Malaysia's East Coast Rail Line touted as a game changer

Singapore could be bypassed as new links alter regional trade routes

Land being reclaimed to expand Kuantan Port, which is central to the East Coast Rail Line project.
Land being reclaimed to expand Kuantan Port, which is central to the East Coast Rail Line project. PHOTO: KUANTAN PORT

In a remote nook along Peninsular Malaysia's east coast, millions of tonnes of sand are being dredged up from the South China Sea to get Kuantan Port ready for the country's priciest infrastructure project yet: a RM55 billion (S$17.7 billion) railway link financed by China.

The East Coast Rail Line project (ECRL) will connect ports on the east and west coasts of Peninsular Malaysia and could alter regional trade routes which currently ply between the busy Strait of Malacca and the South China Sea via Singapore, officials say.

This potential game changer gives a glimpse of China's ambitions to expand its economic clout in Asia and beyond. And it explains why land is being reclaimed at such a frenzied pace at Kuantan Port.

The port owners, Malaysia's construction powerhouse IJM and China's Beibu Gulf Port Group, are spending more than RM1.2 billion to reclaim 40ha of land. The Malaysian government has provided another RM1.08 billion to complete a 4km breakwater, to protect the harbour.

The massive port expansion will feature a 1km-long berthing complex that will feed industries in nearby industrial zones earmarked specially for Chinese manufacturing concerns.

Officials say the upgrading of Kuantan Port, which will be completed by mid-2018, is only one part of what is shaping up to be Malaysia's most expensive infrastructure undertaking.

The port, which began operations in 1984, is central to the ECRL, which will depend on Chinese train technology and funding.

The proposed 620km electrified railway line will snake its way from Tumpat, located near Malaysia's north-eastern border with Thailand, down the coast to Kuantan Port, before cutting through the mountainous central region to Port Klang, Malaysia's biggest port.

China has also proposed building a new port in Malacca, also on the west coast, but Malaysian government planners say financing for the project has yet to be finalised.

Funding for the ECRL, on the other hand, has been secured, with 85 per cent of the project financed with soft loans from Beijing.

While the entire stretch is set to take more than a decade to build, government planners say that top priority will be placed on the construction of the 250km section that will connect Kuantan Port with Port Klang. When completed, the ECRL would become a major land bridge for trade in and out of Asia.

"Cost issues aside, this new network will create new alternative routes to boost trade for Asean, with Malaysia as the base; and why this has to be taken seriously is because the Chinese have a direct interest in the (Kuantan) port and the rail link," said Mr G. Durairaj, managing director of maritime and logistics consultancy PortsWorld.

If everything comes together as planned, the new links could bypass Singapore and offer exporters new options to reach markets in North Asia. Exports from North Asia could also bypass looping around Singapore to get to the busy Strait of Malacca, proponents of the project argue.

Mr Jaafar Ismail of Fergana Ventures, a Malaysian advisory firm that specialises in infrastructure and resource-based projects, notes that the Port Klang to Kuantan Port land bridge could provide a "significant resolution" to China's over-reliance on the Malacca Strait, what it calls the "Malacca Dilemma". Today, about 80 per cent of Chinese energy needs pass through that narrow waterway.

"China clearly considers Asean as the southern hinterland, its new manufacturing base and a huge market," said Mr Jaafar, adding that the land bridge will make any plans for a waterway on Thailand's Isthmus of Kra redundant in the medium term.

But Malaysia's opposition leaders do not share this optimism, arguing that the rail network is an expense that Malaysia's debt-laden economy can ill afford. They further note that the project only underscores Prime Minister Najib Razak's growing reliance on China to help lift the Malaysian economy.

"The government has to explain why this sudden reliance on China and how it will benefit the local economy," said Mr Mujahid Rawa, a veteran MP from Parti Amanah Negara, a splinter party of Islamist party Parti Islam SeMalaysia.

He said the public perception is that "the PM is hiding behind the Chinese because of 1MDB". 1MDB refers to the funds misappropriation scandal involving state-owned 1Malaysia Development Berhad.

Despite the brickbats, Mr Najib's government is pushing ahead with the planned ECRL, which Kuala Lumpur says will be a catalyst for regional growth and help narrow the disparity in levels of economic development between the bustling west coast of Peninsular Malaysia and the more rural east coast states, particularly Kelantan and Terengganu.

During a recent trip to Beijing, Mr Najib's government signed an agreement to award the construction of the ECRL to China Communication and Construction Company, a publicly traded state-owned entity, in a deal that will be financed by a soft loan from the Export-Import Bank of China.

Construction on the ECRL will begin next year and economists say the project could be a major boon for Malaysia's sluggish domestic construction sector.

Signs of a pick-up in economic activity abound in the surrounding areas of Kuantan Port, which is already home to several large petrochemical installations, such as BASF Petronas Chemicals, a joint venture between Malaysia's state-owned oil corporation and Germany's BASF.

The construction of new roads and flyovers from the port complex to a nearby industrial park is almost complete, and government officials say the eastern economic region has already attracted more than RM8.9 billion in investment, mainly from manufacturing concerns from China.

They include investment from Beijing Goldenway Biology Tech Co, the world's largest bio-humic acid producer, and a RM3.5 billion steel facility by Guangxi Beibu Gulf Iron & Steel Investment Co.

Kuantan Port's general manager Mazlim Husin told The Straits Times that describing the planned steel facility to visitors helps to provide a sense of scale to the undertaking around this industrial region.

The integrated steel mill will occupy a 287ha site - half the size of Sentosa island - and have an annual production of 3.5 million tonnes.

"This is the sheer size of just one project and the ECRL will attract more of these large ventures," Mr Mazlim said.

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A version of this article appeared in the print edition of The Straits Times on December 22, 2016, with the headline Malaysia's East Coast Rail Line touted as a game changer. Subscribe