Analysts question viability of KL-Singapore HSR project at RM120bil price tag

NST Thu, Feb 22, 2024 08:09am - 2 months View Original


KUALA LUMPUR: The government will not be able to fully fund the Kuala Lumpur-Singapore high speed rail (HSR) project, not with RM1.5 trillion of debts hanging around its neck, said some transport specialists.

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

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

Transport analyst Dr Rosli Azad Khan told Business Times that he does not think the government can fund the HSR, not with a RM1.5 trillion debt hanging around its neck. There is also the 1Malaysia Development Bhd debt.

"I cannot see how a project that may cost more than RM120 billion in the coming years can be funded on the current government debt," he said.

Rosli noted that low passenger volume between both cities can also pose a problem for the HSR.

As at 2023, Rosli pointed out that the total air traffic between KL and Singapore stood at only about four million passengers.

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

"The government is saying that private sector should be funding it but this project is not financially viable. I can't see how the returns (RoI) could be achieved on a high investment with low passenger volume between KL and Singapore," he said.

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

MyHSR Corporation Sdn Bhd chairman Datuk Seri Fauzi Abdul Rahman said  the proposal was in response to the submission deadline which expired opn that date.

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

Quoting sources, it stated 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 to bid for the HSR. 

Tourism and transport business consultant YS 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 both federal and state governments, particularly on land matters.

"The government may not have the money for funding, but land acquired for 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.

Chan said it is a given that HSR revenue will not be enough to cover operating costs, and therefore the operator will require a subsidy from the government.

"But this will be a few years down the road and 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 its 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 current 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 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.

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