Malaysia said the high-speed rail link between Kuala Lumpur and Singapore may miss a 2020 deadline even after using government land as much as possible to avoid property-acquisition disputes.

BloombergThe project may take six to seven years to complete once construction starts by 2016, Land Public Transport Commission Chairman Syed Hamid Albar said in an interview yesterday. The agency has been “inundated” with proposals to participate, including those from French, Japanese, Chinese and German companies, he said.

“It’s not as expensive as we thought it would be at the start,” said Syed Hamid, whose commission is preparing a feasibility study. While he declined to give the estimated cost of the development, Malayan Banking Bhd. economist Suhaimi Ilias said it may be as much as 40 billion ringgit ($12.2 billion).

The proposed rail line will reduce the 300-kilometer (180-mile) journey over land to 90 minutes from about five hours. With other developing nations in the region including Indonesia and the Philippines vying for a bigger share of investment, Malaysia is keen to make better use of Singapore’s financial muscle as it targets becoming a high-income country by 2020.

Buildings stand illuminated at night in the Malaysian city of Johor Bahru, background, as traffic traveling along the Causeway across the Straits of Johor at dusk is seen from Singapore, on Saturday, Aug. 16, 2014. Photographer: Bryan van der Beek/Bloomberg
Buildings stand illuminated at night in the Malaysian city of Johor Bahru, background, as traffic traveling along the Causeway across the Straits of Johor at dusk is seen from Singapore, on Saturday, Aug. 16, 2014. Photographer: Bryan van der Beek/Bloomberg

Game Changer

Leaders of the two countries announced last year the rail link may be completed by the end of this decade, with Malaysian Prime Minister Najib Razak calling it a “huge game changer” that will transform the way the neighbors do business. The link would have a similar distance as New York to Washington.

While Malaysia initially targeted 2020 for the line to be completed to coincide with its plan to be a developed nation, it recognizes there may be “problems” with the original timeline, said Syed Hamid, 70. There are more elements than just construction that the governments need to study, he said.

“I suspect the government is at the stage where they are mulling over the financing of this project,” Suhaimi said. “How are they going to do this without affecting the target on fiscal deficit and achieving a balanced budget by 2020?”

Malaysia wants to trim the fiscal gap to 3 percent of gross domestic product in 2015 from 3.9 percent last year, and Najib is targeting a balanced budget by 2020.

The cost of building the line will probably increase amid the delays, taking into account inflation and as land prices rise, Suhaimi said. Syed Hamid said the project’s cost will be comparable to “international benchmarks” for similar systems and distance.

Dual Service

The high-speed rail may operate four times hourly with two services, one non-stop and the other that will transit cities and towns in four Malaysian states, Syed Hamid said. The journey on the train that has stops will take about two hours, according to the former Malaysian cabinet minister.

Japan is ready to provide funds and expertise to Malaysia and Singapore on the new network, the New Straits Times said Oct. 27, citing railway official Tomohiro Kobayashi. Kobayashi said the timeline for the project to be completed by 2020 is challenging, the paper reported.

Japan is looking for an overseas customer for magnetic-levitation technology as the country works toward opening its first line in 2027. Prime Minister Shinzo Abe has said the government may provide funding to support Central Japan Railway Co. (9022)’s bid to provide trains for a Washington-Baltimore line.

Maglev Trains

JR Central, as the rail operator is known, operates the world’s busiest bullet train line and this month received approval from the Japanese government to start building a maglev link between Tokyo and Nagoya. The plan will cost 5.5 trillion yen ($51 billion), including trains with speeds of up to 500 kilometers per hour.

The Land Public Transport Commission has studied various financing and business models for the network, including consideration for public-private partnerships, said Syed Hamid, who visited Japan recently to celebrate the 50th anniversary of the Shinkansen bullet train. The Malaysia-Singapore system will have at least four trains, he said.

Malaysia will look beyond ticket sales to bolster returns on investment in the project, including the contribution to the economy as smaller cities along the train line flourish, Syed Hamid said. He cited Shanghai’s Pudong district and the Chinese city of Tianjin as examples.

“If you depend on the fares alone, then it cannot be profitable,” Syed Hamid said. “It must be kept affordable. You need to look at what are the sources of income that will result from the development of the rail stations, the property along it, how the towns and cities will grow.”

Parts of the Kuala Lumpur-Singapore rail link may be build on elevated platforms and portions of it underground to minimize disputes the government may encounter on land acquisitions, Syed Hamid said. The line will try to avoid villages and private properties, he said.

“It’s emotion, sentiment,” Syed Hamid said. “There are so many big, big government projects — while economically and development-wise it is well-accepted, it is good — but there is a lot of public tension sometimes that you need to handle. So our brief and mandate is, avoid as much as possible.”

Source : Bloomberg
Oct 29, 2014 12:52 PM GMT+0800

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