger and cargo railway line will connect Gombak in Selangor with Kota Baru (instead of Pengkalan Kubor) in Kelantan and will be a distinctly different project from what was signed by former prime minister Datuk Seri Najib Razak in October 2017.
For a start, the total cost is expected to be slashed significantly from the monstrous original price tag of RM66bil.
And with the previous deal’s additional hidden outflows, land acquisition, loan interest, fees and other operational costs, the government would have ended up paying a colossal RM81bil.
What will be the eventual pareddown cost that China would agree to? It is still anyone’s guess.
The ECRL is a key component of China’s Belt and Road (BRI) initiative, a vital link for its objective of reviving the ancient Silk Road to reconnect South-East Asia and Central Asia by land, and the Middle East and Europe via historic maritime routes.
As for Malaysia, it cannot afford continued strained bilateral and trade ties with China, the nation’s biggest export market, which recorded a volume of RM138.8bil last year.
Uncertainties over the ECRL and other projects led to a drastic fall in Chinese investments in Malaysia in 2018, compared with the five-fold increase notched between 2012 and 2017.
But what would be the worthwhile cost for Malaysia to continue with the project? Based on Daim’s recent exclusive interview with The Star, the government would only settle for a win-win deal.
He has flatly denied that Malaysia was willing to accept a price reduction of RM10bil, which is the figure being bandied about by analysts within and outside the country.
Last month, Prime Minister Tun Dr Mahathir Mohamad provided a hint of what should be a feasible sum, minus the profit element.
He said based on discussions with China Communications Construction Company (CCCC), the main contractor of the project, it could be implemented for as low as RM35bil.
As affirmed by Daim, China understands Malaysia’s need to slash the cost of the project and ensure that the railway is economically beneficial.
Under the previous government’s lopsided deal, the ECRL would have ended up as a white elephant and the amount of debts would have hastened the financial ruin of the country.
Let’s not forget the main reason for the ridiculously high cost. The price was jacked up by a whopping RM30.8bil to bail out 1Malaysia Development Bhd (1MDB).
As reported in January by The Australian newspaper, the contractor was asked to increase the quote for the ECRL by US$7.5bil.
Among other things, the extra RM30.8bil was to “plug the multibillion dollar hole” in 1MDB, acquire companies linked to fugitive Jho Low and pay unnamed consultants.
There is no doubt that critics of the Pakatan government would slam a decision to continue with the project as another example of its flip-flop policies but the government was forced to rethink the idea because RM20bil or 20% of the first phase had already been paid.
The new government would only be able to recover half of the RM20bil and worse still, also end up paying another RM22bil in compensation and penalties.
Based on Daim’s interview, it looks like China has taken cognition of Malaysia’s financial situation and is agreeable to an ECRL that is less costly, more practical and suited to the needs of the country.
Significant cost savings can certainly be achieved with both parties agreeing to a revised scope of work that is realistic to local participation.
Unlike the previous agreement, under which payments were scheduled at stages with penalties for delays, the new contract should ensure that payments are only made subject to detailed specifications, in accordance with work completed and certified.
There should also be a notable increase in local participation in the construction process. In the deal signed by Najib, participation of local businesses was limited to a paltry 30% of civil engineering works.
Malaysia also needs to work out operations and maintenance issues upon completion of the project in 2024, instead of being burdened with these obligations. This would also add to Malaysia’s cost savings.
Besides closer cooperation in terms of technology transfer, such an arrangement would also provide more training and employment opportunities for locals.
With reduced costs and finetuned features, the ECRL has great potential for boosting foreign direct investments, not only from China but also other countries in the region.
There is no denying that this project can be turned around to become the key catalyst to boost economic growth of the east coast states.
Just in case the former prime minister and his cohorts attempt to spin the revival of the project as their victory or vindication, they should remember what Dr Mahathir asked opposition leader Datuk Seri Ismail Sabri Yaakob in the Dewan Rakyat three weeks ago.
“When the agreement was being drafted, why didn’t Barisan Nasional MPs ask how much was the cost? The consultancy fees? How much would be incurred for land acquisition and other costs?”
These MPs should be put to shame for agreeing to such a dubious deal and made to explain whether they were grossly inept or guilty of dereliction of duty.
Media consultant M. Veera Pandiyan likes these lines of Paulo Coelho: Our life is a constant journey. The landscape changes, the people change, our needs change, but the train keeps moving. Life is the train, not the station.