Posts Tagged ‘ECRL


ECRL folly bound to fail and burden the nation

ECRL folly bound to fail and burden the nation

COMMENT | The East Coast Rail Line (ECRL) is being touted to Malaysians as a world-class “game changer” which will accelerate development in the East Coast states of Peninsular Malaysia. Unfortunately, there is little evidence that it will do so, and the rationale for such claims are dubious, to say the least.

We have been told that RM55 billion is being invested in ECRL, which will be completed by 2024. All over the world, such mega-projects are notorious for cost overruns, and there is no reason to believe that this project will be the exception to the rule.

The justification for the ECRL is that it will carry almost 60 million tonnes of freight yearly by 2035. This is incredible because even KTM only carries about 6 million tonnes per annum with its current nationwide network. If the projected massive surge in freight tonnage does not materialise, the project will lose even more, meaning that taxpayers for generations to come will have to massively subsidise the ECRL.

ECRL is supposed to greatly benefit the country in so many incredible ways as to defy simple logic. But will there be enough passenger traffic to support a high-speed rail link? What kind of cargo needs such a costly high-speed haulage connection. And which high-speed railway in the world stimulates so many businesses and jobs in all the towns it will pass through, as claimed.

Will the ECRL be an expensive ‘white elephant’ paid for by Malaysians for many years to come? The Kemaman-Kuantan rail link, completed several years ago, has hardly been used to date. Are we supposed to be thankful that it cost much less than the ECRL?

Even Wan Saiful Wan Jan, the libertarian chief executive of the Institute for Democracy and Economic Affairs (IDEAS) who endorsed the Forest City project in Johor Baru, found the ECRL claims difficult to swallow in a recent article arguing for improved governance generally, especially to manage investments from China.

Honest critics are already being accused of wanting to deprive the East Coast states of development. But those with longer memories know how much Kelantan has been deprived of federal funds by Putrajaya, while Terengganu has been denied petroleum revenues and its investment fund was ‘hijacked’ to become the now notorious 1MDB.

China firms to profit

Of course, the deal will be good for some Chinese state-owned enterprises. The contract was given to the China Communication Construction Company (CCCC) after direct negotiations, without any open tender, although Malaysian companies have delivered on rail projects before. CCCC will be required to subcontract to local firms, but will remain the main contractor.

As we should have learnt from earlier arrangements, foreign firms find ways and means to bring their preferred partners in with them, using local partners to fulfil such requirements as meaningful technology transfer. The international success of Ingress (e.g., in Rayong, the ‘Detroit of Thailand’) contrasts sharply with the minimal development of Malaysian technological capacity and capabilities by many other Proton vendors due to their (mainly Japanese) principals’ practices.

The ECRL will be funded by a loan from China’s state-owned Exim Bank, with the Malaysian government, i.e., taxpayers, serving as guarantor. Thus, the risk and liability will be completely borne by Malaysia.

So, Malaysia will essentially be borrowing money from a China bank to pay a China company to build ECRL. Very little of the loan will get to Malaysia as the Exim Bank loan will be used to pay CCCC. Malaysians will bear all the risks for ECRL while the China firms are guaranteed profits by Malaysians.

Whether or not the ECRL is profitable, we will still have to repay the loan with interest. Malaysia does not have to pay during the first seven years, but after that, we have to settle it within two decades. So financially, this is essentially a loan for which we Malaysians will exclusively bear all the risks.

ECRL folly bound to fail and burden the nation
Jomo KS
11 Aug 2017 – malaysiakini


10 reasons why we don’t need RM55 BILLION ECRL

10 reasons why we don’t need RM55b east coast rail link

A QUESTION OF BUSINESS | Why does the country need a double-tracked, electrified East Coast Rail Line (ECRL) from Port Klang on the west coast of Peninsular Malaysia to Kuantan and Tumpat on the east coast – 688 kilometres, to be built at a massive cost of RM55 billion?

Especially since the earlier double-tracking project from Padang Besar, Perlis to Johor Bharu costing a massive RM36 billion is already one of the greatest, if not the greatest, infrastructure failures in Malaysia ever?

Proceeding with such a dubious project raises many questions over the competency and integrity of the government which awarded this project without a tender process to the China Communications Construction Company (CCCC), a China state-owned company which was barred from World Bank projects in 2009 because of alleged fraudulent practices in other countries.

