This article first appeared in The Edge Malaysia Weekly on October 21, 2024 - October 27, 2024

EMRAIL Sdn Bhd, a railway engineering company jointly controlled by businessman Tan Sri Hari Narayanan Govindasamy and former chief justice Tun Zaki Azmi, is in talks with the Ministry of Transport (MoT) over the completion of the construction of Package C of the East Coast Rehabilitation Project, two years after the RM301.4 million contract was terminated because the company failed to deliver on its commitments, people familiar with the matter say.

A source says Emrail has been negotiating a new agreement with MoT for a couple of months already and is hopeful of clinching the deal, as it is ready to pick up where it left off.

Some question whether the job should revert to the company, however, since it was dropped in 2022 because of its poor performance. A direct re-award of the project to Emrail would also go against what the Madani government has been preaching, they add.

Another source also questions Emrail’s ability to fund the project, as it allegedly still owes money to some of its subcontractors, suppliers and consultants for previous work completed.

Sources say at least two other companies are vying for the job, which covers a 209km single-track alignment from Gua Musang to Tumpat in Kelantan. More than 80% of the work has been completed.

When contacted, an Emrail spokesman declined to comment and MoT did not respond to questions from The Edge.

In 2015, MoT issued a call for tenders to rehabilitate the East Coast single-track railway line from Gemas in Negeri Sembilan to Tumpat. The project was split into three subpackages: tracks from Gemas to Mentakab (Package A), tracks from Jerantut to Gua Musang (Package B) and tracks from Gua Musang to Tumpat (Package C).

Emrail had emerged as the lowest bidder for Package C. Separately, Package A was contracted to Hikmat Asia Sdn Bhd, and Package B went to Fajarbaru Builder Group Bhd.

According to Emrail’s website, the East Coast railway track, built between 1910 and 1930, was heavily damaged during massive monsoon flooding that occurred between Dec 15, 2014, and Jan 3, 2015.

“Emrail’s scope falls under Package C, which covers the 209km single track alignment from Gua Musang to Tumpat. The scope of work involves track rehabilitation and restoration, slope stabilisation and improving the drainage to avoid a repeat of the track washout resulting from the 2014/15 floods,” it said.

The three-phase East Coast Rehabilitation Project commenced in 2016 and was expected to be completed in 2020.

The website also indicated that Emrail started physical works on Package C in 2016, with completion initially slated for the second quarter of 2019. It did not pan out as expected because of a series of setbacks.

“Not much [of a] survey was done at that point in time. When the company went to the site, it found that the track had suffered far more damage than what it had estimated,” a source close to the matter says.

The source points out that the complexity of working on live railway tracks contributed to the delay. “Access to the tracks was limited to a few hours per day and some areas by the jungle could only be accessed using railway trolleys.”

Under the contract, railway operator Keretapi Tanah Melayu Bhd (KTMB) was responsible for supplying specific items such as the rails. After providing the rails for Packages A and B, however, it ran out of stock for Package C, the source explains.

“So, the government gave approval to Emrail to purchase the rails. Then the 14th general election (GE14) happened. The rails finally arrived 2½ years later. As a result, the firm did not start construction work until 2019.”

In 2020, Emrail suffered another setback when construction work on the project was disrupted by the Covid-19 pandemic. According to the source, the company had to abandon the site throughout the Movement Control Order. The unplanned shutdown caused significant issues with its rail machinery, as it took another two months to get spare parts for its machinery.

The source says its problems were further compounded by cracks appearing in the composite sleepers that were to be placed on the steel bridges under Package C. This was followed by a stop-work order, eventually leading to Emrail’s termination.

“During the period, the government withheld three payments to Emrail. In addition, the company was prevented from going to the site until it resolved the cracks. The culmination of delays led to the eventual termination by MoT in March 2022,” the source says.

About eight months later, GE15 was held in November. Sources say that, late last year, the Public Works Department (JKR) was tasked by MoT to perform due diligence and report on the status of the Package C project before calling for tenders. “Last month, however, JKR received a letter from MoT to return the project to the ministry,” one source says.

The Edge has learnt that Emrail recently decided to appeal against MoT’s decision to terminate its contract with the company. People familiar with the matter say the government is now reconsidering allowing Emrail to resume work on the unfinished project under a new agreement.

“An independent consultant appointed by MoT found that the cost would be much higher if the government were to appoint a new contractor to carry out the remaining work on Package C than to reappoint Emrail for the job,” another source says.

Companies Commission of Malaysia (SSM) data shows that the shareholders of Emrail are Noblemax Resources Sdn Bhd and Magniplan Sdn Bhd, with 39.21% each; Lembaga Tabung Haji, with 15.28%; and Lingkaran Hartaniaga Sdn Bhd, 6.3%.

Checks on SSM found that Noblemax Resources is 51%-owned by Hari Narayanan and 49%-owned by his wife, Puan Sri Vimala Govindasamy. Zaki holds a 99% stake in Magniplan and the remaining 1% is held by his wife, Toh Puan Nik Sazlina Mohd Zain. At the same time, Zaki also has a 51% stake in Lingkaran Hartaniaga, and Hari Narayanan holds the remaining 49% stake.

Emrail’s net profit fell 63.14% to RM869,120 for the financial year ended Dec 31, 2021 (FY2021) from RM2.36 million in FY2020. Revenue rose 120.8% to RM188.94 million from RM85.58 million.

In the preceding years — FY2018 and FY2019 — Emrail had posted a net loss of RM57.15 million and RM25.99 million respectively, before turning around in FY2020. It has yet to file its accounts for FY2022 and FY2023. 

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