Malaysia

Putrajaya mulls multi-billion rail deals

KUALA LUMPUR, June 8 — The Najib administration is considering proposals  costing nearly RM50 billion on two rail projects to improve public transportation in the Klang Valley and for a high-speed rail link to Singapore, say government officials familiar with the deals.

On the table is a proposal from a MMC Corporation Bhd and Gamuda Bhd joint venture to construct a new mass rapid transit (MRT) system with a price tag of at least RM35 billion.

The other proposal for a high-speed rail link connecting KL and Singapore is from a Barisan Nasional (BN) component party to form a special purpose vehicle with capital from some of its other partners in the ruling coalition.

The Malaysian Insider understands that Prime Minister Datuk Seri Najib Razak is "positive" on the proposals.

"But no final decision has been made yet," a source said.

The KL-Singapore link proposal could cost between RM8 billion and RM10 billion, similar to a 2006 bid by YTL Corporation Berhad which owns a 50 per cent stake of the Express Rail Link between KL Sentral and KL International Airport.

But the lion's share would be for the MRT project which could take up to ten years to complete. It remains unclear if the new MRT line would replace or be in addition to the proposed Kota Damansara-Cheras line.

It is understood that MMC-Gamuda had made an unsolicited offer to build and design the MRT system. The Edge Daily yesterday reported both firms are bidding separately but government officials say both made a joint bid.

As a result the government is considering the use of a "Swiss Challenge" philosophy to tender the project out with MMC-Gamuda maintaining an advantage in being awarded the contract.

A Swiss Challenge is a form of public procurement in usually less-developed countries whereby public authorities receiving an unsolicited bid for a project invites third parties to match or exceed it.

The public authority would also usually give the original proponent an advantage in a competitive bidding process. 

Using this principle, competitive bids would have to substantially lower or more cost effective to defeat any proposal from MMC-Gamuda.

A source familiar with the MMC-Gamuda proposal told The Malaysian Insider that MMC-Gamuda appeared to have gained an unusual advantage with its unsolicited bid because of the Swiss Challenge philosophy.

This was because the joint venture would only be involved in the "design-build" phase as contractors and would undertake almost no risk. Syarikat Prasarana Negara Berhad, the national infrastructure company, would ultimately own and operate the MRT line.

The huge price tag of "at least RM35 billion" for the MRT system could also rise further because it is understood that a major portion of the system would be underground.

Some underground sections of the new line being proposed would be constructed near or parallel to the existing underground sections of the Kelana Jaya Light Rail Transit (LRT) line.

But the new line would be underneath the LRT subway, escalating cost further.  

The Malaysian Insider also understands that a BN component party that put forward its proposal to Najib to revive the KL-Singapore high-speed project had received favourable response.

Under the proposal, the BN party's investment arm would set up a new joint venture with capital contributions from a number of other BN parties to undertake the construction of the bullet-train type service.

YTL Corporation had been an original proponent of a bullet-train service which it said it would build for RM8 billion. It had then proposed cutting down travelling time to 90 minutes between KL and the island state.

But the YTL proposal, mooted soon after it had completed the KLIA Express Rail Link (ERL), had been put off by the government in 2008 due to the high costs involved.

It is understood that the new proposal by the BN component party is being looked at positively because of improved bilateral ties with Singapore and the possibility of a third bridge being built across the Causeway.

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