Also, by now, China’s efforts to further its own interests under the One Belt One Road (OBOR) project is now well-known. Many, including this writer, consider it to be a thinly disguised plan using Chinese and other concessional financings which will strengthen China’s role in international trade, industry and connectivity, often at the expense of other countries.

China’s vision for the ECRL seems to be for the link to provide connectivity via rail between Port Klang and Kuantan for cargo to be moved back and forth which will save transport costs for goods headed to and out of China. But at RM55 billion, the number of goods moved has to be astronomical for it to be economically feasible.

Here are 10 reasons why that ECRL project should absolutely not proceed.

1. Economically not feasible. At RM55 billion, it’s the largest infrastructure project ever for Malaysia. If we assume a required 10 percent rate of return on the investment, the ECRL has to generate an income, not revenue, of RM5.5 billion a year. Assuming income is even 20 percent of revenue, then revenue needs to be a massive RM27.5 billion! The impossible task ahead is illustrated by this: In 2016, Singapore’s port had a turnover of S$3.7 billion (RM11.7 billion) and a profit of S$1.2 billion.

2. Earlier RM36 billion double-tracking has failed spectacularly. Let’s look at the utter failure of the RM36 billion double-tracking venture initiated under the Mahathir regime. Rail operator KTM had a revenue of RM1.1 billion in 2016 from which it obtained a cash flow of a mere RM166 million. Revenue is only 3 percent of the cost of double-tracking while operating cash flow is a mere 0.5 percent, not anywhere near enough to cover even interest expenses. For a 10 percent return on costs, cash flow needs to rise over 20 times to RM3.6 billion a year. This is the backbone north-south route of Peninsular Malaysia. How is the ECRL going to fare any better?

3. Expensive. Not only is the ECRL extremely expensive in absolute terms, it is also very expensive in terms of cost per km at RM80 million compared to the Gemas-Johor Bharu double-tracking stretch of RM45 million per km. However, this is not strictly comparable given that the ECRL goes over hilly terrain. But analysis is seriously hampered by the lack of information.

4. Unnecessary. Such a large investment can only be justified if there is a great economic benefit. Economically it will depend on one major customer – China – which is looking to export and import goods more cheaply by ferrying goods between Kuala Lumpur and Kuantan via a rail to cut shipping costs.

5. Does not serve the country’s purpose. Such a move does not serve the country’s purpose but instead represents the diversion of badly needed and scarce resources to a project that could potentially fail and fail big and will benefit China directly.

6. Opportunity for patronage and corruption. By inflating project costs, there are plenty of opportunities for patronage and outright corruption, representing a huge risk to the country and further erosion of government governance and accountability. Reports have flourished saying that amounts from overpricing the contracts could find its way into 1MDB to fill the hole in its debt obligations. Considering that 1MDB is in a rather bad state and needs rescue, such reports cannot be dismissed outright.

10 reasons why we don’t need RM55b east coast rail link
P Gunasegaram
8 Aug 2017 – malaysiakini


Will the ECRL be another white elephant?

Will the ECRL be another white elephant?

COMMENT | Tell me which public transport system in Malaysia is profitable and I will tell you whether any Chinese investor would pump in money to build the East Coast Rail Line (ECRL).

That was literally the challenge I made when I first wrote about the ECRL after Prime Minister Najib Abdul Razak returned from China, boasting of huge investments pouring into Malaysia. I believe after his trip to India this time around there will be a lot of “good news” (technically more like fluff to me).

Don’t get me wrong as I would welcome investments from any country, but my reservations are mainly because of the way how the negotiations have been made.

By his visit to both China and India, just like his 1Malaysia slogan in the lead-up to the last general election, Najib will not win a single vote from those who have already made up their minds. Why is that so?

It is unfortunate that Najib comes to many of us with his baggage that one can only now take his words with a pinch of salt. Ask P Waythamoorthy of Hindraf and you will know why Waythamoorthy is no longer a deputy minister in Najib’s cabinet.

Not that he is the prime minister everyone has to believe what he has said, especially since we have been told so many variants to the real story. The generous Arab prince in the fairy tale of a RM 2.6 billion donation is what we all know from Najib until the US Department of Justice exposed the lie and called us a nation of ‘kleptocrats’.

Why is it a white elephant?

