THE GUY WITH THE GLASSES WANTS TO TAKE MALAYSIANS ON A HIGH-SPEED RIDE… FOR JUST MYR72 BILLION
This is a departure from our usual focus on the aviation sector; the topic of high-speed rail (HSR) in Malaysia has been the subject of intense debate since premier Mahathir Mohamed announced he would scrap the MYR110 billion (USD28 billion) project. He later clarified it would instead be postponed.
The man who came up with the 350km HSR idea, Najib Razak, believed the socio-economic benefits far outweigh its costs, which he said stood at just MYR72 billion at the start of 2018. Rahman Dahlan, a former minister in Najib’s cabinet, claimed it was myopic to scrap or postpone the project.
Here’s our brief analysis on the HSR.
Most HSR lines lose money. Only two in the world – the Tokyo-Osaka and Paris-Lyon lines – are profitable. Another bullet train, the Hakata-Osaka line, breaks even. A large number of HSR companies are subsidised by taxpayers and despite the support, HSR travel is costlier compared to air travel for 12 out of the 23 most popular bullet train services globally.
The greatest challenge for any HSR project is to rein in costs. Overruns occur frequently. For instance, Taiwan’s Japanese-influenced HSR was started in the 1990s. In 2007 it launched the Taipei to Kaohsiung 345km service; the HSR had a price tag of USD15 billion or USD43.5 million per kilometre. Seven years later the government warned the HSR could go bankrupt, with cumulative losses of over USD1.5 billion.
Depreciation and interest payments bogged down the company running the HSR. Cost and ridership estimates, too, had not gone according to plan. In 2008 it was anticipated some 240,000 passengers a day would use the service. At the end of 2015, less than 140,000 people a day rode the train.
ZUOYING HSR STATION IN KAOHSIUNG, TAIWAN. PIC/SHUKOR YUSOF
Minister Rahman used a study by Jetro (Japan External Trade Organisation) to support his case. According to him, Jetro reckoned the HSR would bring in USD1 billion economic gain (see the report here) to Malaysia, which is an over optimistic financial forecast.
Jetro, however, had a vested interest: it was pushing Japan’s bid for Malaysia’s HSR project. Go through the report and one would find it hard to see where the actual benefits would come from, other than some charts, graphs and tables that offer little in terms of real economic gains. The 29-page paper fails to justify spending over MYR70 billion on the HSR.
The fact remains that the HSR is going to be very costly to construct. Older lines such as the Tokyo-Osaka service, built in 1964, cost barely USD5 million per kilometre. According to a World Bank paper (see here), in Europe today the cost would be USD25 million to USD39 million per kilometre while China’s HSR cost between USD17 million and USD21 million per kilometre.
That’s because labour is cheap in China. Moreover, land acquisition and resettlement costs are below 8% of project cost. The Chinese government could also standardise designs – for embankments, tracks, viaducts, electrification, signalling and communication systems – which cuts cost and duplication of efforts. That aside, it attributed the lower cost due to the large scale of the HSR network planned in China.
An estimate by the Institute of Southeast Asia Studies (ISEAS) in 2017 expected the total cost of the HSR to be up to SGD25 billion (MYR75 billion), with SGD5 billion allocated for the laying of tracks. The cost per kilometre is said to be around USD10 million and the cost of a one-way ticket around SGD65.
But nobody talks about ridership for the HSR to succeed. The popularity of rail travel, if anyone bothers to study, has been declining. Not just in Asia but globally. In many countries HSR and conventional rail service represent under 10% of all passenger-kilometres travelled by land. In Southeast Asia, flying is now the most popular mode of travel.
SOURCE: SUNDAY TIMES GRAPHICS
Advocates of HSR list many factors to support the implementation of a bullet train service. These include:
- Safety: HSR is undoubtedly a safe way to travel but most people today travel by air, which is the safest mode of transportation.
- Mobility: Can HSR improve mobility? Unlikely. With the advent of low-cost carriers, most people now fly. In fact Malaysia would do well to redirect some of its resources to upgrade Subang Airport in the heart of Kuala Lumpur, now severely constrained because only turboprop planes are allowed there.
- Going green: supporters of HSR maintain it is more environmentally friendly than flying. That is a myth. Constructing and maintaining a HSR line is energy-intensive and HSR needs lots of electricity generated at the electric plants. Rail can offer lower energy usage and fewer carbon emissions than road or air travel, but that happens only when it is at near or full capacity.
