PETALING JAYA: Extensive private sector participation is the only way the Kuala Lumpur-Singapore High-Speed Rail (HSR) project can see the light of day, given the government’s fiscal constraints, say experts.
“It is clear that the project can only proceed with private sector financing,” said Sunway University economics professor Dr Yeah Kim Leng, who added that the country has to wait and see if any of the proposals submitted meets the self-funding criterion set by the government.
“A likely scenario is that the project will proceed after the government has stabilised its fiscal position, and its financial position is strong enough to invest in the HSR project,” he said.
Yeah, who is also part of the Finance Minister’s panel of special advisers, said the government is currently focused on another mega project, which is the East Coast Rail Link (ECRL), to generate economic multiplier effects.
“As for the HSR, it is understood that the costs currently outweigh the benefits. The project proponents will have to demonstrate to the government the HSR’s economic benefits and viability should their proposals require government funding,” he said.
Malaysian Institute of Economic Research (MIER) executive director Dr Anthony Dass said reviving the project with private sector participation and minimal government involvement is a viable strategy, given the current fiscal constraints.
“However, its success hinges on meticulous planning, transparent governance and effective regulation. The government’s role, while minimal, should focus on enabling private investment, safeguarding public interests and ensuring alignment with Malaysia’s long-term development goals. The HSR’s revival could be a transformative project for Malaysia, provided risks are managed effectively and benefits are distributed equitably across all stakeholders,” he said.
Anthony said the project has benefits in terms of enhancing regional connectivity and economic growth, facilitating smoother business operations, tourism and trade, and boosting gross domestic product (GDP) by attracting foreign direct investment and promoting economic activities in towns along the route, such as Melaka, Muar and Batu Pahat.
It will also spur job creation, particularly in the construction, engineering, service sectors and industry development, as well as support industries like logistics, hospitality and retail.
The private sector can also boost efficiency by bringing in expertise, innovation and operational efficiency.
The challenges, however, could come in the form of high initial investment risks, as the project requires a massive upfront investment that may take years to yield significant returns.
“And if the passenger demand is overestimated, the private sector might face financial losses, potentially necessitating future government bailouts,” he said.
Anthony said other challenges could be in the form of potential accessibility issues for the lower- income groups if the ticket prices are set too high, hence limiting its socioeconomic benefits while smaller towns risk being bypassed or underserved, thus raising the issue of inclusivity.
Although the government’s involvement is minimal, there may still be indirect fiscal risks, such as providing land acquisition subsidies or guarantees for loans. And if the private sector fails to deliver, the government might need to step in to complete the project, increasing public debt,” he said.
Assoc Prof Dr Law Teik Hua, a transport expert and head of the Road Safety Research Centre at Universiti Putra Malaysia’s Faculty of Engineering, believes the concept of minimal government involvement coupled with private sector participation in large-scale infrastructure projects like HSR can indeed be effective, particularly if the private sector has both the expertise and resources to manage the project.
Law said the HSR, if it materialises, would improve connectivity by reducing travel times, boost regional integration, and link urban centres with smaller towns.
