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Economic considerations in scrapping HSR project

  • While scrapping the project helps contain near-term fiscal expenditure, it denies the country of mid- to long-term economic-lifting potentials. Photo courtesy: Sin Chew Daily

Sin Chew Daily

Owing to the exorbitant construction cost, the Pakatan Harapan cabinet has approved the cancellation of the KL-Singapore HSR project.

The project, initiated by the previous BN administration, can only be cancelled after the government has discussed the details with Singapore, and the unilateral announcement by the PH government has since sparked polarized reactions from the market and the Malaysian public.

Those backing the project claim that government debt and stimulation of the national economy should take precedence, while many question the rationale of the hasty decision to scrap the project.

It is necessary for the government to clarify on these doubts. For example, Tun Mahathir needs to offer an explanation how he has come out with the RM110 billion price tag for the project.

The KL-Singapore HSR project has been previously agreed by both the Malaysian and Singapore governments and a breach of agreement will entail a massive sum of compensation.

And since the project is bound by the bilateral agreement, this project can only be officially cancelled if Singapore also agrees to exit the agreement.

The project is believed to enhance the economic and financial cooperation between the two countries, and its cancellation means such an opportunity of mutual cooperation will now become void.

In addition, scrapping the HSR project will also impact certain development plans in Singapore, in particular the Jurong Lake District at the southern end of the line.

As for the compensation, Singapore is believed to seek the rightful compensation provided under the agreement. However, Singapore is also expected to do all it can to preserve the friendly relationship with Malaysia and refrain from doing anything that could jeopardize the Malaysian economy.

Over the long term, the HSR project should boost the movement of people and economic activities in cities and towns along the route, and act as a catalyst for the development of peripheral areas and create tons of employment opportunities.

These positive factors should fall within the serious consideration of the government before making the final decision to axe the project, as similar infrastructural projects help lift cross-border economic activities and movement of people and goods, hence significantly expanding the market.

Mega projects by the previous BN administration such as KL-Singapore HSR have positive effects in boosting the domestic construction industry. As such, construction companies will have to bear the brunt if the HSR project is terminated.

As for those who have invested in properties along the rail line, their anticipated returns will have to be adjusted. On the contrary, the aviation industry is poised to benefit from the decision, and will continue to reap the windfall from the KL-Singapore route, among the busiest in the world.

While scrapping the project helps contain near-term fiscal expenditure, it denies the country of mid- to long-term economic-lifting potentials.

That said, the market remains upbeat that the project will be reconsidered once the country's economic climate improves. However, the government still needs to handle the follow-up works of terminating the HSR project with the country's overall interest in perspective to ensure the national economy is put back on the right track.

 

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