By Vanitha Nadaraj
Does one of China’s largest rail companies have an upper hand in the bid for the Malaysia-Singapore high speed rail (HSR) project? China Railway Group Limited (CREC) is in pole position in the race to get the rail construction contract linking Kuala Lumpur and Singapore.
This has a lot to do with last week’s announcement to set up a regional centre.
The construction of the HSR is an infrastructure project highly sought after by numerous rail companies. They include those from Japan, South Korea, and other companies from China.
On Tuesday last week, CREC and Iskandar Waterfront announced that their plan to jointly bid for the HSR project, once the governments of Malaysia and Singapore call for tender, which is expected to be put up by the end of this year.
There is talk that Malaysia is favourable to the project being awarded to a Chinese company, while Singapore had a preference for either a Japanese or European company. The project is reportedly worth RM40 billion (US$10 billion).
Stronger China presence
But it is the announcement a day earlier that gives the impression that CREC is inching its way towards the HSR deal. Last Monday, CREC announced that it would be spending US$2 billion to set up a regional centre in Bandar Malaysia. The main terminus of the 330-kilometer HSR will be Bandar Malaysia, a huge mixed development that will change the Kuala Lumpur landscape.
On 31 December 2015, CREC and its Malaysian joint-venture partner, Johor-based Iskandar Waterfront Holdings Bhd, bought a 60%-stake in Bandar Malaysia Sdn Bhd, the project owner of the 486-acre Bandar Malaysia.
The stake was sold by the beleaguered state-investment fund 1Malaysia Development Berhad (1MDB) for US$1.82 billion. The remaining 40%-stake is held by the government.
This is one of the two multi-billion dollar strategic assets that China has bought from Malaysia within a space of two months, both of which involve 1MDB, and were said by government officials to be necessary to allow 1MDB to dig itself out of a heavy debt load.
In November, state-owned China General Nuclear Power Corp paid US$2.3 billion to acquire 1MDB’s Edra Global Energy Bhd, Malaysia’s second largest power producer. This gives China and its nuclear power company a major foothold in the energy sector, albeit a controversial one.
China will now have in its clutches 14% of Malaysia’s total power assets. Which is a huge hold for a foreign country, and one that at loggerheads over territorial claims in South China Sea with at least half of ASEAN countries, including Malaysia.
There is, however, a ruling that limits foreign ownership in power plants to 49%, but there have not been any indication as to how the government is going to get around this, or if China will get a waiver.
More China infrastructure projects
Last December the Malaysian government announced that the contract for electrification and double-tracking of the Gemas-Johor Bahru route would be awarded to a consortium led by China Railways Corporation. Works on the project worth RM7.1 billion (US$ billion) will begin next year.
The Malacca state government is working towards getting a RM20 billion (US$5 billion) investment from China in the next five years. One of the mega projects involves the Guandong provincial government of China, that will start construction on the Malacca port, with the purpose of turning it into one that is on par with Singapore’s.
It appears that a good number of mega infrastructure projects, especially those involving rail, are being taken up Chinese firm. And the HSR construction contract is likely to head that way, especially since this project is like the last piece in China’s rail transport jigsaw connecting Southeast Asia to China.
China’s Pan-Asia Railway
Malaysia has more than once in the last couple of months mentioned its commitment towards China’s proposed Pan-Asia Railway, and also its One Belt, One Road project.
The rail project gives China a new access to the Malacca Strait through the Pan-ASEAN Rail. Malaysia would be more than an entry point to the ASEAN markets for Chinese companies. It will be also a transit point to the Middle East, says Li Na of the Economic and Commercial Counsellor’s office of the Chinese Embassy in Malaysia to Xinhua news agency last week.
“Bandar Malaysia will also serve as Malaysia’s gateway to the world through the high speed rail to Singapore with direct links to the Kuala Lumpur International Airport and Changi Airport, and the proposed Pan-ASEAN Rail Transit to Bangkok and beyond”, Malaysian Prime Minister Najib Razak was reported to have said, using the alternative name of the Pan-Asia Railway.
The Pan-Asia Railway is also called the Singapore-Kunming Rail Link (SKRL) Project, which will link the capital cities in all mainland ASEAN countries with the possibility of extending it to Surabaya in Indonesia. Surabaya is the second largest Indonesian city.
Indonesia’s first high-speed rail project, to be built by China, is a 140km link between Jakarta and Bandung and is likely to be completed in 2018. This line is part of Indonesia’s 750km high-speed rail project that will connect Jakarta and Surabaya.
For a while it seemed that Japan would win the bid to build the Jakarta-Bandung railway, because the country had spent several years and millions of dollars to study the feasibility of the project. So when it was announced in October last year that China was given the project, it came as a huge surprise.
So, will CREC get Kuala Lumpur-Singapore HSR construction project? Highly likely, we think.