Opinion: High speed rail to S’pore will dwarf 1MDB losses of RM42 billion

By P Gunasegaram

This unity government surely can think of better things to do with RM200 billion

By the time the high speed rail (HSR) link to Singapore costing an estimated RM100 billion currently is finished, in 10 years or so, the cost would have escalated to perhaps more than twice that at some RM200 billion.

This project, which was abandoned and a compensation of RM320 million paid to Singapore in March 2021, is set to resume with the necessary processes already being rolled out. Seven consortia have submitted requests for information (see table for a timeline).

Transport minister Anthony Loke, pooh-poohed any suggestion that Japanese firms’ withdrawals from the project won’t jeopardise it as many others were still interested. The Japanese were said to have withdrawn because the project will become unviable without government support.

Time-line in reverse chronological order:

1. Seven consortia request for info for RM100 bil HSR- Jan 16, 2024
2. HSR project not affected by Japanese firms' withdrawal - Loke - Jan 13, 2024
3. Pua: Annual interest higher than cost of flights to Singapore - Dec 21, 2023
4. Sultan Ibrahim wants HSR revived, to pass Forest City - Dec 10, 2023
5. Anwar: M’sia to submit new proposal once decision is made - Aug 4, 2023
6. Loke: Private companies interested in HSR - May 11, 2023
7. Loke: HSR can continue if not funded by govt - Mar 8, 2023
8. PM Ismail Sabri: Malaysia interested in reviving HSR project - Aug 23, 2022
9. Malaysia pays Singapore RM320m for terminating HSR - Mar 29, 2021

Loke had said in March last year that the HSR could continue if it was not funded by the government. But it is impossible to see how the project can continue without some kind of government support - if not funding then a guarantee. Loke was silent on the matter of a guarantee.

Any kind of financial support, including guarantees, means that the government bears the risk much like the obligations that 1MDB made over the years from 2009 (15 years ago), leaving the government with liabilities of an estimated RM42 billion over the life of the borrowings. That’s before opportunity costs!

Now, the HSR is estimated at around RM100 billion in costs, and that could balloon to RM200 billion over an estimated 10-year construction period. That’s a huge amount of money - if we assume interest costs of even just six per cent a year, that amounts to RM12 billion a year!

And as correctly first pointed out by former MP Tony Pua, that’s more than the cost of all flights to Singapore and back for one year. Pua had calculated the interest cost at RM4 billion but my revised calculations show that to be RM12 billion.

Let’s use Pua’s RM400 per ticket at current costs. There are 82 flights a day to and from Kuala Lumpur- Singapore - the busiest air route in the world. Let’s say there are 150 seats per flight and 365 days in a year.

That approximates to 4.5 million flights a year and RM1.8 billion (365X82X150X400) in fares, far short of the RM12 billion in interest costs. It implies that just the interest payments will cover the cost of tickets by 6.7 times!

The sad truth, however much you want to adjust the figures, is that it is impossible to make HSR fares anywhere near as competitive as airfares. The HSR project is doomed to catastrophic failure from the start. It will be impossible to get the project off the ground without government support.

And if the government is going to guarantee the loans - the only way this project will take off - the potential losses it will incur will dwarf the losses at 1MDB of RM42 billion even before taking into account opportunity costs. HSR won’t take off for anything less than RM200 billion - all of which will be lost.

If this is not enough to convince people that the HSR to Singapore is sheer folly, here’s an article which gives 10 reasons why it should be stopped in its tracks.

Remember, we have double-tracking right up to Johor Bahru and trains which can go at a speed of 170 km per hour. We could expand this to Singapore and be there in less than three hours. Will getting to Singapore an hour earlier mean much of a difference? No.

Who will benefit more from this link - Singapore or Malaysia? Singapore of course. It will pay less for construction costs and get more Malaysians to come into Singapore. Can you envisage hordes of Singaporeans coming for work or otherwise after HSR? No.

Remember too that politicians - all manner of politicians - love high cost projects. Why? There is so much opportunity for patronage and kickbacks. The people this project will enrich are the already rich who will get the projects, while facilities for the rich who will be the only ones able afford to use this will be made, and it will potentially enrich politicians immensely as well.

The argument that this will have multiplier effects throughout the economy is pure gobbledygook - you will get more by simply giving the money to all Malaysians. As most Malaysians will spend the money because they don’t have enough to spend, that will have far more effect on the economy - a RM200 billion boost - than to give an inefficient, needless project to a few who will squirrel net proceeds overseas.

I am sure this unity government can find a lot of things that it can do with RM200 billion instead of establishing a high-speed rail link to Singapore. If it can't, it's not fit to be a government.

(P Gunasegaram agrees with whoever said: “Those who do not remember the past are condemned to repeat it.” How true!)

P Gunasegaram is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav. Log in to creator.newswav.com and become a Newswav Creator now!

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