SINGAPORE (Feb 12): The KL-Singapore high speed rail (HSR) project, which was suspended following a change in the Malaysian government nearly two years ago, might be revived in the short term, instead of suffering from outright cancellation, says Fitch Solutions Marco Research in a Feb 12 note.

Fitch’s view is premised on a couple of key reasons. First, the business case for the rail remains strong. Point to point air travel between Singapore and KL – one of the busiest air routes in the world, takes four hours in total. The 350km-long HSR can cut travel time by 90 minutes.

“With increased accessibility, the local economies of Batu Pahat, Muar and other locations along the proposed alignment are also likely to benefit from the project,” says Fitch Solutions.

In addition, the project, if and when it is revived, has scope for a reduction in overall cost, as bidders from both China and Japan are believed to still be keen to compete to win this project.

“The revival of the East Coast Railway Link proves that the Malaysian government is willing to bring back big ticket infrastructure projects if they are satisfied with the reduced cost,” Fitch reasons, referring to the new price tag of RM44 billion for the ECRL, down from RM65.5 billion cited before the ruling BN was voted out. The ECRL was one of a string of major infrastructural projects initiated by then Malaysian prime minister Najib Razak.

“That said, failure to reduce project cost to a level more palatable to the Malaysian government is a significant downside risk to revival of the project,” Fitch adds.

The HSR was first mooted back in 2013, preparations began, excitement generated, land, such as the Jurong Country Club (picture) acquired. However, following the shocked victory of coalition led by Dr Mahathir Mohamad in the May 2018 election, the HSR was put on hold, citing costs.

Now, according to Fitch, the case for the HSR will also be aided by the revival of the RM140 billion Bandar Malaysia Project’s revival last December. This integrated property development was meant to house the northern terminus of the HSR at KL.

The HSR will also be a much needed economic stimulus for a slowing Malaysian economy, which is slowing. There’s further downside risks with the Covid-19 outbreak, as tourists stay away from the region.

“As such, the government has been mulling stimulus packages, which could include additional budget to support the KL-SG HSR project,” Fitch says.

“Even if that is absent, the revival of the project will bring about a heightened level of foreign direct investment, as well as construction activity, which could both feed through to economic growth,” Fitch adds.