Belt and Road Initiative Projects: Kuala Lumpur-Singapore High Speed Rail. Guanie Lim (Nanyang Centre for Public Administration)

Transcription

1 Belt and Road Initiative Projects: Kuala Lumpur-Singapore High Speed Rail Guanie Lim (Nanyang Centre for Public Administration) Celia Lee (Nanyang Centre for Public Administration) Sirui Ma (Nanyang Centre for Public Administration) Please cite this work as: Lim, G., Lee, C., & Ma, S. (2018). Belt and Road Initiative Projects: Kuala Lumpur-Singapore High Speed Rail. NCPA Case Studies, 001, 1-8. Please the corresponding author, Guanie Lim for feedback. I. Introduction In 2013, Chinese President Xi Jinping announced a pair of initiatives, which aims to restructure the economies spanning Europe and Asia. The Silk Road Economic Belt was announced in September 2013 as a program to connect China to Europe by land, with routes interlinking relevant countries. A month later, President Xi announced the 21st Century Maritime Silk Road, a sea-based development initiative targeting the ports of Southeast Asia, South Asia, the Middle East, East Africa, and the Mediterranean. These two Silk Road programs collectively form the Belt and Road Initiative (BRI). Following the announcement, several countries have embarked on various projects to forge better economic, logistical, and political connections amongst each other. In conjunction, Singapore and Malaysia signed a legally binding agreement to build the 350-km Kuala Lumpur-Singapore High Speed Rail (HSR) in late The Kuala Lumpur-Singapore HSR is a strategic project between the governments of Singapore and Malaysia, despite the latter s initial policy uncertainty when its administration changed hands on 9 May Touted as Southeast Asia s largest infrastructure project, it potentially costs anywhere from SGD 13 billion (The Star, 2013) to slightly above SGD 20 billion (Hutchinson, 2016). It aims to facilitate seamless travel, enhance business linkages, and bring the peoples of both countries closer together. With terminus stations in Singapore's Jurong East and Kuala Lumpur's Bandar Malaysia, the HSR is expected to cut travel time between the two cities to 90 minutes, compared to about four hours of motor vehicle commuting (Land Transport Authority, 2018). The project is originally expected to be This case was written by Guanie Lim, Celia Lee, and Sirui Ma under the guidance of Hong Liu, Nanyang Centre for Public Administration, Nanyang Technological University and has been funded by the Nanyang Centre for Public Administration. The case does not reflect the views of the sponsoring organisation nor is it intended to suggest correct or incorrect handling of the situation depicted. The case is not intended to serve as a primary source of data and is meant solely for class discussion. Copyright 2018 by the Nanyang Centre for Public Administration at the Nanyang Technological University. All rights reserved. This publication can only be used for teaching purposes.

2 completed in 2026, but has since been delayed to 2031 (Nik Anis, 2018) (see Figure 1). At a regional scale, this project is a key cog in the much-touted Singapore-Kunming Rail Link (SKRL), an ambitious railway announced at the fifth summit of the Association of South East Asian Nations (ASEAN) in It is envisaged to link China s Yunnan Province to Singapore via Laos, Thailand, and Malaysia (Wu, 2016). Source: Land Transport Authority (2018). Figure 1: Illustration of the Kuala Lumpur-Singapore High Speed Rail As one of the most anticipated railway projects in Southeast Asia, the Kuala Lumpur- Singapore HSR has attracted the attention of some of the biggest railway builders, especially those from China and Japan. For China, efforts to export its railway projects is one of the most prominent vehicles undergirding the BRI. The construction of overseas railways is crucial to promote Chinese trade and investment linkages with other foreign markets. Securing such projects is also vital for China s infrastructure and engineering firms, many of which are suffering from overcapacity and a stuttering domestic business environment as a result of the recent deceleration of the Chinese economy following years of rapid growth (Yu, 2017). For Japan, the export of railway projects is just as important. It not only is one of Japanese industry s key growth strategies, but also a pillar of Japan s Asian regional diplomatic strategy. This is even more pronounced after a consortium of Japanese firms lost out to their Chinese rivals in the bidding of the Jakarta-Bandung HSR project in To 2

