Loke needs to clarify cost of ECRL project

 

From V Ravindran

I refer to Rosli Khan’s article, “Let me undertake the ECRL project for half the price”, published on Dec 25.

The general belief among the rail fraternity and observers is the very high cost of the East Coast Rail Link Project tagged at an “original figure” of RM86 billion for a network length of 665km from Port Klang to Kota Bharu.

However, taking over the project at this stage by any outside party in an attempt to reduce project costs is wishful and quite unthinkable.

The ECRL project was awarded in 2016 and it will soon hit the 40% completion target.

Some reports have stated that China’s funding has gone up to 85% of the total project cost. Any attempt to abort the project now will be met by a massive backlash of compensation, damages, claims by the main Chinese contractors, and expected increase in cost estimates by a new party.

There could also be a negative impact on bilateral relations, keeping in mind that China is one of our biggest trading partners.

Rosli is on target regarding transparency about the project cost elements. Various quotes have emerged over the last few years, ranging from RM44 billion to RM86 billion. Some media reports have even mentioned that the actual cost may exceed RM100 billion when the ECRL is finally completed due to global instability affecting factors like supply chains, manufacturing and financing costs.

It is certainly important for transport minister Loke Siew Fook to offer clarification on this massive project to clear doubts and suspicions.

The principles of competency, accountability and transparency (CAT) must be seen to be in action for the sake of enhancing the credibility of the new government.

Project costing from different sources seem to differ and this will only cause more confusion and suspicion in this era of great public disappointment with corporate governance and level of corruption.

The relevant authorities (especially the finance and transport ministries) need to verify the cost elements and consistently display the breakdown items for public consumption.

Often, construction costs are mentioned separately from overall project costs, which can include rolling stock, land acquisition, consultancy, cost escalation of materials and labour and even financing costs. In the case of the ECRL, even the rail link between Gombak and Port Klang was given a separate price tag of RM11 billion in some earlier media reports.

All said, the commercial viability of this massive project is unlikely as already proven with KTM’s inter-city double track electrified railway project in the highly populated and industrialised west coast.

The very long-term benefit of the ECRL is the linking up of the under-developed and sparsely populated east coast with the more affluent west coast for greater development and resource utilisation far into the future.

Meanwhile, with the projected low financial returns on investment, the federal government has to plan wisely on managing the heavy financial burden of this additional inter-city rail line spanning 665 km through tunnels, jungles, hills and valleys.

The cost which cannot be compromised is related to operations and maintenance (O&M) which is always linked to safety and competitive commercial service.

There is some potential in both passenger and freight services for fare and non-fare revenue if professionally and exhaustively managed. At the least, if professionally managed, these can marginally offset the O&M costs.

The more massive non-negotiable obligation is tied to debt repayment to China. On this matter, too, there seems to be no transparency on aspects like the original loan amount involved, the terms and conditions, interest payable, default penalties and other related elements. - FMT

V Ravindran is a retired administrative and diplomatic service officer. 

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.