Asia Heavyweights Show Interest in Singapore-Malaysia High Speed Rail Link

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Japan, China, and South Korea have all shown interest over the last month in bidding for the proposed Malaysia-Singapore high-speed rail link. The project was originally announced in September 2010 and if completed will connect Singapore and Johor Bahru to Kuala Lumpur. Official agreement between the two countries was made in February 2013 to complete the project with the target date of 2020.

Japanese Prime Minister Shinzo Abe expressed his country’s interest on the bidding in a bilateral meeting with Malaysian Prime Minister Datuk Seri Najib Tun Razak during the ASEAN summit. JR Central which operates the world’s busiest bullet train line is looking for overseas customers for its magnetic-levitation technology. Japan has also been looking to invest more in ASEAN countries and thus could see this as an opportunity to improve trade ties in a time when the domestic economy is struggling.

China is also interested in building the high-speed rail link. Premier Li Keqiang showed interest during meetings in the APEC Summit. This comes during growing efforts by China to export its rail technology to many countries around the world.

Most recently South Korea has shown they are keen to bid on the project. A South Korean delegation expressed interest in a meeting with Malaysia’s Lang Public Transport Commission. The project is seen as a possible plus for South Korea’s creative economy and South Korea’s approved investments in Malaysia’s manufacturing sector already amount to US$1.7 billion.

The proposed rail line will reduce the 300km (180 mile) journey over land from five hours to 90 minutes. The high-speed rail may operate four times hourly with one non-stop service and one that will stop in four Malaysian states.   The Malaysian government sees this as an opportunity to spur development and investment in the smaller cities along the rail line. On the other hand, some Malaysians believe it will serve as another channel for brain drain from Malaysia to Singapore.

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Another initiative being explored to go along with the rail link is a single border checkpoint with the Singaporean and Malaysian Customs, Immigration and Quarantine complexes sited at one location. This single border checkpoint exists between France and Britain, and between Germany and Poland, but it will be the first in Southeast Asia.

Although countries are expressing interest in the project, there are some indications that Kuala Lumpur and Singapore may miss a 2020 deadline even after using government land as much as possible to avoid property acquisition disputes. The Land Public Transport Commission Chairman Syed Hamid Albar has said the project may take six to seven years to complete once construction starts in 2016. The project may cost as much as 40 billion ringgit (US$12.2 billion).

There could be difficulties in financing the project in the future as Malaysia wants to cut its fiscal gap and Prime Minister Najib wants a balanced budget by 2020. To reduce costs, parts of the rail link may be built on elevated platforms and portions of it underground to minimize land acquisition disputes.

In the end the project will likely be a private-public one with the link being built by private contractors with government infrastructural support. Since costs may rise it isn’t possible to accurately say what the final cost will be. Companies from France, Germany, China, South Korea, and Japan have shown interest in contributing but in the end the most likely contributors will be from China or Japan.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asean@dezshira.com or visit www.dezshira.com.

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