THE recent launch of the 688km East Coast Rail Link (ECRL) has once again sparked great interest among the Malaysian public relating to Chinese investments in Malaysia following the signing of 23 memoranda of understanding (MoUs) worth RM183 billion.
Part of the deal is the RM55 billion earmarked for the ECRL infrastructure project. Not all issues raised about China’s deal with Malaysia can be substantiated though. Issues, such as the deal might “sell” our sovereignty, is clearly a stretch. And the solution to this, which is to turn away investments from China, is equally ridiculous.
First of all, we have to remember that all the deals made with China is a two-way deal. And by that, I mean Malaysia will also benefit from this arrangement in so many ways, such as increase in growth, improved exports, accelerated development, job creation as well as gaining access to China’s capital and market.
As for the ECRL infrastructure project, a lot of research, studies and analyses have shown that the possible positive impact of this project far outweighs the possible costs raised by the critics.
For one, the regional development gap between the east and west coast of Peninsular Malaysia will be significantly reduced.
According to Malaysia Rail Link Sdn Bhd, we can expect around RM50.1 billion worth of socio-economic benefits from this project. The east coast states of Terengganu, Kelantan and Pahang are expected to generate 1.5 per cent growth over the next 50 years.
Based on the World Economic Forum estimates, every dollar spent on a capital project, such as transport, the economic returns generated is expected to be between five and 25 per cent.
The ECRL, as part of the “infra-rakyat” projects together with the Mass Rapid Transit, the Kuala Lumpur-Singapore High-Speed Rail, and the Pan-Borneo Highway, which provides modern, safe, efficient and reliable public transport, will play an big role in propelling the Malaysian economy into the top 20 nations by 2050.
The ECRL will cut travel time between the east and west coast from 12 hours average, to a mere four hours. As transport costs will be significantly reduced, and as places in the east coast will be well connected with Port Klang in Selangor, business opportunities are expected to flourish with new jobs being created along the 23 stations, improving existing towns, such as Mentakab, Chukai and Maran, and may also open new towns along the rail line.
ECRL will connect Malaysia to the rest of the world through Asia, thus helping to boost the business of local traders, especially the small- and medium-scale enterprises (SMEs).
The local tourism industry is also set to reap economic benefits, which will directly impact the living standards and quality of life.
But issues with regard to cost is somewhat justified, especially in terms of the cost structure, pricemechanism, and how it is funded. No doubt that the debt issue, especially on the part of the contingent liability, could be a cause for concern.
In this regard, I do believe that proper implementation and a continuous engagement with the public on the latest development on the project is critical to avoid any unnecessary misinformation about this project, which is expected to be completed in 2024.
With the successful implementation of the Mass Rapid Transit recently, it is hoped that the execution of the ECRL will be as efficient. Any delays or unnecessary uncompetitive bidding will certainly incur costs.
The other concern is the recent capital control imposed by the Chinese government.
The fear that the ECRL project will become an abandoned project and will burden the future generation is somewhat misplaced. It is essential to note that 85 per cent of the ECRL project will be funded by the Chinese Exim Bank soft loan, with 3.25 per cent interest. This is highly attractive compared with other loans to developing countries in financing infrastructure projects. The balance of 15 per cent will be financed with Sukuk Programmes through our local banks.
ECRL is part of the bigger vision of China’s Belt and Road Initiative, which is of the highest priority for the Chinese government, which involves 65 other countries in the world, encompassing a third of global gross domestic product and 60 per cent of the world’s population.
Hence, it is unlikely to negatively impact the major contractor from China, the China Communications Construction Co Ltd (CCCC), which handles 70 per cent of the project.
The other 30 per cent, or RM16.5 billion, will go to local contractors, which hopefully will not just create jobs and business opportunities for Malaysians, but also technology transfer and hence, improve the capability and capacity of local companies.
In any economic deal, there are always risks involved. That is just natural. The issue is on how we handle the possible risks and find ways to minimise them while optimising the benefits.
**The writer is a director of the Asian Research Institute of Banking & Finance, Universiti Utara Malaysia