KL-Singapore HSR revival faces uphill battle due to funding hurdles

KUALA LUMPUR, Jan 5 — The Malaysian Cabinet is expected to discuss the future of the stalled Kuala Lumpur-Singapore High-Speed Rail (HSR) project in the coming weeks, with funding constraints for the 350km line being the main challenge, according to industry experts.

As reported by The Straits Times (ST), Prime Minister Anwar Ibrahim has expressed willingness to revive the project, which industry estimates now place at a cost of approximately RM100 billion.

The government has maintained that the High-Speed Rail project must be entirely funded by the private sector, prioritising efforts to reduce the government’s debt, which exceeds RM1.24 trillion.

According to industry insiders, informal approaches to the Chinese government for funding in 2024 were unsuccessful, as the 90-minute Kuala Lumpur-Singapore route is anticipated to face financial losses.

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

He noted that although his consortium could potentially raise RM20 billion in upfront funding, financial institutions might be reluctant to finance the remaining RM80 billion.

He also pointed out the significant market difference. The combined population of China’s profitable routes, covering its four wealthiest cities, stands at 83.1 million, while the Kuala Lumpur-Singapore corridor comprises only 14 million people, making the market relatively small.

Without government subsidies, he said, it would be difficult for the project to remain financially viable.

The HSR project was initially proposed in 2013 by then-prime ministers Lee Hsien Loong and Datuk Seri Najib Razak as an alternative to the world’s fourth-busiest international air route. A binding bilateral agreement was signed in December 2016, with plans for operations to commence a decade later.

However, in May 2018, then prime minister Tun Dr Mahathir Mohamad, whose Pakatan Harapan coalition had just taken power, first cancelled the project before announcing it would be temporarily postponed.

The project was ultimately terminated on January 1, 2021, after Malaysia and Singapore failed to agree on proposed changes, leading Malaysia to compensate Singapore for incurred costs.

ST reported Malaysia’s King, His Majesty Sultan Ibrahim, is said to have approached a Chinese state-owned company for funding to revive the HSR project during his official four-day visit to Beijing in September 2024. However, sources familiar with the situation indicated that little progress has been achieved since then.

“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 familiar with Beijing’s Belt and Road Initiative (BRI) told ST that the HSR project might not be a priority for China, as the country is currently focused on addressing its domestic government debt of 14.3 trillion yuan (RM8.8 trillion) and other economic challenges rather than allocating resources to overseas infrastructure projects.

Malaysia already has a BRI-related railway project, the RM50 billion, 665km East Coast Rail Link (ECRL), primarily financed by China’s state-owned Export-Import Bank.

Cheong Sze Hoong, assistant secretary at public transport organisation Transit Malaysia told ST that the country could consider two potential funding models for the HSR.

One option is to replicate the ECRL approach, funded through a loan from China, which would give China significant control over aspects such as construction, rolling stock, signalling, and contractors.

Alternatively, he suggested Malaysia could opt for a government loan or sovereign bonds, leveraging its strong credit rating to maintain control over the project’s specifications.