Malaysian East Coast Rail Link Spurs Economic Growth

 

 

malysia

Photo By Lloyd Green

Connectivity is not only the reigning buzzword in contemporary economics, it’s also the key to unlocking tomorrow’s success stories.

Driven by necessity, the Malaysian government has adopted the role to become the prime engine of social and economic action.

In this context, the East Coast Rail Link (ECRL), a 688-kilometer railway connecting the west coast to the east coast of peninsular Malaysia will benefit state coffers through the economic propulsion of trade, enterprise and development.

The infrastructure project is projected to cost RM 55 billion ($14 billion), while creating more than 80,000 jobs, spurring local economic multipliers and achieving equitable growth and development between the east and west coast.

Criticisms levelled against the ECRL have blindsided the fact that such infrastructure projects will propel the economy, shape how Malaysians travel, communicate, and make a living – and promote national competitiveness. These social and economic benefits can definitely be reaped within a mid-to-long term.

There were dissenting voices, too, when the North-South highway was launched in 1981. Small towns and cities dotted along this stretch have since flourished, and continue to prosper. The same could be achieved through the connectivity of the ECRL. It must be considered holistically and in tandem with the national development agenda.

Despite the bounty of “oil money,” the east coast states have not developed as rapidly as the west coast states, the hub of economic activity. In fact, the GDP of the west coast states is a multiple of seven times that of the east coast states. This could be largely attributed to being disconnected to the west coast states

In recognition of this issue, the government launched the East Coast Economic Region (ECER) Master Plan in 2008 to remedy the development gap. The goal, as outlined in the plan, was to eradicate poverty, improve and income and wealth distribution in a sustainable manner, and to rectify the regional socio-economic disparities. The ECRL is the tipping point in the physical connectivity between the east coast states with the developed west coast.

With the announcement of China’s Belt and Road expansion initiative in Malaysia, the Malaysian government secured a soft loan from Exim Bank of China on attractive terms, including a currency swap mechanism to contain exchange rate risks.

Debates about the project’s feasibility often question the financial viability, citing its potential risks in generating sufficient revenue to service the loan. The argument is valid. However, such large scale infrastructure projects must be evaluated beyond profitability – not in the early years anyway. Development plans are being finalized for each major town throughout the ECRL line – from Kuala Lumpur and through Bentong, Mentakab, Kuantan, Kertih, Kuala Terengganu, to Kota Bharu, that will accelerate economic and social activity. These benefits can only be realized once the project is fully operational.

The government is cognizant of the investment required and have taken accountable measures to mitigate the negative impact on the government’s fiscal position.

Mega infrastructure projects like ECRL are normally financed through government guaranteed debt rather than through direct government expenditure. Government guaranteed debt has clear advantages over direct expenditure since the latter requires substantial upfront outlays, paralysing the government’s efforts to deliver other beneficial programs to the Rakyat.

Due to more stringent evaluation and robust risk assessment, Malaysia’s government guaranteed debt growth has been reduced from an average of 14 percent in 2012-2014 to just 4.3 percent in 2015-2016.

To promote awareness of the ECRL to the public, the government will be disseminating information in the near future. The government will also undertake a market consultation a year in advance of the official announcement and also make available the ECRL environmental impact assessment report on official websites.

In all fairness, the ECRL must be appraised in a comprehensive manner, taking into account potential synergies from other projects as well as in concert with the national development agenda. Ultimately, as Malaysia transitions into a high-income nation, it is only reasonable to expect greater inter-city and inter-state connectivity to ensure more equitable growth across the entire nation.

The ECRL must be a shared priority of the public, towns and cities, realtors, the environmentalists, local public officials, and the business community for our future well-being.

Liow Tiong Lai is the Malaysian Minister of Transport.

(Jakarta Globe)