“The government said the project is worth RM55 billion and that 70% of the total will be financed by China and another 30% will be financed by Malaysia through the issuance of sukuk and bonds,” PPBM supreme council member Rais Hussin told FMT.
“Whether from sukuk, bonds or loans from China, it will still incur some element of interest payment.
“Given the reported seven-year grace period and 240-month instalment plan, let’s take 3% for ease of calculation.
“The interest on the loan may even kick in seven years after the completion of the project, and this can amount to a total of RM99.6 billion.”
Rais said the project’s cost of development alone was already around RM100 billion.
He also questioned the government’s decision to put such a huge amount of money into the project. He said this would have a negative impact on the country and the people in future.
“It is Malaysians who will end up having to ‘finance’ the project on behalf of the government.
“Malaysians could end up having to bear the cost through more taxes possibly, especially if the government has to borrow money from external sources to make up for the losses,” he said.
“Aside from Singapore’s MRT, no train systems in the world, even Japan’s highly-efficient Shinkansen bullet train, is making money. Why?
“Because Singapore’s MRT does not recognise capital expenditure (capex) as part of the cost. In its balance sheet, the capex is the infrastructure provided by the government. Our RM55 billion is only capex. This does not include other incurring expenditure.
“And Singapore went through all transaction processes leading up to the actual development of the project in a transparent manner, and it even awarded the contract through an open tender process,” Rais said.
Meanwhile, Damansara Utama assemblywoman Yeo Bee Yin said it did not make sense for the government to spend so much on a project which could cost far less.
“And why didn’t the government put the project up for an open tender? Why should it be awarded specifically to this China company?” she told FMT.
Yeo said so far, the ECRL deal had been shrouded in secrecy and that the government must disclose its feasibility studies to be more transparent with the people.
It has previously been reported that the ECRL returns would not justify the country’s investment as the cost was far more expensive than what had been reported.
The ECRL project was awarded to China Communication Construction Co Ltd (CCCC) without an open tender. At RM55 billion, it is also deemed the most expensive railroad of its kind after being benchmarked against other rail projects around the world.
Malaysia also received attractive financing terms for the ECRL, with 85% of the project financing, including a soft loan of 3.25% from China Exim Bank with a moratorium period of seven years, with the remaining 15% to be funded through a sukuk programme managed by local investment banks.
It will be built by CCCC, a leading transportation infrastructure group, with Malaysia Rail Link Sdn Bhd (MRL) tasked as the project owner. The project is slated for completion by 2024.