Is HSR necessary for Malaysia?

By Stephanie Jacob

Proponents of the HSR link to Singapore suggest that it is more than just a rail link because it will come with an economic multiplier effect. Critics, meanwhile, ask if the economic benefits generated would justify the RM40 billion (at least) price tag, and if there may be more pressing projects to be completed.

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The main reason the proposed high-speed rail (HSR) link from Kuala Lumpur to Singapore is attractive to the government and economists is the potential multiplier effect, which may arise from its construction.

JF Apex Securities Bhd head of research Lee Chung Cheng highlighted the project would be an “infrastructure boom which would have a multiplier effect on the local economy and create more jobs. Furthermore, it would also enhance property values along the route”.

Maybank IB economist Suhaimi Ilias added that such a link would have an impact on easing congestion as it would be an additional mode of transport for the route. Furthermore, HSR links are usually seen as being more environmentally friendly.

Post-construction, analysts see the link as having a positive impact on the flow of business activities between the two countries. Suhaimi said the link would also offer increased labour mobility, which would be positive.

Kenanga Research’s construction analyst Mohd Iqbal opined that “the HSR link would be useful for business travellers and it will encourage businesses to set up in Malaysia, as it will be easy to travel between the two cities”.

“Each city has its niche and therefore, both sides will stand to benefit from the HSR,” said Iqbal.

HSR links have brought unequal benefits

The idea that HSR links bring benefits to all the cities along the route is touted by the governments involved as well. In fact, when the link was first announced, both countries’ prime ministers said: “Ultimately, this project will give both countries greater stakes in each other’s prosperity and success.”

And the Land Public Transport Authority (Spad) on its website said HSR would “strengthen the link between two of Southeast Asia’s most vibrant and fast-growing economic engines. In addition, the HSR presents an opportunity to open up and rejuvenate smaller cities in Peninsular Malaysia by connecting them to the two major metropolises”.

But will all the cities along the route benefit equally? An article in The Economist magazine in 2011 suggested that it does not. In fact, past international experiences suggested that HSR links tend to benefit the bigger and more developed destinations along the route.

The article was written as a call for the government of the UK to reconsider its plans to build a HSR link from London to the North of England.

”Governments remain susceptible to the idea that such projects can help to diminish regional inequalities and promote growth.

“In fact, in most developed economies, HSRs fail to bridge regional divides and sometimes exacerbate them. Better connections strengthen the advantages of a rich city at the network’s hub: firms in wealthy regions can reach a bigger area, harming the prospects of poorer places.

“Even in Japan, home to the most commercially successful line, Tokyo continues to grow faster than Osaka. New Spanish rail lines have swelled Madrid’s business population to Seville’s loss. The trend in France has been for headquarters to move up the line to Paris and for fewer overnight stays elsewhere,” the article read.

The KL-Singapore link will likely have stations in Seremban, Putrajaya, Ayer Keroh, Muar, Batu Pahat, and Nusajaya – all cities which are far less developed than KL. Will they suffer the same fate seen by the smaller cities in other countries with HSR links?

Perhaps even more worrying is, will KL’s development fall even further behind Singapore? It would be a shame that if after building this multibillion-ringgit project (largely on Malaysian soil), it ends up disproportionately benefiting our southern neighbour – taking more businesses and tourists into the city-state.

Are the stations even strategically located for Malaysia?

A few weeks ago, Spad chief executive officer (CEO) Mohd Nur Ismal Mohd Kamal was forced to clarify comments he made to The Edge Weekly, which suggested that Spad would have preferred for the HSR line to end at the Johor CIQ complex.

In a statement later, Spad said its CEO had been “regrettably misquoted”. The statement suggested that Nur Ismal had used the example of the link ending in Johor as an example of what would have been easier since it would have been totally under Spad’s purview, but would not have benefitted either country.

“We would have preferred to terminate the line at the central business district area. This is closer to Orchard Road than Jurong East. However, it is a joint project for the benefit of both countries, so there has to be give and take,” said Nur Ismal.

Explaining why Malaysia consented to the terminus being located at Jurong East, the CEO said that just as Malaysia expected Singapore to consider its economic growth, so must Malaysia consider the concerns of its neighbour.

Nonetheless, it begs the question of whether or not the stations are located in locations which are advantageous to Malaysia and which will make the link attractive to potential travellers.

Will the government have to subsidise tickets?

Analysts suggested that the link’s clientele would largely be business travellers and foreign tourists. But this raises questions about whether these two groups can provide sufficient ridership to keep the link sustainable and, eventually, profitable.

More likely, the link will have to attract a significant portion of travellers who currently use road and conventional rail to travel – both significantly cheaper options. This would make setting ticket fares a difficult issue to manage.

HSR links are expensive to build and RM40 billion is by all accounts a conservative estimate (see previous article for Australian case study). Moreover, expenses do not cease after the project is completed because it requires ongoing maintenance to ensure it runs safely and smoothly.

This will all add up and will inevitably make HSR among the more expensive modes of transportation for this route – yet tickets cannot be priced too high as it would make it too expensive for a significant portion of travellers.

JF Apex’s Lee noted that “fares cannot be too steep as current budget airline tickets from KL to Singapore cost around RM200 to RM300 for a round trip”.