The truth is that no investor would pour in RM55 billion to build the ECRL because it will not be able to generate returns. In short, the project is not sustainable. If it were profitable, investors would be bidding for the contract to build the ECRL.

For this reason, I agree with Damansara Utara state assemblyperson Yeo Bee Yin that the ECRL will be yet another ‘white elephant’. Like the many white elephants around the country, the construction of the ECRL would only become a financial burden to the country for the next 20 years.

Let’s look at the rationale. Even though the government is not prepared to reveal the feasibility studies done by (engineering group) HSS (Integrated), your guess is as good as anyone’s.

Just look at the North-South rail link, which is supposed to be the busiest. A local company was willing to invest in the high-speed train between the Klang Valley and Singapore, yet till today, Keretapi Tanah Melayu (KTM) Berhad has not turned the train service for the entire stretch from Padang Besar to Singapore into a lucrative business.

How else would you expect the ECRL to bring good returns in order for it to be able to service its own loan? We can gauge from the traffic flow both ways from East Coast states and the rest of the peninsula. In the absence of the ECRL, are the highways always very congested with cargo trucks and inter-state coaches?

How many of the loads in these vehicles can be converted into either cargo or passengers for the ECRL? Putting the figure at 50 percent would be too ambitious, and that being the case, would it be only 20 percent at most?

Does that kind of figure justify the government’s spending of RM55 billion to build what we believe will become a white elephant, not forgetting the cost of maintaining the service.

Will the ECRL be another white elephant?
Stephen Ng
1 April 2017 – malaysiakini


East Coast Rail Link not needed, a white elephant in the making?

Is ECRL a white elephant in the making?

The East Coast Rail Link (ECRL), a 620km high-impact project under the 11th Malaysia Plan, will be built and funded by China. The government is hopeful that it would spur the country’s transportation industry development and help to speed up growth of small towns along the way.

However, PKR Bandar, Terengganu Assemblyman Azan Ismail worries that the project may end up in a same fate as the East Coast Expressway (LPT2), which is struggling to recover its building cost.

“The highway is very much under-utilised,” he says. “It lacks of traffic volume and toll collections are also not up to par as what was projected prior to the construction of the highway.

“That is why this railway project looks as though it would have a recurring problem. The state government of Terengganu paid for the LPT2, are they expecting the same to take place for the ECRL?

“It is really not a wise decision to spend that much in this economic situation that country is facing at the moment.”

Azan says he does not see any reason why the railway is needed.

“In terms of ROI (Return of Investment) I don’t see how it will yield returns even in the next 100 years. There is no public reason as the people don’t need this rail, and if we are talking about efficiency and timing, it also does not support the building of the railway, especially when we are possibly entering pre-economy crisis soon.

“Maybe the PM (Datuk Seri Najib Razak) could say that he wants to modernise towns, but otherwise, logically, it just looks like a reason for him to show that he is doing something for the people to regain the public’s confidence in him,” he adds.

Even with 60% of the railway project being located in Terengganu, the people will not necessarily benefit from it.

“The state government forked out RM1.85 billion and until now there is no recovery. If this is a form of reward that Najib is giving to Terengganu for its past years of revenue contribution, while it may sound rewarding, the railway only passes the town centres but there is no indication of regional development in its plans.

“The locations are not strategic at all and it will not encourage regional development no matter how you look at it,” he says.

Azan says none of the state’s representatives have spoken or given their views on the project.

“They are all keeping quiet as if they don’t know anything about this project. Nothing had been discussed or projected, there no information on the project and lacking in discretion.

“Even if the government has stated that the project is conducted as a PFI (Private Finance Initiative), there is no reason for another country to take interest in Malaysia’s social obligations.

“What is in it for China that it wants to interfere with Malaysia’s social development? The only logical reason for China’s involvement is that it is making a huge profit out the project. If you look at the towns the railway will pass, these could be towns that are rich in gold reserves, mineral reserves and timber that could be worth billions.

“But if that is true, that would be the most stupid move taken by our government and that is to sell out the country on purpose,” says Azan.

He adds that in terms of investment returns, it would take at least 100 to 200 years to break even. The amount to be spent, a rough estimation of RM35 billion out of the total reported cost of RM55 billion, does not justify this amount of spending all used on a railway project.

“The people in Terengganu don’t need a railway. The government cannot even ensure basic fundamental investment in the society let alone this railway.

