In May 2018, Malaysia’s new Prime Minister Mahathir Mohamad announced that the Kuala Lumpur–Singapore high-speed rail (we will call it HSR in this article) is cancelled. While discussions are still underway, we shall focus on the hidden benefits this project might bring if it gets back on track in the future.
Why was the HSR cancelled?
The main reason for cancellation as given by Dr Mahathir is due to its high-cost which is estimated to be RM110 Billion. The governments (Singapore and Malaysia) will be financing a large part of the capital costs. Otherwise, it will not be profitable for the rail operators. Where do governments get the money? Tax obviously! Donald Low did an excellent analysis of this part, do give his post a read for a better understanding. There might also be political reasons as to why the HSR is cancelled, but we shall not touch on that.
The obvious benefits
The benefit is that travelling between Kuala Lumpur and Singapore will take only be 90 minutes. Even though flight time is quite short, it usually takes up to 3 hours when we include check-in, check-out, security clearance and waiting. The HSR will also connect Singaporeans and Malaysians, forging stronger bilateral relationships.
The hidden and optimistic benefits
This is a mega project which requires extensive labour. The construction requires not only construction workers and foremen but also all the different types of engineers (e.g. Material, Mechanical, Electrical, Computer, etc.) who specialise in different areas. Architects are also required to plan the terminals and railways. The railway parts are probably manufactured overseas, but tons of labour jobs are also needed. Drivers are required to deliver the parts from Point A to Point B and workers are needed at the port to handle the logistics. Also, some of the raw materials may be exported from Malaysia. The assembly process could also take place in Malaysia or Singapore. These are just some potential jobs created from the project.
Jobs will provide income to these people, and their spending will lead to a circular flow of income for other citizens. This multiplier effect will spur expenditure in the economy. However, it is hard to gauge how much spending will be created in the economy.
When the HSR is completed, it is possible to visit the other country for Weekend shopping. Singaporeans can now comfortably visit Kuala Lumpur, instead of the good old JB. They can also visit other parts of Malaysia where the HSR will stop to take a breather. Likewise, Malaysians, especially those in the more affluent areas such as Kuala Lumpur, can also do the same. Tourism brings in additional income for F&Bs, retail stores, hotels, tourist attractions and more. With an influx of tourists, more employees will be hired again. The increase in income would also mean more tax collected by the governments.
Better connectivity between the two countries also suggests that business owners can expand into the other state with ease. Singapore business owners can expand into Kuala Lumpur and tap on their lower costs and high expertise. Alternatively, they can also set up their businesses in the less developed areas such as Batu Pahat.
Similarly, business owners in Malaysia can also set up their business in Singapore and tap on the expertise and infrastructure that is available. This not only creates Foreign Investment and new jobs but also enables the exchange of ideas and technology. This can help business in both countries to be more productive in the long run. Students in both countries can also cross-border for their education.
A concern with this is that cost of living (more applicable to Malaysia) will rise. However, this is just a natural outcome of development when people get richer. The HSR drastically cuts down travelling time between the two countries and Malaysian students can easily commute daily/weekly to Singapore for their University education. Their travelling time (those living nearer to Singapore) may even be shorter than those who have to travel from Pasir Ris to Palau NTU. Likewise, Singapore students can broaden their University choice with Malaysian Universities becoming more accessible once the HSR is built.
The value of these spillover effects is hard to calculate. In the future, the benefits will definitely outweigh the costs. However, the question is how long in the future are we looking? We are sure 200 years later; the RM110 million will be “earned back”. What about 30 years into the future? We can never be sure.
Last updated on July 2nd, 2019.