KINIBIZ’ assumptions show that if fares are set at RM300, the link would need 8.3 million passengers to simply cover financing costs. Seeing a return on investment, much less a profit, will be unlikely for many years unless the fares are increased or the ridership levels grow.

To make this happen, the government would likely have to step in to subsidise the ticket prices. Given that the link will almost exclusively be used by a small portion of the population particularly business travellers and foreign tourists, would this be fair?

“Even if fares are subsidised for social reasons, over time the economic burden of maintaining low or cheap fares may outweigh the social benefits, especially if compounded by deteriorating service quality, under-investment, etc,” Maybank IB’s Suhaimi said.

How much will HSR improve a KL-Singapore trip?

One of the project’s key selling points is the speed in which one can get from KL to Singapore. Spad estimates that the entire trip on the HSR could be almost two hours quicker than a direct flight. Interestingly, actual travel time spent on a high-speed train or a plane is estimated to be 90 minutes for both.

Technically, the journey via flight is only 45 minutes; however, Spad doubles that to account for taxiing time. Barring a significant disruption, allocating 45 minutes for taxiing and takeoff seems excessive.

However, the most significant difference comes from travel time to and fro from the stations and time spent on the departure and immigration process. Spad estimates that for a flight, a customer would spend 45 minutes on those two steps, while with HSR it would only be 15 minutes.

Theoretically, there are ways to reduce the difference between the two modes, starting with time spent in the airport itself on the departure and immigration process. Surely the system which will be put into place for the HSR link can also be implemented for flights between KL-Singapore to speed up the process.

One assumes the HSR process will be faster because there will be some sort of agreement between the two countries to simplify it, similar to the agreement between the UK and France for the Eurostar link.

In that case, immigration officers of both countries are situated at both the terminuses allowing passengers to immediately depart the station when they reach their destination.

The counter argument to this is that it would likely be difficult to run different immigration processes at the KLIA or klia2 as it would complicate things because of the numerous flights and routes.

Perhaps then flights between the two cities could operate from another airport such as one of the Subang terminals. This would make good use of an already existing functional airport. It would require very little expenditure to equip a terminal for this purpose, given that it cost the government RM4 billion to build klia2 from scratch.

Furthermore, the travel time from the KL city centre to Subang is about 25 to 30 minutes by road (depending on when you travel) which makes it quicker than going to Sepang. To improve on that, Spad could look into building an extension connecting the airport to the Light Rail Transit 3 (LRT3) line.

The LRT3 goes from Bandar Utama to Klang and it will stop in Lembah Subang and Ara Damansara – both quite close to the Subang airport. Given the entire LRT3 project is expected to cost RM9 billion, such an extension will cost a fraction of what would need to be spent on the HSR.

The journey to Singapore could be reduced to even less than on the HSR. A travel time of 45 minutes to and fro from the airport on either end, a 60-minute allocation for taxiing and flight time, and a one-time immigration process of 15 minutes, would translate into a two-hour journey. This is half an hour less than a HSR journey according to Spad’s estimates.

Getting the most out of KTM’s double-tracking project

In terms of opening up new areas of the country for development, some of the RM40 billion could be spent on improving the current rail options under Keretapi Tanah Melayu (KTM). This would include completing the last portion of the double-tracking project from Gemas to Johor Bahru expected to cost RM8 billion, which has been budgeted for when the project was first approved.

KTM has also said it needs to invest more money in acquiring the right trains to allow it to fully benefit from the double-tracking project. Increasing and improving KTM’s rolling stock will allow it to fully capitalise on the project.

Speaking to KINIBIZ after becoming the chairman of KTM last year, Nawawi Ahmad said the group would request funds to acquire 30 more Electric Train Service (ETS) model trains. When KTM last purchased 10 sets of the trains, it cost them RM500 million, which means it would need RM1.5 billion to purchase the additional sets in needs.

Although they do not quite move at the 300km per hour (km/hour) that the high-speed trains do, ETS trains can travel at about speeds of around 140km/hour – which is categorised at fast-speed train travel.

And by using ETS trains, KTM has reduced the intercity journey from KL to Ipoh to about two hours and 15 minutes from three hours previously. A direct journey between the two could be reduced even further to below two hours.

The government would have to invest a significantly smaller amount of money in giving KTM what it needs to take full advantage of double-tracking. If the rail group can improve its service, it will build confidence, and people will feel comfortable in relying on it. In turn, this will encourage the development of areas through which the trains run.

Furthermore, KTM does have train tracks running all the way into Singapore. Theoretically, these tracks could be improved into double-tracks which would also quicken the journey into Singapore. It will also build on a project which is already underway as opposed to beginning a whole new multibillion-ringgit project.

Improving rail connectivity on the East Coast

Alternatively the RM40 billion could be channelled towards improving rail connectivity between the East Coast and the West Coast of Peninsular Malaysia. Under the East Coast Economic Region, there have been long-existing plans to build an East Coast Rail Route connecting KL and Kuantan, Pahang, and on to Tumpat, Kelantan.

Although various estimates suggested that such a link would cost about RM60 billion, it would be useful in terms of opening up new developments all along the East Coast, as well connecting the two coasts.

Besides bringing much-needed and long-awaited improvement to the East Coast rail network, it will also improve access for tourism, which would further boost economic development in the region and the country.

Yesterday: High-speed rail not feasible economically

Tomorrow: Making KTM’s RM36 billion double-tracking project work