By Stephanie Jacob
In the fourth of a five-part series on high-speed rail we look at the possible benefits and disadvantages of the project and the likely losers and winners. Predictably, construction companies are excited about the many opportunities the projects offer. But if this expensive project which costs RM30-80 billion is to fail in terms of delivery, it would be disaster.
Various proponents of the KL-Singapore High Speed Rail (HSR) link are keen to emphasise that this project is not just about transportation.
In fact, as SPAD chief executive officer Mohd Nur Kamal says, there is more than one way to travel between KL and Singapore. Rather, he says this link is a business and investment opportunity. One that will help generate business, that might not have happened without it.
HSR links have in the past tended to draw investments into the more developed cities on the line rather than spreading it out to the various cities along the line. This is a genuine concern for Malaysia, as we are likely to have up to five stations on the line. The last thing we can afford is to spend tens of billions and then to not make any gains from it.
Economists suggest that there will be opportunities for gains from this project, both during the building of the rail, and more importantly upon its completion. It will be imperative for the logistics of this link and the potential development of these sectors to be taken into consideration from the get-go.
As expected, the construction industry has responded eagerly to the proposal and this is not surprising given the magnitude of the project. Analysts say that it is unlikely that the entire project will go solely to one company – and with several tens of billion ringgit worth of jobs on offer, there is plenty to go around. Furthermore, with the government likely to be involved – even companies without the necessary funds to go at it alone, now have an opportunity to get involved.
An analyst with a bank-backed research house believes that the local firms may not have the experience necessary to embark on a project like this themselves. “Construction will go to a foreign company, such as China Railway or Siemens…I do not believe that our big local players will be the main construction company,” he said. That being said, there will be many opportunities for the locals through sub-contracts, he said.
Maybank KE analyst Wong Chew Hann agrees that a foreign firm might play a central role, but believes that it will probably be via a joint venture with a local firm. She opines that with such a big sum of money involved – it is possible that the government might look to appoint a project delivery partner in a structure similar to the one in place for the MRT project.
Nonetheless both say that with a project of this magnitude, there will be plenty of spill over contracts for any number of construction companies, both local and international to benefit from. Industry talk suggests that all the usual suspects are lining up bids to get involved, including YTL, UEM, Hartasuma and companies under Syed Mokhtar Albukhary amongst others.
But more than construction companies raking in billions; the HSR’s impact on other sectors in the economy will be the more important benchmark to whether or not this link is the best option for Malaysia.
Many analysts see real estate and property development to be the clear favourites to benefit from the HSR project.
“Right now, the property market in Malaysia and land costs are undervalued,” says a property and construction analyst for a local investment bank. He believes that with the reduction of travel time, many Singaporeans will be attracted to investing in land both here in the Klang Valley and in the upcoming Iskandar development in Johor.
Singapore’s expensive property prices and the strict measures in place to regulate it, has put owning property out of reach to many. Those who are willing to live in KL and commute to work in Singapore might see Malaysia’s cheaper real estate and a lower cost of living as an inviting alternative.
Furthermore Singapore’s extensive plans to reclaim and recycle land such as old industrial areas for new developments might encourage Singaporean manufacturers and factory owners to look at Malaysia as a possible place to relocate their operations to. A prospect that is further enhanced when the lower labour costs here is factored in.
Tourism is another sector likely to receive a boost from the HSR link. The large number of affordable food and beverage, and retail options available will be a massive selling point for attracting both foreign tourists and Singaporeans to Kuala Lumpur.
Highlighting that Singaporeans have a large spending capacity, RAM economist Dr Yeah Kim Leng says it will be important to develop areas of tourism that might be of interest to them. One area that is less explored, but possibly lucrative is the medical tourism sector which can be developed over the next few years, in time to be marketed to Singaporeans once the link is completed.
“Gaming will also a winner as result of this link,” says an analyst with Public Investment Bank. Singaporeans are likely to flock into Malaysia to avoid restrictions that have been placed on them at home, he says.
Wong also suggests that if marketed properly and effectively, tourism gains will not be limited to KL alone. Cities along the way including Malacca with is a UNESCO Heritage status and the Legoland theme park in Johor could see an influx of Singaporeans looking for affordable holidays not too far from home.
On the other hand, Dr Yeah says that “some cannibalisation of the airlines (market share) will be inevitable.”
Hong Leong Investment Bank aviation analyst Daniel Wong agrees, saying, “the ticket pricing will eventually determine how much market share will be lost to the rail.” He explains that should the cost of the ticket be anywhere from RM140 to RM200, then AirAsia will be able to compete but not MAS. As a full service carrier, MAS will unlikely be able to drop its prices to such a level, said Wong. Airports could also stand to lose revenue, due to the decrease in passenger foot traffic.
The impact of High Speed Rail links on the environment is also a matter of much contention. HSR links have long been touted as the solution to depleting oil reserves and environmental concerns. Run on electricity, they are seen as the green transportation option as opposed to buses, cars and airplanes.
However the picture may not be as a rosy as the one that is being painted, as it fails to take into account the construction process and land clearing that will be undertaken to build the link.
Furthermore, if tickets are RM200 to RM300 per trip and out of reach to the average traveller who depends on road travel – then the HSR link is not necessarily going to make a significant dent in carbon emissions.
For Malaysia, one hopes that a detailed environmental assessment is being done in tandem with the feasibility report to ensure that along with determining the best alignment option to ensure maximum economic gain – the serious environmental concerns are also sufficiently addressed.
There is a need to ensure that everything from the route the link takes, to land clearing activities and construction are done in a manner that is least harmful to the environment. Otherwise the environment might end up being the big loser.
But there is potentially a much bigger loser than even the environment – if this project turns out bad, it will be a major financial disaster for the country. That means every Malaysian could be a loser.
Yesterday: How much would it cost and would it be feasible
Tomorrow: The right steps towards high-speed rail
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