KUALA LUMPUR – The Malaysian Cabinet is slated to deliberate the way forward for the stalled Kuala Lumpur-Singapore High-Speed Rail (HSR) project in the next few weeks, with the lack of funds to build the 350km line its biggest stumbling block, industry players said.

Prime Minister Anwar Ibrahim has said he is open to reviving the project, which would cost around RM100 billion (S$30.4 billion) today, according to industry estimates.

The two-year-old Anwar administration has insisted that funding would have to come totally from the private sector, as it focuses on paring the government debt of more than RM1.24 trillion.

“Even in China, the only profitable (HSR) routes are Beijing-Shanghai and Guangzhou-Shenzhen. The rest require government subsidies to cover their high costs,” said a Malaysian industry leader connected to a consortium shortlisted for the project.

He said that although his consortium could raise RM20 billion in cash upfront, financial institutions could be unwilling to lend the remaining RM80 billion.

“Are we going to mortgage the entire company for the project?… The four richest cities in China have a combined population of 83.1 million, while the KL-Singapore corridor has only 14 million. The market is small,” he told The Straits Times on condition of anonymity as he was not authorised to comment.

“Without government subsidies, it’s difficult to stay afloat.”

Malaysia’s Transport Minister Anthony Loke told the New Straits Times (NST) newspaper that a policy paper on the HSR to be discussed in early January will not determine if the project would actually be revived, as negotiations would need to be held with Singapore.

“Just to manage expectations, it (Cabinet approval) is not the final say on the project, but rather a question of where we go from here,” Mr Loke told NST in an interview published on Dec 18, 2024.

Three consortia were shortlisted by Malaysia to bid for the project, comprising two Malaysian groups and one from China, The Edge business daily reported in March 2024.

They were the Malaysian Resources Corp (MRCB)-IJM Construction-Berjaya Rail-Keretapi Tanah Melayu consortium and the YTL Construction-SIPP Rail consortium. The Chinese group is led by the state-owned China Railway Construction.

But MRCB, a major player in Malaysia’s transit-oriented development, dropped a bombshell by leaving the consortium and pulling out of the HSR project on Dec 18 to “pursue other strategic opportunities”. Its decision jolted industry players as it came just before the Cabinet was set to deliberate on the project.

The idea for the HSR was raised by then prime ministers Lee Hsien Loong and Najib Razak in 2013 to provide an alternative to the world’s fourth-busiest international airline route. A legally binding bilateral agreement on the HSR was signed in December 2016, with operations set to begin 10 years later.

But in May 2018, then Malaysian Premier Mahathir Mohamad, whose Pakatan Harapan coalition had come into power that year, first dropped the project, then said it was temporarily shelved.

The project was terminated on Jan 1, 2021, after both countries failed to reach an agreement on changes proposed by Malaysia, which paid compensation to Singapore for the costs it had already incurred.

To help revive the project, Malaysia’s King, Sultan Ibrahim Sultan Iskandar, reportedly sought funding for it from a Chinese state-owned company during his four-day official trip to Beijing in September 2024.

But not much progress has been made, according to sources who were privy to the matter.

“While China is less strict about financing conditions, they are unlikely to want to own a loss-making project outright,” a top executive from one of the consortia, who spoke anonymously given the sensitive nature of the matter, told ST.

Another source, who is familiar with Beijing’s Belt and Road Initiative (BRI), said the HSR may not be a priority for China as it is focused on tackling its local government debt of 14.3 trillion yuan (S$2.68 trillion) and other economic issues, rather than investing in foreign infrastructure.

Malaysia has an ongoing BRI railway project, the RM50 billion, 665km East Coast Rail Link (ECRL), which is largely funded by China’s state-owned Export-Import Bank.

Mr Cheong Sze Hoong, assistant secretary at public transport organisation Transit Malaysia, suggested that Kuala Lumpur has two options to fund the HSR – either adopt the ECRL model or issue government bonds.

“It’s convenient to adopt the ECRL model, which is funded by a China loan. However, China would control the entire (construction) project, including the rolling stock, signalling, engineering and contractors,” Mr Cheong told ST. “On the other hand, taking a loan or issuing sovereign bonds is viable, as Malaysia has a strong credit rating and can retain control over the project’s details.”

As at December 2024, Fitch Ratings affirmed Malaysia’s long-term foreign-currency issuer default rating at BBB+ with a stable outlook.

Mr Goh Bok Yen, a transport consultant in Malaysia, said government involvement is crucial to making the HSR project viable.

“Given the huge capital costs, the project cannot proceed without government subsidies for land acquisition or interest-free loans.

“Additionally, there is uncertainty over whether Singapore would agree to sign a mega-scale infrastructure project with a private company, as the HSR is a bilateral project,” said the expert, who has 30 years of experience in the transport sector.

• Lu Wei Hoong is Malaysia correspondent at The Straits Times. He loves to travel and discover hidden gems of stories.
• Shannon Teoh is The Straits Times’ bureau chief for Malaysia, where he has reported on various beats since 1998.