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China is forerunner in HSR project

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by April 3, 2016 General

In just 13 years since rolling out its first high speed train, the republic has become the system’s fastest developer in the world. Now, it is eyeing a spot in Malaysia-Singapore’s rail project and its chances are bright indeed.

WITHIN a span of four months, China’s state-owned conglomerates have made acquisitions in Malaysia with value totalling RM25bil. Most analysts see this as laying the ground for its bid for the Kuala Lumpur-Singapore High Speed Rail (HSR) project planned for launch within one to two years.

Generally, China is now seen as the forerunner in the race for this anticipated project, which could cost RM70bil and spur economic activities in all the towns that the fast speed train have stations.

Last November, China General Nuclear Power Corp paid US$2.3bil (RM9.8bil) to acquire 1MDB’s power assets in Edra Global Energy Bhd.

This has saved the embattled 1MDB, whose advisory board chairman is Prime Minister Datuk Seri Najib Razak, from its RM42bil debt crisis. Since October 2014, 1MDB’s debt troubles had weighed on Malaysia’s sovereign credit rating. Moody’s Ratings recently said 1MDB is no longer a concern.

In December, China Railway Construction Corp Ltd (CRCC) – one of the largest construction giants in the world, teamed up with Ekovest Bhd to buy a 60% stake in 1MDB’s Bandar Malaysia for US$1.7bil (RM7.2bil). Bandar Malaysia, a mixed-property project on a 196.7ha site, will host terminals for the HSR project.

And just two weeks ago, China Railway Engineering Corporation (CREC) – which is keen to bid for the HSR project – announced in Kuala Lumpur that it would invest US$2bil (RM8.1bil) to build its regional centre in Bandar Malaysia.

CREC, the parent company of Hong Kong and Shanghai listed CRCC, also promised to bring in more Chinese investments into Malaysia. These recent favourable developments for Malaysia has convinced most market observers that China is likely to win the HSR project or be involved in some ways, overtaking Japan and other Western competitors.

“On the investment and political fronts, China has made inroads and many think it is the frontrunner for the HSR project. But it is premature to say who will get it now as the joint venture company to own and manage the HSR project has not been set up yet,” says Goh Bok Yen, a well-known transportation planning consultant.

The governments of Malaysia and Singapore are expected to finalise the commercial model and procurement approach of the project by this year. The HSR, starting at Bandar Malaysia, will have intermediate stations at Seremban, Ayer Keroh, Muar, Batu Pahat and Nusajaya, before ending in Singapore at Jurong East.

“Today, due to the fast development of new technology, nobody dares confidently say whose system is better. Even if the Chinese do not get the whole project, they have already gotten the terminal and with that kind of investment, they may be given participation in the supply of rolling stocks like locomotives and coaches,” adds Goh in a telephone interview with Sunday Star.

Indeed, China has already gained a favourable spot at the conceptual stage when the cost of the HSR was estimated at RM40bil. The world’s second largest economy pledged full-scale financing for the whole project and this augured well for the project during the economic slowdown.

Another advantage China has over its competitors from Japan, France and other Western players is that China has the experience of working with Malaysia on the latter’s KTM and LRT rail lines. It has supplied about 75% to 80% of the locomotives and coaches and related equipment to Malaysia, from its manufacturing plant in Malaysia.

On the ground, China is being favoured by many Chinese Malaysian-owned firms – which are eyeing lucrative projects in the One Belt-One Road regional economic initiative of China.

Indeed, Kinsteel Bhd’s Tan Sri Pheng Yin Huah, who is also president of Hua Zong that groups all Chinese guilds in Malaysia, has openly urged the Government to give the HSR job to China. Several other trade leaders have followed suit.

Some business leaders, such as Malaysia-China Chamber of Commerce president Datuk Bong Hon Liong, see spillovers into other areas of economic cooperation with Beijing if the HSR project is awarded to China.

China has been Malaysia’s largest trading partner since 2009. According to the Chinese’s official data, which took into account Malaysia’s indirect exports to China via Singapore and Hong Kong, total bilateral trade in 2014 exceeded RM400bil – with balance of trade heavily skewed towards Malaysia’s favour.

Goh: China has far more tracks and rail systems than all other countries combined.

Goh: China has far more tracks and rail systems than all other countries combined.

In recent years, Malaysia’s robust tourism has also relied heavily on tourist dollars from China. After a plunge of Chinese tourist arrivals in 2014 and 2015 caused by two plane disasters in 2014, the Chinese are now returning to Malaysia with a vengeance.

Although many people believe that Malaysia might return the favour to China for throwing a lifeline to 1MDB, Goh notes that Malaysia will have to take the views of Singapore into consideration as the republic will be an important stakeholder.

