This article first appeared in The Edge Malaysia Weekly on September 4, 2017 - September 10, 2017

THERE is much excitement over the East Coast Rail Line (ECRL), which has been touted as a game changer for the country as it is expected to cut travel time between the east and west coasts of the peninsula to four hours from the current seven hours.

While it is tempting to focus on the cost to build the 688km rail link, which is estimated at RM55 billion, equally important is how it would enhance accessibility to the rural areas along its alignment and boost the economy in the eastern region, particularly in the facilitation of cargo movement.

The rail link will connect Kuala Lumpur with Kelantan through Pahang and Terengganu, easing pressure on the road network by getting more people and cargo onto trains. There are also plans to extend the line west to Port Klang in Selangor.

At the groundbreaking ceremony for the project, Prime Minister Datuk Seri Najib Razak said the ratio of passengers to freight is expected to be 30:70.

“The viability of the ECRL is undisputed as it is estimated that 5.4 million passengers and 53 million tonnes of cargo will use the service annually by 2030 as the primary transport between the east and west coasts,” Najib said.

As ambitious as the ECRL is, in order for it to reach its full potential of improving inter-terminal transfers (ITT) of cargo between Kuantan Port and Port Klang, it will require the implementation of Phase 2 — that is, an extension of the line to Port Klang.

According to Kuantan Port Consortium Sdn Bhd (KPC) CEO Datuk Khasbullah A Kadir, the ITT would only be successful if Phase 2 is completed.

“That is one of the models that we are talking about, where cargo — from China especially — is dropped off at Kuantan Port and then transported by rail to Port Klang, saving about 1½ days in vessel sailing time,” Khasbullah tells The Edge.

“We see the ECRL as another potential business, but it has yet to be proven. There are a lot of factors that need to be ascertained, one of which is the freight cost. But theoretically, it might work.”

Khasbullah says it does not make commercial sense for cargo to be dropped off or picked up from anywhere along the alignment as that would incur additional transport costs. “It would be expensive,” he remarks.

“For the ITT between Kuantan Port and Port Klang to be feasible, the rail link has to be extended to Port Klang to avoid double handling and to provide seamless connectivity. If the ECRL only stops at Gombak, Selangor, it wouldn’t work,” he reiterates.

While the Land Public Transport Commission (SPAD) has given its approval for Phase 1 of ECRL, which will span 600km and link Wakaf Bharu in Kelantan to Gombak, the construction of 88km from Gombak to Port Klang (Phase 2) has not yet been approved.

Nevertheless, project owner Malaysia Railway Link Sdn Bhd has signed a memorandum of understanding with its main contractor, China Communications Construction Co Ltd, in May to deliberate on construction work for the second phase.

Still, there is talk that ECRL may face hurdles in extending its alignment to Port Klang, particularly in relation to acquisition of land in the opposition-led state.

But in his speech during the groundbreaking ceremony, Najib thanked all four state governments involved in the project for their “full cooperation and support”, particularly in matters of land acquisition, which is pertinent to the construction of ECRL.

Currently, Kuantan Port has the capacity to handle 26 million tonnes of cargo a year. It is in the midst of a deep water terminal (DWT) expansion programme, which will see its capacity doubling to 52 million tonnes a year.

IJM Corp Bhd CEO and managing director Datuk Soam Heng Choon is of the view that the development of the ECRL is timely due to the ongoing DWT expansion at Kuantan Port.

“Kuantan Port is expected to secure the final clearance to operate as a free trade zone by the end of this year. This is a highly complementary feature for the port to be a multi-cargo transhipment hub in the region,” he tells The Edge.

KPC is 60% owned by IJM Corp and 40% owned by Beibu Gulf Holding (Hong Kong) Co Ltd, a unit of China’s Guangxi Beibu Gulf International Port Group Co Ltd.

Kuantan miners saw a boom in bauxite demand after the Indonesian government imposed a ban on the commodity in 2014. However, in January last year, the Kuantan government imposed a temporary moratorium on bauxite mining as the activity had had a severe impact on the environment.

In June, the moratorium was extended until the next general election, with the state government saying that it will leave the decision on whether to lift the ban to the federal government thereafter.

Khasbullah says, even without the bauxite throughput, Kuantan Port’s utilisation rate remains around 80%, thanks to its regular customers. The port handles about 15 million tonnes per year, he adds.

According to the Kuantan Port Authority’s statistics, the port saw its cargo throughput decline 58% to 16.8 million tonnes last year, dragged down by the moratorium on bauxite mining.

“This year, we expect to handle 20 million tonnes. We have a lot of project-based cargo for construction material coming for Alliance Steel (M) Sdn Bhd,” says Khasbullah.

Alliance Steel, a subsidiary of Guangxi Beibu Gulf International Port Group, is the first investor for the Malaysia-China Kuantan Industrial Park.

Khasbullah says the steelmaker is expected to bring about seven million tonnes of cargo to Kuantan Port in six months, after commencing operation.

“Alliance Steel is expecting to complete its factory by the first quarter of next year. In fact, it wants to do a trial shipment towards the end of the year.” He adds that the port has allocated 400m of its 1km berth at the new DWT to serve the needs of the company.

Nevertheless, IJM’s Soam says the decision to expand Kuantan Port is not only to cater for the upcoming demand from Alliance Steel but also to broaden the port’s customer base.

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