This article first appeared in The Edge Malaysia Weekly on March 18, 2024 - March 24, 2024

THREE consortia’s concept proposals for the Kuala Lumpur-Singapore high-speed rail (HSR) are believed to have been shortlisted for the multibillion-ringgit mega infrastructure project.

According to sources privy to the matter, the three consortia are YTL Construction Sdn Bhd-SIPP Rail Sdn Bhd, Malaysian Resources Corp Bhd-IJM Construction Sdn Bhd-Berjaya Rail Sdn Bhd-Keretapi Tanah Melayu Bhd (MRCB-IJM-BRail-KTMB) and a Chinese consortium said to be led by state-owned China Railway Construction.

However, it is believed that only the Chinese consortium has the financial muscle to undertake the project via private funding. The HSR was estimated to cost RM72 billion when the project was being developed between 2015 and 2020, but this could have significantly escalated.

“It is likely that the Chinese consortium will get the project if the government is adamant about having it privately funded. But the government may require the Chinese to take on a bumiputera partner,” says one of the sources.

If the MRCB-IJM-BRail-KTMB consortium’s proposal is chosen, the Employees Provident Fund (EPF) would end up having the biggest exposure to the KL-Singapore HSR. That is because EPF is the largest shareholder of both MRCB and IJM with 36.21% and 17.62% equity interest respectively. It is also a substantial shareholder of YTL Corp Bhd (which wholly owns YTL Construction) with a 5% stake.

In July last year, MyHSR Corp Sdn Bhd issued a request for information (RFI), calling for concept proposals for the KL-Singapore HSR. The RFI was closed on Jan 15 this year.

On Jan 15, MyHSR chairman Datuk Seri Fauzi Abdul Rahman said seven local and international consortia, comprising 31 firms, had submitted concept proposals for the project. MyHSR will be responsible for the development and implementation of the project.

“The findings from the RFI evaluation will be presented to the Ministry of Transport and the cabinet for deliberation. If the response is positive, we will move on to the second phase with the request for proposal (RFP) stage to obtain detailed proposals from the selected consortia,” he said in the statement.

When contacted by The Edge on the shortlisted consortia, MyHSR CEO Datuk Nur Ismal Kamal declined to comment. “We will only announce the government’s decision,” he replies in a text message.

Meanwhile, Gamuda Bhd, which is understood to have submitted a concept proposal on a standalone basis, is believed to have little chance of being shortlisted. As a standalone party, the company could find it challenging to fund the project, considering that the government intends to have it privately funded.

Gamuda founder and managing director Datuk Lin Yun Ling in a media interview last year expressed his view that the government’s penchant for keeping prices artificially low through subsidies, which have now ballooned to about RM80 billion, has little left for infrastructure development, which is among the reasons why the HSR has to be privately funded.

It is not known if Gamuda managed to include something in its concept proposal for the HSR that would allow the project to be privately funded, or if the construction giant’s plans will involve a government guarantee, either a government debt guarantee or revenue guarantee.

The source who spoke on Gamuda’s plans says, “Banks won’t lend so much and there could be a mismatch with the cash flow. The funds are needed to build now, but the money from the development rights will come much later.”

Even if the Chinese consortium has the financial backing of the Chinese government or government-backed financial institutions to fund the HSR, it too would likely require some sort of guarantee from the Malaysian government.

Indonesia, which built the first HSR in Southeast Asia, learnt this the hard way when the Jakarta-Bandung HSR suffered cost overruns. Its government has used state funds and loan guarantees to keep the project afloat since 2021.

One instance was in April 2023 when the republic’s Coordinating Minister for Maritime Affairs and Investment Luhut Pandjaitan revealed that China Development Bank (CBD) had asked for guarantees through the state budget for it to provide US$560 million in loans for the project.

The loans were to cover cost overruns of US$1.2 billion from the initial budget. Indonesia approved China’s proposal for the construction of the Jakarta-Bandung HSR in September 2015, with an early investment plan of US$6.07 billion.

CDB provided PT Keretapi Cepat Indonesia Cina (KCIC) — the consortium responsible for the project — a loan worth US$4.77 billion in 2017 to develop the HSR. The loan has a 40-year tenure, with a 10-year grace period, and an interest rate of 2% per annum. The rest of the costs were to be funded by the shareholders of KCIC.

With a guarantee from the Indonesian government, CBD is set to receive loan payments from the state budget if Indonesia is unable to repay the principal and interest on the loan. This was approved by the Indonesian government in September 2023.

The guarantee is from the government, along with PT Penjaminan Infrastruktur Indonesia (PII), a state-owned infrastructure project guarantor. The guarantee covers all financial liabilities, including the loan principal, interest and other additional costs.

The rest of the cost overruns are to be funded via equity injection by the shareholders of KCIC. The Indonesian side, led by PT Kereta Api Indonesia, owns 60% of KCIC, while the rest is owned by Chinese parties led by China Railway Group. 

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