Will the East Coast Rail Link be a game changer for Malaysian international trade?

Work is underway for Malaysia’s US$13 billion East Coast Rail Link. Malaysia expects the railway to bring economic and social benefits for the whole country.

By John Pennington

The construction of Malaysia’s US$13 billion East Coast Rail Link (ECRL) began earlier this year. The government hailed the project as a “game-changer”. When complete, the 688-kilometre electrified line will connect the capital Kuala Lumpur with Pahang, Terengganu and Kelantan in the northeast of the country.

The ECRL is one of the biggest infrastructure projects Malaysia has ever taken on. It dwarfs the length of Mass Rapid Transit 2 (52.5 kilometres) and even the scale of the Port Carey Island development (100 square kilometres).

Source: Channel News Asia

The government claims it will be a huge boost for the region

Prime Minister Datuk Seri Najib Tun Razak declared that the ECRL would be a “catalyst for economic equality between the west and east coast.” He believes that the ECRL will lead to an increase in jobs, education, and a boost in regional tourism. That could stimulate growth in the area by as much as 1-1.5%.

The ECRL will link up with Kuantan Port, which is undergoing massive Chinese-funded expansion to enable larger vessels to access the port. The government hopes both projects will provide an “alternative trade route” for cargo that currently moves through the Strait of Malacca via Singapore.

Sources: Channel News Asia, Global Construction Review, Rail Journal

ECRL critics point to environmental damage and costs

While the ECRL will take traffic away from congested and polluted roads, its construction and operation will cause environmental harm. It crosses major rivers and protected forests. “Malaysia should have a forest spine, but now it’s all broken,” lamented Shariffa Sabrina Syed Akil, president of non-governmental organisation PEKA. “This is where our wildlife runs into problems, trying to cross these areas.”

The developers made some concessions. They will build 19 new tunnels and raise the railway off the ground in some regions in a bid to reduce the environmental impact. However, these changes added more construction costs.

While some analysts claimed that it could be a “significant resolution” to China’s over-reliance on the Strait of Malacca, others noted that the quoted figure of 54 million tonnes of cargo Malaysia hopes the ECRL will carry makes up around one-tenth of the Port of Singapore’s current traffic. China’s share of the global shipping market is small. Even if China diverts as much traffic as it can away from the Strait of Malacca, it does not have the resources to make Malaysia and the ECRL a regional powerhouse.

With the failure of the RM36 billion (US$8.6 billion) double-tracking project still fresh in their memory, critics immediately denounced the ECRL, which will cost even more. The government must be cautious about overspending and how they collaborate with China.

In Thailand, local engineers protested against China’s influence and forced delays to a similar rail project. When Sri Lanka could not repay China the money lent to develop its harbour in Hambantota, the government negotiated a new deal which effectively handed control of the port to China.

The link calls into question Malaysia’s reliance on China

Such a situation would lead to stronger claims that Malaysia is becoming more and more reliant on China. The rail link is one of many infrastructure projects which benefited from Chinese backing.

 

Source: Eurasia Review

Massive infrastructure projects such as these are a boon for local employment. However, China’s influence means Malaysians will not be the sole benefactors of those opportunities. Razak attempted to counter this by guaranteeing 30% of construction jobs will go to local workers. Pakatan Harapan, the opposition coalition, said that none of the country’s 6,000 national rail workers would work on the project.

Another argument against the ECRL is that the more gains China makes in Malaysia through investing in infrastructure, the more soft influence and power Malaysia loses in the region; in other words, China’s chequebook diplomacy buys their support.

Razak remained defiant, asserting, “It makes no economic sense for Malaysia to turn away Chinese FDI (foreign direct investment), as some politicians are suggesting. Such a myopic and narrow-minded view betrays a fundamental misunderstanding of economics and would be bad for the country.”

Malaysia must strike a balance

Malaysia must, therefore, try to strike the careful balance between necessary dependence on stronger economies to aid development and overdependence on one such power that limits political leverage and independence.

Razak, who will soon be seeking reelection, will continue to defend increased Chinese investment in infrastructure projects. If the project falls behind or fails, it is Malaysia that will suffer rather than China.

If as many Malaysian passengers and cargo use the railway as predicted, the ECRL will be on track to reverse the recent trend of Malaysian development failures. However, the chances of that happening are slim. These figures appear wildly optimistic, and even if they materialise, the ECRL will struggle to turn a profit or make a big enough impact on its regional competitors. In that case, it is hard to see how Malaysia will pay back the loan without incurring more debt.

Recent history tells us these projects rarely stay on budget, often get delayed, and may even collapse entirely. In the short-term, the ECRL will do more damage than good. The longer-term outlook does not look much better; Malaysia can expect the ECRL to be a burden for many years to come.