IN some ways, it is a blessing in disguise that the high-speed rail (HSR) project connecting Malaysia to Singapore has been delayed.
When the project was first approved in 2013, it was due to kick off in 2017 and be ready for operations by 2026. The new timeline for the project is for it to be operational by 2031.
When the balance sheet of governments are already stretched to just keep the economy afloat, borrowing more money for mega-projects is something most developing countries cannot afford to do.
Malaysia falls into the category of having a bloated balance sheet, no thanks to the Covid-19 pandemic. Like all other governments, Malaysia bulked up its balance sheet and broke all the financial ratios that are normally used to evaluate governments.
The federal government debt-to-gross domestic product ratio is expected to be above the 55% mark this year, while the budget deficit is likely to be more than 4% to the national output.
Against an already challenging environment, putting off the HSR to a later date may be a blessing in disguise for the government.
“At the moment, the HSR is not a priority for many. It’s more bread-and-butter issues affecting the people. The economy is expected to rebound next year. If work starts in 2022, it should add to the economic growth multiplier, ” says an economist.
The economist says that the biggest beneficiary of the HSR will be the property sector as it would complement the current infrastructure connecting Malaysia and Singapore. He says that Singapore has a large expatriate crowd and limited affordable properties.
“Malaysia on the other hand has a lot of properties sold or rented out at much cheaper prices. Enhanced connectivity will benefit the property market here, ” he says.
Towards this end, Bandar Malaysia, a project under the joint venture of Iskandar Waterfront Holdings Sdn Bhd and China Railway Engineering Corp (CREC) is seen as the main beneficiary of the property play in HSR.
IWH is the private vehicle of Tan Sri Lim Kang Hoo who carved a name for himself as a developer of projects with a long gestation period. Towards this end, he has a 4,500-acre development in Johor Baru that is built on reclaimed land.
The IWH-CREC joint venture is the master developer of the 486-acre Bandar Malaysia that has been touted as the single biggest piece of development in the region with a gross development value of RM140bil.
The president of the Association of Valuers, Property Managers, Estate Agents and Property Consultants, Michael Kong Kok Kee, says that the HSR will obviously bring enormous benefits to both Malaysia and Singapore.
“It’s a long overdue plan. Connectivity is the key for the development. Bandar Malaysia will reap the most benefit being the terminal station on the Malaysian side just like how KL Sentral benefited from being a transportation hub, ” he said.
Under the Pakatan Harapan (PH) government, IWH-CREC was to build 10,000 affordable homes. IWH-CREC is also to pay the government a bigger upfront payment of RM1.24bil in return for a 60% stake in Bandar Malaysia.
The MoF holds the remaining 40% through TRX City Sdn Bhd.
In a recent reply in Parliament, the Ministry of Finance stated that IWH-CREC has so far paid RM146.2mil or 2% of the RM6.45bil net due for its 60% stake in Bandar Malaysia. IWH-CREC purchased the 60% stake for RM7.41bil and took up its portion of debts carried by Bandar Malaysia.
IWH-CREC has been given an extension of time to pay up the balance of the RM1.24bil deposit for the purchase.
With the Covid-19 pandemic and slow economy, the delay is probably a blessing in disguise for Lim and IWH-CREC.