KUALA LUMPUR: The government's decision to terminate the Kuala Lumpur-Singapore High-Speed Rail (HSR) project is the right move as the country is currently facing both health and economic crises, economists said.
Putra Business School associate professor Dr Ahmed Razman Abdul Latiff said this was despite the fact that the government was facing the possibility of paying RM300 million in compensation to Singapore.
He said the cost of committing to the project was much higher, ranging from RM70 billion to RM100 billion.
"Given that the country is facing both health and economic crises at the moment, the financial commitment required to continue with the HSR project might not be the top priority for the government," he told the New Straits Times yesterday.
Ahmed Razman said it was possible for the government to build a domestic HSR from Johor Baru to Kuala Lumpur, but an overall impact analysis should be carried out again.
"There is no point building the infrastructure if it does not create demand for it and does not create the multiplier effect to the economy, especially surrounding the stations along the route.
"In addition, the government has to tackle its ever increasing debt commitment and this can have repercussions on its sovereign debt rating as well as its ability to manage the economy under the 12th Malaysia Plan."
Juwai IQI chief economist Shan Saeed said amicably calling off the project at this moment signalled that both countries understood the limitations and global fragilities in the external landscape, as most countries would be focused on maintaining macroeconomic stability this year.
"Markets won't be affected by this decision. In my opinion, the government should focus on strengthening the domestic economy and demand in order to keep the growth trajectory moving in a structured manner.
"Supporting local investors and boosting aggregate demand is the key to Malaysia's economic outlook for 2021.
"This is called the dual circulation strategy that many countries are now following, the Chinese economic model, to revive the economy."
He said the government could review and revisit the idea of a Kuala Lumpur to Johor Baru high-speed rail, which could buttress the economy at the macro level.
"This can provide much needed momentum to the national economy, employment opportunities for locals, contribute 0.5 to 0.7 per cent to the gross domestic product (GDP), boost productivity and, above all, give significance to the domestic infrastructure projects.
"Infrastructure investment has positive correlation with GDP growth in the long run."
Shan said Covid-19 had altered the financial and economic outlook for many economies.
"Many markets have plummeted and the alchemy of markets has taken a new direction.
"Maintaining economic confidence brings the desired outcomes to meet masses expectations.
"The government is cognisant of the fact to alleviate the hardships of people to achieve economic progress." By Farah Adilla