MRT3 — a costly necessity?

MALAYSIA is at a crossroads with the Mass Rapid Transit 3 (MRT3), also known as MRT Circle Line project, a massive infrastructure initiative that has sparked intense fiscal debate.

Originally estimated at RM68bil in 2018, the project’s cost was revised to RM45bil in Budget 2023. Recent updates suggest it may now cost even less than that.

However, the government has yet to finalise how the project will be funded – through direct fiscal expenditure or a public-private partnership.

This has raised critical questions: Can Malaysia afford such a costly endeavour, and more importantly, does the country truly need it?

Most say it will involve DanaInfra Nasional debt issuances rather than the earlier proposed hybrid financing model.

Great expectation?

What can be expected of the project?

Will it be implemented seamlessly or will it be mired in delays, cost overruns and public scepticism?

While the project is technically affordable due to its multi-year horizon, economist Anthony Dass notes that it will increase the country’s liabilities and limit fiscal flexibility.

Dass, who is senior economic adviser at KSI Strategic Institute for Asia-Pacific and executive director of the Malaysian Institute of Economic Research, highlights that execution discipline, long-term revenue mobilisation, and cost containment safeguards are crucial to ensuring the project does not undermine fiscal consolidation efforts.

“The project’s affordability is therefore conditional – not just on available fiscal space, but on whether its economic returns justify its costs,” he tells Starbiz 7.

Are the costs justified?

MRT3 will connect radial MRT, Keretapi Tanah Melayu (KTMB) and Light Rail Transit as well as Monorail lines around greater Klang Valley through 10 interchange stations.

If it goes according to plan, the MRT3 will be 51.6km long, including 10.7km of underground tunnels. The rest will be elevated tracks.

The entire loop will take an estimated 73 minutes.

At present, the rail network lacks full orbital connectivity, causing redundancies and long detours for cross-suburban travel.

Picture needing to travel from Setapak to Mont Kiara – a long detour through downtown is required, along with multiple train network changes.

Dass says the MRT3 is expected to increase network coverage from 69% to 85% of the Klang Valley population within 400m of a station.

It also aims to improve public transport modal share, which currently falls below the 40% national target.

Despite these goals, ridership on the MRT1 and MRT2 lines remains below expectations, he adds.

It was reported that the MRT1, also known as the Kajang line, operated at 10.8% to 37.4% of projected daily ridership between 2017 and 2023.

In the first quarter of calendar year 2025 (1Q25) , the MRT1 saw a daily average of 240,627 riders – below the 250,000 threshold needed to cover operational costs.

The Putrajaya Line – MRT2 – saw even worse ridership numbers, hitting only 20% of its target in 2022 and 45.6% in 2023.

In 1Q25, an daily average of only 127,780 riders were recorded on MRT2.

“MRT1 averaged only 200,000 to 250,000 daily riders pre-pandemic versus the 400,000 projected. MRT2 has an even lower uptake,” he says.

Dass attributes this not only to the rail coverage but also first and last mile connectivity.

This is compounded by limited density around stations and inconsistent feeder services.

“Until those gaps are addressed, the cost will continue to outweigh the benefits of a new line. Besides, MRT3 demand is concentrated in Greater KL (Kuala Lumpur), while other regions continue to face more pressing infrastructure deficits,” Dass adds.

Xiamen University Malaysia senior lecturer and fellow at Centre for Market Education, Dr Tan Consilz, says that numbers are growing, and perhaps the MRT3 is just what the doctor ordered.

She says ridership might increase through enhancing alignments between integration points in the Klang Valley’s rail network in the longer run.

However, it will take time for the entire public transportation system to mature.

She echoes Dass’ view on the prevalent issues – weak feeder systems and poor first/last mile connectivity.

Nevertheless, Tan opines that the MRT3 is necessary for Malaysia to achieve its goals in urban development.

As she points out, Malaysians are tired of traffic congestion and inefficient networks. Tan adds that the government should focus on transit-oriented developments (TODs) that promote easy access and affordability.

“There is a need to provide a greener solution, quality infrastructure, well-connected urban living and sustainable transportation systems. So, TOD is contributing to the sustainable development of the nation’s transportation system by providing greener solutions, reliable, up-to-date energy management, quality infrastructure and road safety.

“All these subsequently promote a higher quality of life and help the country’s economy,” Tan says.

Her positivity is supported by a public inspection exercise from September to December 2024 that sought out 45,000 written responses from Malaysians.

“With 93.3% voicing strong support, we have a positive outlook on achieving a cohesive network in the Klang Valley.

“According to MRT Corp, this project is aimed to deliver optimal benefits to the communities and prepare for the KL Local Plan 2040.”

Tan says the ensuing crucial steps will be to ensure there are no cost overruns and strengthening the feeder systems.

Meanwhile, a source that requested anonymity tells Starbiz 7 the question is no longer whether Malaysia can afford it, but whether Malaysia can afford not to build it.

According to the source, the MRT3 is the missing link that will unlock the potential of MRT1 and MRT2.

“Without MRT3, the existing lines operate sub-optimally, and the project is a structural need, not a discretionary ‘nice-to-have’,” the sources notes.

The MRT3 is likely to redistribute demand intelligently and grow new ridership, particularly through better connectivity and last mile integration.

“Circle lines are proven globally to reduce travel times, relieve interchange pressure and grow demand. As proven in Singapore and London, ridership on existing lines often rises after a loop line is added.

