Business Commentary

ECRL : Economics Cannot Be Set Aside

Written by TheMole

By Salahuddin bin Hisham

The tagline, “It’s the economy, stupid” made American voters focus on recession as an  issue and secured Bill Clinton’s victory against incumbent George Bush in the 1992 presidential election.

Boon or bane, a financial weekly cannot set aside economics to discuss the East Coast Rail Line (ECRL) project in a sensational manner.

Salahuddin Hisham was involved in various financial markets but has since, turned political and online.

It is fair to be concerned about cost as it is a major challenge in the construction and operation of high speed rail (HSR).

There is also the difficulty of predicting traffic. Economic viability and sustainability of service are dependent on it.

Nevertheless, any discussion has to give a fair perspective. For instance, The Edge claimed the ECRL cost is RM91.67m per km, which is equivalent to USD20.55m or £16.45m per km.

The estimated construction cost for a California HSR line is USD55m per km. And, HS2 planned for Britain is estimated at £78.5m per km.

Even though it is not an apple to apple comparison, surely ECRL cannot be “the world’s costliest railway”!

Then, the concern for China rising as an economic powerhouse, their investment in Malaysia, choice of CCCC as contractor, and national debt seem to highlight trivial issues.

China’s interest beyond its shores is only economics and the safety of its supply line. It has no history of colonialising countries beyond its borders. The notion of China as #2 superpower is exaggerated by the west.

All these concerns do not downplay the need for efficient transport as a necessary component for development.

Those critics quoting from HSS Engineers Berhad feasibility study should have pointed out shortcomings in the economic viability of the project.

Efficient transport systems reduce cost and time, improve reliability, and minimise waste from loss and damage. It links raw materials, parts, energy, and labor, and broader markets into a web of producers and consumers. And, it enables efficient division of production, leveraging of geographical comparative advantage, and opportunity for expansion.

More location translates to wider network and market size-access to achieve economies of scale. All these translate to growth.

The game-changing ECRL should be seen beyond better logistics for goods and people to/from Klang Valley. Economic activities and growth could be generated along the route and nearby area in the neglected East Coast states.

To spend additional billions of ringgit to extend the line to link Port Klang and connect to the 30-percent China-owned Kuantan Port, there must be a strategic reason. The proposed plan is for a ratio of 70:30 cargos to passenger.

There is opportunity from the massive development of rail transport to acquire technology and expertise, gain management skill and develop supporting services. Local universities could develop courses, establish faculty and conduct research on rail engineering.

This is something MIGHT need to look. A new leadership with commercial experience and fresh new idea is needed to develop this sub-sector into a new industry.

Malaysia is at the economic juncture where labour supply is slowing and there isa need for increased productivity.

In  a TV3 interview on Wednesday night, Minister in the Prime Minister’s Department Datuk Abdul Rahman Dahlan said HSR could last 100 years.

It is a game changer that should have been developed 20-30 years ago.

Perhaps, the opportunity and money only presented itself now.

It is the opportunity to be part of China’s One Belt One Road (OBOR) global master plan to connect Asia with Central Asia and Europe.

There are views doubtful of its success. It could take 20 to 30 years and trillions of Ringgt to complete.

However, if Kazakhstan could use the opportunity to build their infrastructure, it would be foolish of Malaysia to dwell in short-term rise in government debt to GDP ratio.

Should China turn colonialist,  it could not dismantle and take the ECRL home.

And, Malaysia is not Tibet.



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