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KL-SG High-speed Rail Proposal – Drawing Closer For Mutual Benefit?
Perspective | 20 September 2013
By: Yong Chia Win
Articles (2) Profile

Residents in Johor Bahru (JB) often complain that the high cost of living in JB can be attributed to the horde of Singaporean visitors who are jacking up prices. Now, if there is a mean of transportation that can whiz Singaporean shoppers to Kuala Lumpur (KL) in 90 minutes, will it drive prices up in KL as well?

Comparing a comfortable 90-minute ride on a high-speed rail to KL against suffering the hassle of the traffic jam on the Causeway, which would Singaporeans choose?

Singapore Prime Minister Lee Hsien Loong met with his Malaysian counterpart Datuk Najib Razak on 19 February 2013, and they jointly announced that the two countries agreed to build a high-speed railway line linking Kuala Lumpur and Singapore that is expected to be completed in 2020. The proposal consists of a non-stop, 90-minute express train service, as well as a commuter train service that stops at transit stations that takes less than 2 hours to travel between the two cities. The proposed high-speed rail stations will be located in Seremban in Negeri Sembilan, Ayer Keroh in Malacca, Muar, Batu Pahat and Iskandar Malaysia in Johor.

Driving Economic Development In Southern Malaysia
The reason why the Land Public Transport Commission (SPAD) chose these five cities to build the high-speed rail stations is to leverage on their existing strengths to further the economic development in these cities.

Each of these five sites are strategically positioned differently: Negeri Sembilan will build a 1,000-acre SME TechValley near its train station site to attract SMEs that engage in environmental protection technology, green manufacturing and biotechnology. Malacca will focus on developing its tourism and medical tourism industry that targets medical tourists from Singapore and Indonesia. Muar is currently the furniture manufacturing centre of Malaysia, so it is best poised to focus on industrial designing. Batu Pahat has the potential to develop into a fashion capital with its existing 300 garment and textile factories that churn out half of Malaysia’s textile exports. The EduCity in Iskandar Malaysia is gradually taking shape as a world-class education centre, with world-leading universities setting up branch campuses here alongside various international schools and colleges.

Once completed, the high-speed rail is bound to inject more vibrancy to the local economy, driving further growth in other sectors like real estate, commerce, retail and urban transportation. Such railway services in China and Taiwan have brought in the crowd and money to areas around their high-speed rail stations, which gave rise to the so-called “railway economy”. The China Economic Weekly pointed out that high-speed rail systems are the “new leverage” in the transformation of economic development that can lift the development of other sectors to whole new levels. After Taiwan’s high-speed rail service went operational, a round-trip between Taichung and any city in the north or south of the island took just one hour, and this gave rise to a new and enlarged “zone of activities” for the Taiwanese. The area surrounding the high-speed train station in Taichung is designated as an international entertainment hub that is modelled after Sentosa in Singapore. When the KL-Singapore high-speed rail service goes live, it will introduce a multitude of business opportunities. This gives Singaporean investors the option of investing in these Southern Malaysian cities apart from Johor Bahru in the future.

Development Concepts For Areas Around The High Speed Rail Stations

Dealing A Bodily Blow To The Aviation Industry?
The high-speed rail is a form of transportation with many advantages, including the ability to stay in service for a long time, its carrying capacity, greater speed, higher reliability, superior safety and more environmentally friendly. Till now, people traveling between Singapore and Kuala Lumpur generally either take long-haul bus rides or drive themselves. When both countries opened up the aviation market, flying became a popular choice because budget airlines have since significantly lowered short-haul plane ticket prices.

Figures provided by the Centre for Aviation (CAPA) show that budget airlines have cornered about 60 percent of the KL-Singapore air travel market in terms of in-flight seats, with AirAsia leading the budget airlines pack. CAPA commented that when the KL-Singapore high-speed rail goes live, budget airlines will certainly cut back on the number of flights between these two cities. Analysts also predict that airlines will halve the price of air tickets for flights between these two cities. These predictions are based on similar rail projects abroad: in China, for example, airlines began slashing prices when the Beijing-Guangzhou high-speed rail became operational, with air tickets between Wuhan and Beijing going for below Rmb200. When Taiwan’s high-speed rail became operational in 2007, airlines even stopped flying certain domestic routes.

CAPA pointed out that since passengers taking the KL-Singapore flights on Malaysia Airlines and Singapore Airlines are mostly transit passengers, the high-speed rail service will have little impact on these national carriers. However, many analysts differ from this view. In any case, CAPA said that the impact of the high-speed rail service on the aviation industry will depend on whether the authorities will build a high-speed rail station at the airport, as this will give transit passengers the option of taking the high-speed rail instead of flying.

Planning And Management Is The Key
It is easy to dream big, but it is another matter to transform these dreams into reality. Whether the high-speed rail project can bring about the various benefits as expected will depend on what form the Malaysia government’s cooperation with the private sector will take, the location of these high-speed rail stations, the various connecting transportation means to the high-speed rail stations and train fares. As it would be difficult to recoup the high investment cost of the high-speed rail project in the near term, the Malaysia government must plan carefully and manage the rail service well when it becomes operational to ensure that the train rides are comfortable and punctual, so that passengers will feel that it is good value for money. In this way, people who initially plan to drive, take the long-distance buses and short-haul flights between these two cities will choose to take the high-speed rail instead. Japan’s Shinkansen has the honour of claiming an average delay of only 36 seconds, including delays caused by natural disasters. Can the KL-Singapore high-speed rail match this record?

The Malaysia government is still studying the high-speed rail project, and is expected to start calling for tenders at the end of this year. The Business Times, a Malaysia’s newspaper, pointed out that some local and foreign companies have begun negotiating joint ventures to enter into bidding for the high-speed rail project. Among which, MMC Corporation may partner Gamuda as well as some other Chinese and European companies; YTL Corporation may partner Spanish bullet train manufacturers Talgo or CAF to invest in this high-speed rail project; UEM Group and ARA Group are working together to woo a conglomerate of European companies that includes Talgo; Global Rail is currently in talks with Canada’s Bombardier Incorporated and China Railway Group.

So, will Singaporean visitors to Kuala Lumpur cause prices to rise there? If the high-speed rail can indeed drive economic development and breathe more life into Malaysia’s commercial activities, prices will naturally rise. Then again, wouldn’t that also mean the people can look forward to higher incomes?

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The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

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