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Saturday, 18 April 2015

Cost-sharing likely for HSR

 As  the physical  length of the  high-speed rail  will be longer  on the  Malaysian side,  Malaysia could  possibly be spending more than its counterpart over the  causeway

As the physical length of the high-speed rail will be longer on the Malaysian side, Malaysia could possibly be spending more than its counterpart over the causeway

THE development cost high-speed rail (HSR) project linking Kuala Lumpur and Singapore could possibly be divided between the two governments based on geographical location of the project’s infrastructure.

Dividing the scope of responsibility that way is seen as the main way for Malaysia and Singapore to decide on how to split the huge investment required for the HSR project, which is reportedly more than RM38bil.

“Mobile infrastructure cost that will be mutually utilised by both sides of the border such as the rolling stock and system works could be equally shared between Malaysia and Singapore,” Land Public Transport Commission (SPAD) chief executive officer chief executive officer Mohd Nur Kamal tells StarBizWeek.

“Private sector participation is expected to be done via international tender bidding process that could possibly include local participation clause.”

As the physical length of the HSR will be longer on the Malaysian side, Mohd Nur does not deny that Malaysia could possibly be spending more than its counterpart over the causeway.

As the development cost is relatively high against the long-term return on investment, he points out that the public-private partnership (PPP) scheme could rely more on government financial support.

“For the PPP scheme, we are looking at a long-term concession. So far, this project has garnered a lot of local and international interest,” he says.

The HSR is dubbed as South-East Asia’s most ambitious infrastructure project and the region’s first HSR along a 340km link. It will greatly reduce the travel time between the two neighbours to 90 minutes from about four hours by car.

So far, international players from advanced economies such as Japan, South Korea, China and some European countries have openly expressed their interest to participate in the HSR project.

Japan’s government has shown keen interest to support its private company – the East Japan Railway Co (JR East) – for this project.

Meanwhile, China’s high-speed rail design, development and construction companies comprising China Railway Construction Corp Ltd (CRCC), The Third Railway Survey And Design Institute Group Corp (TSDI) and CSR Qingdao Sifang Co Ltd are also interested in the project.

Mohd Nur adds that they are also talking to a few financial instituitions in terms of extending a credit line to finance the project.

“We know that this project cannot be fully funded by private sector due to its huge upfront capex and long gestation period. Realistically, a substantial amount of government assistance is required in the form of either soft loans or grants.

“An integral criteria for the bidders are to show its ability in creating the optimal environment with the minimal amount of Government assistance while not compromising on the project’s long-term socio-economic benefits to be developed along the line,” he says.

Nevertheless, Mohd Nur cautions that the overall plan on how this project could be developed is still at drawing board stage where everything will be definitive in the upcoming Malaysia-Singapore bilateral agreement, expected to be inked in the third quarter of this year.

The regulatory body is currently busy with the details of the bilateral agreement that will be the first step to officially kickstart the project and clear any sovereign matters.

“Both governments are to be on the same page on all the technical, commercial and governance frameworks by the signing of the bilateral agreement, only then we can go into procurement stage,” he says.

However, Mohd Nur declined to confirm on the total development cost at this juncture as it would distort the optimal proposals by the private sector in their tender submission.

Last Friday, Malaysian lawmarkers have approved the HSR project that prompted the setting up of MyHSR Corp Sdn Bhd, the entity that will undertake the construction of the system.

As an initial investment, Ministry of Finance Inc will invest in 10 million shares of MyHSR Corp for RM1 per share. Based on the tight HSR operational deadline in 2020, the entity must swiftly act to get the ball rolling.

Mohd Nur says at this juncture, the Government has already shortlisted a few candidates to lead and fill in the key positions in MyHSR Corp.

“MyHSR Corp in some ways will have similar functions as MRT Corp in developing the mass rapid transit (MRT) system with an added procurement portfolio. MRT system in the city centre is currently a fully-funded government project,” he says.

In terms of Malaysia’s affordability to finance the project that has been repeatedly questioned in the media, Mohd Nur reteriated that the main focus of this project does not concretely depends on transporting people but as an economic catalyst to further develop and spur new modern townships and economic activities along the lines that will cross towns in Negri Sembilan, Melaka and Johor from Kuala Lumpur.

“For instance, at this juncture, the HSR line will add value to the economic development of Bandar Malaysia and Nusajaya.

“Thus the cost that could be considered high at this point of time could comparatively be a lot cheaper when we look far ahead in, maybe, the next 40 to 50 years in terms of its economic benefits for the people,” he says.

Additionally, Mohd Nur says the cost would be spread out throughout the development period.

Tags / Keywords: Construction , Government , Singapore , High speed rail

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