HSR, MRT 3 projects may be reviewed

It could see a whole new process of open tender. And don’t be surprised if its cost comes down, as it can be viably built at 30% lower. Rail consultant

THE Kuala Lumpur-Singapore high-speed rail (HSR) and the Klang Valley mass rapid transit line 3 (MRT 3) projects are likely to be differed, as the new government looks to review mega-projects in the construction sector.

Unlike infrastructure projects such as the East Coast Rail Link (ECRL), MRT 1 and MRT 2 as well as the Pan Borneo Highway, the HSR and MRT 3 projects have not been committed yet.

“This means there’s no drawdown yet on funding, making it easier for them to be put on the back burner,” says an industry source.

The two projects have a total value of RM105bil, with the HSR at RM60bil and MRT 3 to cost about RM45bil to be built.

Their combined value is about half the value of construction projects that are currently committed and ongoing.

Of the current ongoing projects, the ECRL is the second-largest infrastructure work which the previous government had committed to after the MRT 1 and MRT 2 at a combined RM70bil.

The Pan Borneo Highway comes at a cost of RM32bil, including the Sarawak and Sabah portions.

These projects are part of the government’s hidden expenses or what we know in financial parlance as “off-balance sheet items.”

However, the new government has said that the completion of the Pan Borneo Highway would be prioritised.

Other construction projects that are part of the previous government’s off-balance sheet items are the light rail transit (LRT) extension, LRT Line 3 and the controversial 1Malaysia Development Bhd.

The HSR is a 350-km railway scheme linking Kuala Lumpur and Singapore and is expected to start operations from 2026.

Interestingly, two days before the Dewan Rakyat was dissolved in April to pave way for the 14th general election, MyHSR Corp Sdn Bhd – the firm responsible for the development and implementation of the project – announced the appointment of two project delivery partners (PDPs) for the project to oversee the civil works worth a combined RM30bil-RM40bil.

The contracts were secured by the joint ventures (JVs) of Malaysian Resources Corp Bhd and Gamuda Bhd (MRCB-Gamuda JV) and YTL Corp’s Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd and TH Properties Sdn Bhd (YTL-THP JV), a subsidiary of pilgrim fund Lembaga Tabung Haji.

Noteworthy is that the announcement acts as a letter of intent, pending the official signing of the PDP terms, which analysts say have a potential 5%-6% PDP fees over six years.

However, industry sources say that work on the HSR is still in the early phases of design and land acquisition, and may not have much of an impact if delayed.

“We already have an existing KTM line which can be upgraded. What could happen is that initial work already done could be compensated,” says a rail consultant.

CIMB in a recent report said Malaysia was only to begin the initial land acquisition process in the second half of this year, with a target to begin construction work in 2019.

Over in Singapore, meanwhile, it was reported that the tender process for the Singapore tunnel sections had started in April. Notably, the Singapore rail line portion will cover 15km.

As for MRT 3, it is an urban rail line stretching 40km. Under the previous government, the project, also known as the Circle Line, was to have been accelerated with a three-month public display of the railway scheme slated for end-June.

However, while the project has been approved, it has not been officially awarded.

Some think that the MRT 3 project could be brought back at some point in the future, given that it integrates all existing lines of the urban rail network.

“But it could see a whole new process of open tender. And don’t be surprised if its cost comes down, as it can be viably built at 30% lower,” reckons a rail consultant.

A consortium of Gamuda BhdMMC Corp Bhd-George Kent (M) Bhd was recently seen as a strong contender to secure the MRT 3’s Circle Line turnkey contract.