“We need a better infrastructure system, a better town organisation in both urban and sub-urban areas. The state’s infrastructure is in a mess as there are no changes for 40 years, including the inter-connectivity between towns.

“Terengganu is very hilly, it does not make sense for a train to pass through,” he says.

Is ECRL a white elephant in the making?
Nov 04, 2016 – The Heat Malaysia


Enormously inflated ECRL rail contract a ruse to pay off 1MDB debt?

Desperate to Survive, Malaysia’s PM Sells his Country to China

Enormously inflated rail contract a ruse to pay off 1MDB debt

The vulnerability of Southeast Asian countries to the combination of Chinese money and their own corrupt politicians has been laid starkly bare by a new report on Malaysia’s scandal ridden 1MDB.

Desperate to extricate himself from the massive misuse of funds supposedly raised for development by the state-backed sovereign fund, Najib has turned to China. The price has been Malaysia’s silence in the face of China’s claims to most of Malaysia’s South China Sea economic zone and failure to speak up following the Court of Arbitration’s ruling against China and its nine-dash line claim. Thwarted by the court of arbitration, China over recent months has been seeking – with considerable success – what it was clearly denied in court: by purchasing the loyalty of the littoral nations.

The Sarawak Report, an online publication with a remarkable record of access to leaked documents on thievery by leading Malaysian politicians, has revealed a plot, now close to realization, to use a Chinese state company as a conduit for dishonestly using public funds to plug gaping holes in 1MDB accounts.

These holes are the direct result of a billion dollar spending spree in the west by 1MDB on luxurious apartments, parties and the international jet set as well as direct and indirect payments to Najib himself and associates such as Jho Taek Low and Najib’s wife Rosmah Mansor’s son from a previous marriage. It is quite likely that before long, other of the clutch of countries investigating the scandal are going to go public with charges equally as damning as those made public last week by the US Justice Department, which named “Public Official No. 1” 34 times in the document. In all, Attorney General Loretta Lynch said, at least US$3.5 billion had been siphoned off the Malaysian taxpayer.

Now Najib is attempting to get China to cover that loss surreptitiously and in the process probably selling out his country over its rights in its own exclusive economic zone. Chinese companies have already helped 1MDB’s cash situation by buying power stations assets at favorable prices. But those deals were aboveboard compared with the latest multi-billion ringgit scam.

According to the documents published by Sarawak Report, the plot is for China’s state owned China Communications Construction Company (CCCC) to be awarded the contract to build the high speed East Coast Rail Line (ECRL). Following official receipt of the award, CCCC is due on Aug. 5 to pay US$850 million for certain 1MDB assets. CCCC will also assume responsibility for US$4.78 billion in interest and principal due of 1MDB obligations due between now and 2022.

In return for this enormous bailout, Malaysia’s Ministry of Finance is to undertake to pay billions to CCCC on top of the actual cost of the project.

The contract works thus:

Total contract value: MYR60 billion

Actual assumed cost of project: MYR27 billion

CCCC profit margin of 4.55 percent: MYR2.729 billion

Additional differential: MYR29.8 billion

The so-called “additional differential” is the amount needed to compensate CCCC for its support of 1MDB. Thus the Malaysian public is expected to pay double the proper price for the railway simply to bail out Najib and his corrupt associates. The amounts to be paid on behalf of 1MDB total an astonishing US$7.46 billion. This includes the debts due to Abu Dhabi’s sovereign wealth fund which is currently suing 1MDB over unpaid loan guarantees.

According to the Sarawak Report documents, the bail-out also reaches companies controlled by Jho Lo – and by mega rich former Sarawak Chief Minister Taib Mahmud, which were used to funnel money to Najib.

The deal also gives China additional advantages from which it would benefit for years to come, limiting Makaysia’s ability to open later projects to competitive bidding, notably the adoption of China’s rail technology for future major infrastructure. CCCC will get a 10-year break on GST and income taxes, allow CCCC to select suppliers and sub-contractors without reference to the government. Meanwhile the government will take responsibility for land acquisition along the route.

Desperate to Survive, Malaysia’s PM Sells his Country to China
By Philip Bowring
July 27, 2016 – Asia Sentinel

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We cannot afford ridiculously expensive RM55 Billion ECRL!
All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
When the people
fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
Do you hear the people sing?