KL-Singapore HSR should not cost more than RM30bil

  • Corporate News
  • Saturday, 04 Jan 2020

Let’s examine the ridership and the indirect economic benefits objectively in the case of the KL-SG HSR.

The Pakatan Harapan government announced soon after the last election that the Singapore – KL High Speed Rail (HSR) would be reviewed and potentially scrapped.

However, since then, these has been a reconsideration after realising that the cost of cancellation would amount to an abortive cost of more RM1bil on both sides of the causeway.

In 2019 two important announcements were made that put the project on a surer footing. First the appointment of a Technical Advisory Consultant to review the technical aspects to recommend the alignment, stations and MSR maintenance with a view to reduce the overall cost. Just this month it was announced that a deal was signed with Putrajaya and IWH-CREC JV for the Bandar Malaysia Development. It was later confirmed that there would be an HSR Station built within the development.

HSR is very expensive to build and operate. The current cost per km to build varies from US$25 to US$31 mil per km in Europe. Clearly, the more expensive the line is to build, the more difficult it will be to break even. Rail experts estimate that an HSR line would need ridership of between six mil and nine mil passengers per year to break even operationally.

Proponents always allude to the economic benefits of an HSR to justify the investment. However the many debates and studies carried out by independent researchers have been mixed and do not provide compelling evidence that HSR has provided the bang for the buck that has been claimed. The current debate in the UK, US and Australia give invaluable insights into the pitfalls of investing in HSR without a careful and truthful assessment.

Let’s examine the ridership and the indirect economic benefits objectively in the case of the KL-SG HSR.

HSR has direct effects of reduced travel time, which often helps it win political and public support. My HSR has not provided data on the initial ridership of the KL/Singapore HSR other than a figure of 15.2 mil passengers by 2030 and 37.8 million passengers by 2060.These figures look far too aggressive in my opinion.

Studies suggest that the HSR modal share is most competitive between two to three hours door to door. Imputing this would mean road transport would dominate the modal share on the KL to JB route. On the reverse route the HSR modal share will be primarily for weekend traffic from Singapore, initially; with the possibility of commuting in the longer term.

Therefore, the modal share shift will only be dominated by a shift from air traffic for business and time sensitive tourists which will amount to three mil passenger/year at best for the initial years.

The EU requires a minimum initial threshold passengers per year of six mil before any funding is authorised.

Studies by World Bank on the Chinese HSR model also recommend a minimum of six mil passengers initially for an efficient operation.

The results of Independent researchers on economic growth due to HSR have been mixed and the general conclusion is that HSR contributes towards redistribution of the regional economies but there is no clear correlation that it contributes to economic growth through agglomeration effects.

Studies also generally confirm that HSR increases the convenience of living in outlying suburbs of crowded and expensive cities.

This is predicated on the GDP per capita vs the cost of travelling by HSR as a commuting option. The price point of the HSR and the lower density of population in Kuala Lumpur coupled with the low median household earning in WP and Selangor of USD$2000 per month will not encourage commuting from a distant outlying suburb to Kuala Lumpur.

However, Singaporeans with a median household earning of USD$6500 may chose the HSR to live in cities like Muar, Batu Pahat or Melaka and commute to work. This would be beneficial to Singapore as the new Jurong East CBD will need talent from Malaysia to support its growth.

Studies indicate HSR will have a negative effect on the local economy in the short to medium term.

The “straw effect” refers to the effect of prominent services in the hinterland relocating to the larger city as transport distance get reduced and they are able serve the hinterland from a distance. Various studies in Spain, France and Japan attest to this phenomenon in the short to medium term after opening. This could lead to migration of talent from Malaysia to Singapore to support the development of the new Jurong East CBD. On a positive note however; HSR will enhance tourism to cities like Melaka and Kuala Lumpur. Currently Melaka attracts five mil foreign tourists per year. The opportunity to design and aggressively market tourism jointly with airlines could attract the time sensitive travellers to use HSR.

According to studies conducted by ADB, the timing of the introduction of HSR relative to the economic development is vital. The estimated cost for the construction of the KL/Singapore HSR was last quoted to be around RM60bil.

This figure was based on highly ambitious station designs, massive underground works at Bandar Malaysia and a speed of 350km/hour.

This translates to a cost of USD$43mil per km. Costs in China vary from USD$17mil/km to USD$21mil/km whereas costs in Europe vary from US$25 – US$31mil/km. The outliers are Taiwan and Korea HSR at US$43mil/km.

At current GDP values the KL/Singapore HSR will represent approximately 4% of the annual GDP of Malaysia. Similar benchmarks for HSR introduction in Europe, Japan and China put the average figure for the introduction of HSR at 1.5– 2.0% of annual GDP.

The outliers are Korea and Taiwan at 3.5 and 3.8 respectively. This would limit the KL/SG HSR at around RM30bil. This is half the current estimate.

One can therefore conclude that from a ridership and economic perspective; Malaysia is not ready for the implementation of HSR. It will not only cost RM60bil to construct but will continue to require subsidy for a decade or more given the low ridership.

Instead, the RM60bil should be better spent as follows:

> Producing a long-term intermodal transport master plan that would future proof our economic growth by substantially increasing the road, rail and sea transport capacity and ensuring seamless interconnectivity among all three modes. This will significantly contribute to economic growth nationwide and not just the KL/Singapore corridor.

> Converting the existing double track network from metre gauge to standard gauge and future proof the speeds of up to 200km/hour. This would require converting the KL/Singapore double track (KL Sentral to Woodlands) to standard gauge now and progressively expanding the conversion northwards to Padang Besar with common rolling stock. This is technically feasible and has been carried out in Spain. It will enable higher speed for the flow of passengers and goods instead of only passengers as is the case now for the HSR (The German High Speed model).

Additionally, future proof the signalling system for the implementation of European Train Control System Level 3 (increased automation). This will dramatically increase track capacity and allow increased throughput of passenger and cargo.

The widening wealth disparity and lack of affordable housing is leading to social unrest elsewhere in the world. It is good that the recent agreement with the IWH-CREC consortium included the building of ten thousand affordable homes. However there is still a pressing need for more affordable homes and instead of passing this responsibility to the private sector the government needs to do more to accelerate the delivery of affordable homes.

The government has finally announced that the MRT3 would be implemented although it will be two years too late in my opinion. Improved journey times within the city contribute to productivity for the masses and will enable a better economic outcome for the rakyat.

Parameswaran Sivalingam is the former project director for the Klang Valley MRT Serdang-Sungai Buloh line. The views expressed are the writer’s own.

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