“Adding to that is Prasarana Malaysia Bhd’s on-demand van solution and improved mobile app finally offering a promising last-mix fix,” the source says.

If anything, the source adds that what’s missing is proper pedestrian access.

“Unlike China, where local councils fund access infrastructure, in Malaysia this is passed to MRT builders – resulting in poor connectivity and shaded walkways. A clear policy framework is needed to align all parties in delivering the last mile,” the source says.

On why ridership for the MRT1 and MRT2 lines is lower than targeted, the source says they are artificially constrained by poor integration and the lack of supporting policies.

“MRT1 and MRT2 were designed to shift 40% of trips from private to public transport, but this has been undermined by failure to implement congestion pricing, low parking charges in the city centre, and incomplete pedestrian and feeder access,” the source notes.

Now, the suggestion of redirecting large funds towards other aspects of national development, such as healthcare or education, has been raised.

However, the source clarifies that the MRT3 project does not need to compete with these priorities. The real constraints lie in larger issues, such as wasteful subsidies and inefficiencies.

“According to the Auditor-General’s report, billions are lost annually due to public procurement inefficiencies. Additionally, blanket subsidies for petrol, sugar and flour have led to long-term social and healthcare costs,” the source adds.

Redirecting even a fraction of these expenditures towards productive infrastructure like the MRT3 could generate significant long-term economic and health benefits.

Strategic infrastructure and social equity, the source emphasises, should be pursued together rather than in opposition.

Dass says to avoid cost overruns and delays, the government should implement protective measures using local lessons and best practices from peer countries.

“A key lesson is MRT1, which largely remained on budget and schedule due to the Project Delivery Partner model – where responsibility for delivery was separated from ownership and performance incentives were built in,” he says.

But MRT2 saw delays and costs rose after it shifted to a turnkey model without comparable independent oversight.

“To mitigate such risks, mechanisms like transparent procurement, third-party cost validation, and early-stage risk assessments must be institutionalised,” Dass says.

The source adds that insulating the project through a statutory MRT3 authority with cross-party oversight is critical and using phased implementation, front-load civil works and price escalation clauses are necessary.

“To avoid resistance from local communities, foster strong community engagement and ensure transparent land acquisitions to mitigate and pre-empt potential issues. For technical risk, adopt a two-tiered delivery model – bid out civil works early and deliver systems through public-private partnerships, similar to Sydney’s Metro.

“On the governance side, enforce scope lockdown, maintain transparent reporting, implement milestone-based payments, and utilise real-time dashboards,” the source advises.

Cutting commute but boosting output

If the MRT3 is built, what will the positive impact be for the country?

Dass says improved transport links in highly populated cities like KL typically generate positive gross development product impacts through direct investment effects and long-term productivity gains.

To give context, in 2022, the transport and storage sector contributed RM140.5bil in gross output, reflecting a 3.7% annual growth since 2015, and employed 475,831 people, with a 2.1% annual increase from 2015.

“Infrastructure investments like the MRT have strong linkage multipliers, stimulating upstream industries such as construction and materials, and downstream services like retail and real estate.

“The positive impact will be felt if there are spillover gains such as reduced travel time, improved labour mobility alongside increases in property values and business activity around stations,” Dass says.

The source adds that improved transport links are highly likely to boost productivity, unlock land value, expand labour markets and enhance national competitiveness.

“Urban transit investment improves labour mobility, reduces lost productivity from congestion, and spurs TODs.

“For Malaysia, the MRT3 also supports national projects like the ECRL and KL-Singapore double tracking by providing the city dispersal backbone needed to absorb increased intercity traffic.

“Secondary benefits include reduced healthcare costs, carbon savings, and improved air quality – all of which enhance economic sustainability,” the source explains.

The source says while data is still somewhat limited, MRT stations like Cochrane and TRX have seen increased commercial activity and property uplift, while companies are beginning to prioritise transit accessibility for office locations as well.

The project was first announced under then Prime Minister Datuk Seri Najib Razak in June 2010 – a part of the 10th Malaysia Plan to enhance public transportation within the region.

KTMB had been running since 1995, but the service quickly became overwhelmed with overcrowded trains, prompting frequent public complaints and highlighting the urgent need for upgrades.

By December 2016, Phase 1 of the Kajang Line opened, followed by Phase 2 in July 2017.

For MRT2, discussions began earlier in 2014 as the chief executive officer of MRT Corp at that time announced that plans were underway and construction was expected to start in November 2015.

However, construction only began in September 2016 in phases and completed in March 2023.

It is worth noting that all three railways lines, including MRT3, were conceived as a single integrated project. But in 2018, the MRT3 was shelved by then Prime Minister Tun Dr Mahathir Mohamad, with the government citing fiscal difficulties.

In 2020, with a new administration, came plans to revive the project which was approved by the Cabinet in 2021. After a number of studies and a change of government, current Prime Minister Datuk Seri Anwar Ibrahim announced plans to re-evaluate its costs in 2023.

Land acquisition is underway and expected to take up to 24 months, while construction tenders are expected to begin in the middle of next year.

Whether the MRT3 rolls out smoothly or faces familiar roadblocks remains to be seen.

What’s clear is that expectations are high – for better connectivity, shorter commutes and a more productive Klang Valley.

Malaysians can only hope that the promises made on paper translate into real progress on the ground.