The RM60 billion rail link bailout that wasn’t


Today, the Sarawak Report has accused the government of inflating the cost of the East Coast rail projectfrom RM30 billion to RM60 billion in order to “bail-out” Jho Low and 1MDB – complete with dodgy looking documents.

This is what they wrote:

The PM’s ‘cunning plan’ is to get the Malaysian Government to agree to inflate the actual cost of the East Coast Rail Project from only RM30 billion to RM60 billion, all to be borrowed from the Chinese Government, in order to disguise the payment of 1MDB’s (and Jho Low’s) company debts!

The East Coast Rail Link (ECRL) is a long-planned project that was put under the 11th Malaysian plan which will link Kuala Lumpur and three east coast states in Peninsular Malaysia. It is 620km long involve a “significant amount of underground tunnelling”. The East Coast Economic Region Development Council has established that a rail route connecting the major ports, business centres and towns in Pahang, Terengganu and Kelantan was vital to achieve growth in the region.

It is expected to take 15 to 20 years to develop as it will involve a lot of underground work and building tunnels across Banjaran Titiwangsa. It is not a trivial project. Here is the proposed route from SPAD website.
There are multiple problems with Sarawak Report’s “expose” though. They are:

1. The project was already projected to cost RM60 billion (not RM30 billion as alleged by Sarawak Report) many years ago.

Here are some links over the years:

18 April 2013 East Coast Rail Line May Cost RM60 Billion

9 October 2013 Rail-related projects to create oasis of opportunities


This project was already discussed heavily in the popular Malaysian forums in LowYat and Skyscraper City in the year 2013 with the RM60 billion cost prominently discussed.
Another problem is that this project is a Privately Funded Initiative (PFI) and is to be funded by the private-sector, not by the govt. So, is the private sector expected to go along and bail out 1MDB?

2. The RM60 billion price tag does not seem to be over-priced

At RM 60 billion, this 620km long project – rail and rolling stock – which cut through peninsular Malaysia’s Titiwangsa mountain range will include much hard-rock tunneling and bridges, cost about RM96,7 million per KM.
This would be a real bargain compared to the Penang Tunnel project where the Penang Government had signed to pay RM3.5 billion to build a 6.3km undersea tunnel – meaning a cost of RM555 million per KM.
Tunnelling undersea where the earth is mostly sedimentary based actually cost less than tunnelling hard mountain ranges thus making RM96.7 million a bargain compared to the RM555 million per KM.
In fact, the Penang Govt had even awarded feasibility and detailed design reports for that tunnel and 3 associated roads of about 20.3km long costing RM305 million and already paid for about half of that.
And even more strange is that on top of paying the full cost of the construction of the tunnel, the Penang Govt also signed to allow 30 years toll to be given to the same company awarded and paid to build that tunnel. Probably the weirdest privatized concession agreement in the world.
If there is any project to be investigated for jacking up the cost, then it would be those who approved and signed the Penang Tunnel project – certainly not the ECRL.

Another project that gives us a guide on the pricing is the the Gotthard Base Tunnel which is a railway base tunnel through the Alps in Switzerland. It opened on 1 June 2016 with full service to begin in December 2016. With a route length of 57.09 km, this rail tunnel was completed at a cost of more than USD12 billion (RM48 billion).

Assuming that just 10% of the 620km is going to be tunneling through Banjaran Titiwangsa, or 62km then the RM60 billion price seems reasonable.
And here is another one funded by the Chinese too – the railway line for passengers and cargo transportation between Mombasa, the largest port in East Africa, and Nairobi, the capital city of Kenya.
The 609km-long line began in October 2013 and is scheduled to be completed by December 2017 cost USD13.9 billion (RM56 billion). Not only was work started earlier hence lower construction cost but there is little tunneling work due to the flat African plain lands.
So, do you think RM60 billion for our 620km ECRL spanning 15 to 20 years going thru mountain ranges is inflated?

Also, following from multiple feasibility studies over the years – as the year 2005, SPAD had also issued a market consultation RFI in March this year.