Malaysia's Cabinet approves new LRT3 project after costs cut by nearly half

The completion date for the LRT3, which stretches from Johan Setia in Klang to Bandar Utama in Petaling Jaya, was also extended from 2020 to 2024, said Malaysian Finance Minister Lim Guan Eng. PHOTO: THE STAR/ASIA NEWS NETWORK

KUALA LUMPUR (THE STAR/ASIA NEWS NETWORK) - Malaysia's Cabinet has given the go-ahead for the third Light Rail Transit (LRT3) project in the Klang Valley to continue after its final cost was reduced by nearly half.

Finance Minister Lim Guan Eng said on Thursday (July 12) that the Cabinet gave its approval to the 37km-long rail line during a meeting on Wednesday after the final cost was reduced by 47 per cent to RM16.6 billion (S$5.6 billion). That, he said, would enable the country to save a total of RM15 billion.

The completion date for the LRT3, which stretches from Johan Setia in Klang to Bandar Utama in Petaling Jaya, was also extended from 2020 to 2024 to further reduce construction cost which was inflated due to acceleration costs, he said.

Mr Lim said the reduction in cost was made possible through renegotiation and a rationalisation exercise of the project that was undertaken with all key stakeholders, including national rail operator Prasarana, the MRCB-George Kent joint venture, which is the project delivery partner, and the Land Public Transportation Commission.

One critical criterion for the review was that the integrity of the 37km LRT3 line must be maintained. In addition, the safety, frequency and quality of service must meet the requirements of the regulators.

He added that the construction of the LRT3 project would be restructured from a project delivery partner model to a fixed-price contract with MRCB-George Kent.

"This will ensure that the price will be fixed and will not be subject to cost overruns. The details of this contract will be disclosed at a later stage," he added.

The savings of more than RM15 billion would not only mean a massive reduction of RM15 billion in debt to be incurred, but also result in additional savings to taxpayers of up to RM14 billion in interest cost over the period of the loan financing.

"The 47 per cent reduction in cost demonstrates that the new federal government is walking the talk in securing significant cost reductions for excessively priced projects caused by the poor governance of the previous government," said Mr Lim.

"This cost will include all project costs, including but not limited to work package contracts, land acquisition, project management, consultancy fees, operational and overhead costs, as well as interest during construction," he said.

Prasarana had on March 30 submitted the latest estimated cost of the LRT3 project, which amounted to RM31.7 billion.

At the same time, Prasarana sought an additional financing of RM22 billion in the form of government guarantees, on top of the initial RM10 billion granted in 2015 to finance the project.

Mr Lim said the LRT3 project is a critical project meant to alleviate the issue of traffic congestion along one of the most important and densely populated economic development corridors in the Klang Valley, from Klang to Petaling Jaya.

The new LRT line is expected to serve a two-million population, with the capacity to transport 36,700 passenger per hour each way.

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