ECRL spending comes under scrutiny

  • Business Premium
  • Tuesday, 15 May 2018

KUALA LUMPUR: The RM55bil East Coast Rail Link (ECRL) project is now under the spotlight with the top brass of Malaysia Rail Link, the company handling the project, been summoned to Putrajaya to explain financial details on the mega railway job to the new administration.

It is learnt that so far that around RM10bil has been drawn down for the project to pay for feasibility study  and set up base camps along the 688-kilometre railway project that is from Gombak to Kuantan and onwards to Kota Baru.

The project is led mainly by contractors from China is broken into eight main packages. As of March, progress on the project is reportedly at 13%. 

 The ECRL is the second largest infrastructure work that the previous government had committed thus far, after MRT 1 and 2 at a combined RM70bil.

“The scrutiny is on the expenses incurred and the draw-down so far by MRL for the ECRL project,” said a source.

“The initial work on all eight packages have started. But the amount of work done may not commensurate with the amount drawn down,” said a source.

Prime Minister Tun Dr Mahathir Mohamad has said that the ECRL would be one of the projects that his administration would want to re-negotiate as he felt that there was little need for a project of that size at the moment.

A Team of Eminent Persons that is headed by former Finance Minister Tun Daim Zainuddin is assisting Dr Mahathir is running the administration until a Cabinet is formed.

For the ECRL project, the Chinese government provided 85% of the funding while Malaysia is to come up with up 15% the remaining financing requirement. The Malaysian government is to start paying back after seven years.

It is learnt that an additional loan agreement amounting to RM10bil has been arranged with the Chinese government, something that is due to be announced later this month. The arrangement was done last month before the 14th General Election where Barisan Nasional lost to a coalition of Pakatan Harapan.

“The additional amount is to add infrastructure for the project so that it can accommodate a double track in future. It is a single track project with a design for double track to cater for future needs,” said a source.

The MRL a Ministry of Finance incorporated stand-alone company created specifically for the ECRL project. The chief executive officer is Datuk Seri Darwis Abdul Razak and chairman is Tan Sri Irwan Siregar, by virtue of his former position as the secretary general of the Ministry of Finance.

The longest railway track in the country has come under fire for its cost, which critics say is the most expensive on a per-kilometre basis. On a RM55bil budget, the cost is RM80mil per kilometre. Assuming the budget balloons to RM65bil, the cost per kilometre is almost RM95mil.

In comparison, the Ipoh to Padang Besar double track project that was completed in 2014 was done at about RM50mil per kilometre while the Gemas to Johor Baru double track projects is estimated at also RM50mil per kilometre.

The former government had touted the rail link as a game changer that would open up vast uncharted territory in the East Coast.

Former Prime Minister Datuk Seri Najib Tun Razak the project would reduce the economic inequality between the East Coast and West coast of peninsula Malaysia.

The main contractor for the project is China Communications Construction Company (CCCC) while China Exim Bank provided the loan. The loan comes with a an interest of 3.25% per annum and carries a moratorium period of seven years.

Critics have argued that the financials of the project was not feasible and income would not be even sufficient to cover interest.

Assuming full drawn down of RM55bil, interest servicing alone would come up to RM1.9bil per year.

However, MRL contended that public infrastructure projects cannot be implemented if only the financial aspects were to be considered as it takes a long gestation period for it to bring full economic benefits.

Apart from financials, the MRL said that the rail link would be an economic catalyst to the whole region.


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