Do We Need MRT Line 2 Now? – Saleh Mohammed

The Malaysian Insider, 24 February 2014

Last year, the Fiscal Policy Committee (FPC) decided that priority will be given to jobs with low import content and high-multiplier effects, while those with high import components will be sequenced, to narrow the government's fiscal deficit gap and bolster shrinking current account surplus.

Parties with interest in the Klang Valley MRT Line 2 project argued that any delay will result in rising cost and economic benefits foregone. There is also this simplistic view where contractors will be selling off unused machines and even let go employees if Line 2 is not approved. Lines 2 & 3 are seen as a provider of longer-term jobs for the construction sector.

Though acknowledging it is the government's call, MRT Corp seems confident it will also be undertaking MRT Line 2 where a decision is expected soon. It seems MRT Corp would again source out its financing needs to DanaInfra Nasional Bhd, with government-backed bonds.

Let us have a look and learn from the experience gained from Line 1.

Credit has to be given at the speed with which the project was implemented from when it was seriously debated and approved. Proper structure was developed, project owner incorporated, project delivery partner (PDP) appointed, financing sourced out and relevant laws put in place to suit the needs of the project.

To implement a project of this mega-scale, proper coordination and planning is a must. Stakeholders and/or affected parties have to be engaged/consulted. Relevant approvals to be thought of and applied for. Proper studies including environmental impact to be carried out to mitigate/avoid issues and problems. Optimum technical solutions to be applied to control construction and operation and maintenance costs. Finally, support is required from the highest level.

From the above, there are few areas where room for improvements exist and decision makers may want to seriously consider.

There were protests and even a court case against MRT Corp. It is hoped that there would be constructive and productive engagements with relevant stakeholders and affected parties before a decision on Line 2 is made.

A comprehensive Social Impact Assessment has to be made available before project commencement. Environmental Impact Assessment study to cover every single aspect of impact on environment with proper data recordings and findings. Traffic dispersion study has to be carried out before project implementation.

Saving costs during construction is a good strategy but the longer-term operation and maintenance costs have to be critically considered as it would have a negative effect on the economics of the project which may lead to subsidies. This may be the reason why the PDP and MRT Corp are not keen in becoming the operator - SPAD will be the operator.

It is also hoped MRT Corp will confirm the total cost of the project including all soft costs as it is still unclear even after all the major contracts have been awarded for Line 1. Better still if a comparison on cost/km is made with MRT projects in Singapore, Thailand, Indonesia and Hong Kong.

While we talk about import content, let us not forget the funds outflow from foreign workers/experts involved in this mega project. It was also argued that it will provide jobs for the construction sector. We have to take a look at the percentage of foreign workers directly or indirectly involved in this project.

Foreign workers in Malaysia remitted to their respective home countries RM48 billion between 2010 and 2012 (the MRT project was not in full swing during this period). And this did not include funds that flowed out of the country illicitly.

It was said there will be minimal expenditure for the first 24 months after getting government approval but the issue here is whether the country can afford the overall cost of the additional lines whilst there could be other projects with higher commercial investment returns which have measurable immediate impact within a shorter period.

Before a decision is made to proceed with Line 2, I would suggest that SPAD consult the Malaysia Competition Commission (MyCC). SPAD would also like to look at improving the present support systems for transit, including transit priority and traffic restraint measures on present roadways.

I trust decisions should be made based on the need to help build a culture of performance and accountability within the government bureaucracy. – February 24, 2014.

Saleh Mohammed reads The Malaysian Insider.

This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.

(Source: http://www.themalaysianinsider.com/sideviews/article/do-we-need-mrt-line-2-now-saleh-mohammed)