- Economic gain: Malaysia has a different spatial structure compared to China, France or Japan. Kuala Lumpur, where most people are likely to board the HSR, has not quite the same population density as Beijing, Tokyo or Paris.
And let’s not forget that Malaysia has an entrenched car culture. In 2014 a Nielsen Global Survey of Automotive Demand revealed that Malaysia has the world’s third highest level of car ownership at 93% and the highest incidence of multiple car ownership globally (54% of households have more than one car).
How many Malaysians (and how often) would leave their cars behind and pay for a costly HSR ticket just to experience the 90-minute ride to Singapore?
Buses are another popular way to get from town to town in Malaysia. A one-way, four-hour coach ride from Johor Bahru, the southernmost city in Peninsular Malaysia, to Kuala Lumpur costs on average just MYR30+ (USD7.50). Buses remain a convenient way to move from the capital to other towns within the peninsular with many citizens unable or unwilling to pay more than MYR50 one-way for a 3-4 hour ride.
One of the reasons many HSR lines are loss-making is that its advocates often over-estimate the number of people who are willing to switch from flying or driving or riding (the bus). According to the promoters of the HSR, annual ridership is expected to reach 15.2 million in 2030 and rise to 37.8 million in 2060. Read it here.
It is unclear how the figures were arrived at. The population of Klang Valley (greater Kuala Lumpur) is just over 7 million while Singapore has a population of 5.6 million. HSR supporters assume by 2030 at least 10 million travellers annually would be persuaded to pay MYR450-500 (the price of a return ticket for the HSR to be profitable) instead of taking a low-cost flight or hopping on a bus.
How on earth did we ever get to this stage? Someone suggested that ex-premier Najib was so taken by his ride on a Chinese HSR from Beijing to Tianjin that he concluded Malaysia needed one, too. That’s fine except that, there are a few differences between China and Malaysia, namely economic growth, population size and land mass.
Simply put, the HSR project ignores history, evidence and logic. There is very little, if any, business case in spending over MYR70 billion on such an extravagant project.
In any case MyHSR Corporation was born in 2015, with seven board directors and a leadership team of nine. The Ministry of Finance owns the company. It remains unclear how much taxpayers money were spent in the past three years just to compensate these executives.
The world’s costliest international ferry terminal?
WHITE ELEPHANT – THE PUTERI HARBOUR INTERNATIONAL FERRY TERMINAL. PIC/SHUKOR YUSOF
Speaking of taxpayers money, let us introduce you to the Puteri Harbour International Ferry Terminal(PHIFT) in Iskandar Puteri, Johor Bahru. Built by UEM Sunrise (a wholly owned company of Khazanah Nasional) at a cost of several hundred million ringgit, it was officially opened on 8 May 2013. The idea behind the terminal was to cater to tourists and Singaporeans alike, as well as Malaysians working in Singapore, by providing hassle-free sea travel to and from Singapore’s Harbourfront.
Najib and Singapore premier Lee Hsien Loong officially announced a ferry service between Puteri Harbour and Singapore during a leaders’ retreat in Singapore on 19 February 2013. Read the full joint statement here.
Over five years later, the said service has not started. No reason has been provided on whether it has been postponed, delayed or outright cancelled. Daily ferry services between Iskandar Puteri and Singapore would do much to alleviate the daily traffic congestion at both the Causeway and the Second Link.
A recent detailed Channelnewsasia report estimated that over 300,000 Malaysians travel across the Causeway each day. Some 145,000 vehicles cross Johor Bahru’s checkpoint daily.
Newly installed politicians in Johor blame congestion on the Second Link on the increase in number of users; some 9 million people apparently used it in the first five months of 2018.
Oddly enough officials have conveniently forgotten and completely disregarded the ferry terminal at Puteri Harbour, which was built using public funds to facilitate easier travel between Johor Bahru and Singapore.
With the failure of the intended service to Singapore – a sea link that could cut congestion and provide seamless access for commuters and tourists – the ferry terminal has been reduced to providing daily, very likely loss-making rides ferrying a handful of travellers to Batam and Karimun, in Indonesia’s Riau archipelago.
Today, the PHIFT – despite its strategic location and millions invested – is an under-used white elephant, quite possibly the costliest ferry terminal in the world based on a cost-benefit analysis.