HSR project to boost KL-Singapore economic integration: Bank of America Merrill Lynch

KUALA LUMPUR: The high speed rail (HSR) project will boost efforts in Malaysia-Singapore economic integration process, said a research house. This opportunity, said the Bank of America Merrill Lynch, comes at a time when both Japan and China – armed with ready infrastructure funds -- are showing keen interests in the project.

“With the Asean Economic Community (AEC) set to start end-2015, the fast train will complement ambitious train projects connecting Thailand and the Greater Mekong region,” said economist Dr Chua Hak Bin. Malaysia’s abundant land and larger population offers Singapore a natural avenue to overcome its geographical and manpower constraints, while Malaysia also needs more foreign investment, as the oil and gas price collapse is hurting growth and fiscal revenue. Prime Minister Datuk Seri Najib Razak is in Singapore for the Sixth Malaysia-Singapore Leaders Retreat. Both governments are expected to firm up details of the HSR and other projects.

The retreat is expected to see some signs of progress since the project was announced five years ago. “The RM40 billion infrastructure investment will provide a significant economic boost, at a time when exports are faltering and investment is slowing.” Singapore's cumulative direct investment into Malaysia has doubled to S$27.2 billion in 2013 from $13.5 billion in 2003.

Malaysia is the fifth largest direct investment destination, accounting for about 7 per cent of total. “Investment flows have improved both ways. Malaysia's FDI into Singapore also shows a significant turn and increase since 2003 while bilateral trade however continued to slide lower over the last 10 years, with Malaysia accounting for about 11 per cent of trade compared to about 18 per cent a decade ago.” Chua said the Kuala Lumpur stop, which will likely be Bandar Malaysia, a 1MDB development, will especially help boost 1MDB’s asset values, and Johor (with three stops).

The seven steps for the HSR are Kuala Lumpur, Putrajaya, Seremban, Ayer Keroh, Muar, Batu Pahat; and Nusajaya (Iskandar). For Singapore, the terminal could be at Tuas West, Jurong East or the Downtown Core. “Placing the HSR stop downtown will however increase the costs significantly. We think Jurong East will be the preferred option, given decentralisation efforts and costs.”

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