“Singapore culture is very different. They are very independent and professional in their approach and assessment,” says Goh, noting there is a firm commitment by two governments to invite open tenders once all details are hammered out.

According to individuals who have communicated with rail consultants in Singapore, advisers to the Singapore Government are not leaning towards China.

Rightly or wrongly, China’s rail system and engineering technology has given the perception that it is not as safe as Japan and the West.

This is partly due to the much shorter history of fast train development in China but mainly because of several rail mishaps that had occurred several years ago.

News that a crash in Wenzhou in 2011 killed 40 people and injured 190 others has not faded from the people’s memory.

The negative perception of China’s fast rail system is made worse by the recent problems China had encountered in Thailand and Indonesia.

According to Bangkok Post on March 24, Thai government has decided to wholly invest in the Thai-Sino fast-to-medium train project after it failed to agree with China on some crucial terms that have set back progress for months.

According to Jakarta Post, the signing of an agreement on the development of the China-funded high-speed Jakarta-Bandung rail project between the government and PT Kereta Cepat Indonesia China (KCIC) was delayed to March 17 after several allegations against KCIC. Construction of the project had been suspended for two months after the groundbreaking in January.

But Goh says China has to be judged in the right perspective. It only rolled out its first high speed train in 2003 and in the early stages, there were bound to be hiccups.

“If you look at the number of accidents involved, China may be high. But if you look at the accidents per million train-km, it may not be high and is lower than many other countries,” Goh states.

But so far, China has not been proactive or even responsive to correct the perception on safety.

The CERC has not replied to Sunday Star’s emails on safety concerns. However, China is inviting journalists to experience China’s rail ride in mid-April and to brief them on its rail development.

In fact, China can now boast the fastest high speed railway development in the world. Its nine bullet rail systems covered total rail line distance of 19,000km in 2015, accounting for 60% of the world’s total line distance.

Goh remarks: “China started rail modernisation and high speed train development only about 15 years ago. But its speed of development and implementation is incredibly high. Competitors can say anything about China, but look at this country, it has far more tracks and rail systems than all other countries combined in the world.

“They picked up from the middle road, they picked up new technology, did their own research and development (R&D) and modernised the technology acquired.”

Indeed, China has made it known that it has studied the technologies of Germany, France and Japan – countries known for their superior rail engineering and systems – before developing its own HSR technology and systems.

“Due to China’s R&D on major train projects and super lengthy tracks, China has developed the most cost-effective rail system in the world that nobody can compete with,” says Goh.

In fact, Sunday Star learns that one of Malaysia’s top decision makers who have been to China several times to study its rail system is impressed by China’s rail construction and engineering work.

In China’s first ever rail exhibition held in Kuala Lumpur held in mid- December 2015, Malaysians were impressed with China’s extensive experience in HSR construction and operation under different geological and weather conditions, and its ability to develop a complete technology system for high speed railway.

The exhibits had given emphasis on how safe and reliable the Chinese system is. One of the safety assuran­ces highlighted was that China has developed a 400km/h comprehensive inspection train for real-time inspection of the track, communication, traction and power supply system of high speed railway.

But in terms of public image and media relations, China is lagging behind its regional rival Japan.

Japan took Malaysian media for a bullet train ride and a briefing on its technology last year. The trip left many impressed with its superb technology, safety measures and track record. Japan has a head start in high speed rail projects, rolling out the first Shinkansen (bullet train) passenger service in 1964.

“On the media front, Japan has won a battle over China. But on local sentiment and political fronts, it has lost out to China,” observes Goh.

But an independent engineer in Malaysia still sees China in a favourable light. He notes that China’s HSR train technology has evolved from Japan, Germany and France.

“There’re several mishaps of its trains in China due to new start up and technical glitches but China has been able to rectify the defects. After all the learning curves, China is able to manufacture at a cheaper cost. In addition, they may win HSR train contract in Malaysia due to cost factors, providing financing loan and inter-governmental diplomacy,” said the senior engineer.

He notes that Malaysia and China are enjoying the closest ties since they began diplomatic ties in 1974. Kuala Lumpur, which has maintained a cool gesture towards China’s occupation of disputed islands in South China seas, is viewed by China as its best friend among South-East Asian nations.

Hence, it is no surprise that China is extending hands to help Malaysia overcome the current economic slowdown and the 1MDB crisis.

But for Malaysians and Singaporeans who will be the frequent riders of the future speed train, safety and reliability of the HSR must be given priority.

“Safety cannot be compromised. Malaysia now needs to set up a good expert team to look into all systems. It also needs an independent assessment team to give professional advice to the government, without political and sentiment considerations,” says Goh.

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