3 regain its prominence in the region, Japan plans to make an all-out bid for the Kuala Lumpur- Singapore HSR, tapping into the technological expertise and branding of its world-renowned Shinkansen bullet train system. However, the Pakatan Harapan (PH) government, after coming into power on 9 May 2018, has vowed to review all the mega projects (including the HSR) committed by the previous Barisan Nasional (BN) government. The postponement or even shelving of the Kuala Lumpur-Singapore HSR signifies that the awarding of large, capital-intensive projects and their eventual implementation are almost always contingent upon place-specific political economic factors. While not denying the impacts of great power contestation, this episode shows that smaller states (in this case, Malaysia) have their own political and economic calculus that may not be in-line with those of the bigger states. In other words, the existence of a wide range of interest groups in the domestic arena can make outcomes less open to generalization. To illustrate this point, the paper shall focus on the Kuala Lumpur-Singapore HSR, analysing the immediate and systemic reasons leading to its postponement. More prosaically, it aims to offer some policy lessons for the project (should it get resurrected with the same or reduced conditions) or similar bilateral infrastructure projects involving both Singapore and Malaysia (see Liu and Lim, 2018 for more details). II. China s High-Speed Rail Diplomacy Meets Local Politics To some extent, the zeal with which the leadership of Singapore and the former BN led-malaysia is pushing the project reflects the broader sentiment in Southeast Asia. According to Pitakdumrongkit (2016), Southeast Asian nations have long been aware of the benefits of improved connectivity, especially in bolstering trade and investment. This can be seen in the launching of the Master Plan on ASEAN Connectivity (MPAC) in Among the MPAC s 15 priority projects are the ASEAN Highway Network, SKRL, and ASEAN Power Grids. Implementation of the MPAC, however, is hampered by the chronic lack of funds. Indeed, Bhattacharyay (2009) estimates that Southeast Asian countries will require investment amounting to SGD 80 billion (USD 60 billion) per annum in the coming years for them to plug the infrastructure gap. Yet, the ASEAN Infrastructure Fund a financing arm of MPAC can provide only SGD 5.3 billion (USD 4 billion) until 2020 (Pitakdumrongkit, 2016). Nevertheless, the loss of BN during the May 2018 general election has ushered into power the PH administration led by former (now current) Prime Minister, Tun Dr Mahathir 3

4 Mohamad. The new administration then postponed the Kuala Lumpur-Singapore HSR within weeks of helming Putrajaya, citing high costs and the gaping national debt, which it has committed to trim. In addition, the new administration has declared that the project provides relatively little benefits to the Malaysian citizenry (Leong, 2018; TODAY, 2018). Mahathir added that the process would take time as he acknowledged that there is an agreement with Singapore on the matter. He also indicated that there was a SGD 170 million (MYR 500 million) compensation payment to be made if the deal was cancelled (Bedi & Sivanandam, 2018). Singaporean Transport Minister Khaw Boon Wan, in a statement on 1 June 2018, said the Republic has requested the Malaysian government through diplomatic channels to clarify Malaysia's position on the project. The Transport Minister also said that should Malaysia cancel the project, Singapore will study the implications and exercise its rights including any right to compensation for expenses in accordance with the terms of the bilateral agreement signed in 2016 (Leong, 2018). As outlined previously, Mahathir s rationale to postpone the project are threefold: high costs, the need to rein in the national debt, and the project s perceived lack of benefits to the Malaysians. While ministers of the previous administration have disputed the first two reasons, pointing out that the decision was made in haste and disagreeing on the figures cited by Mahathir (see Channel NewsAsia, 2018b; New Straits Times, 2018), it must be acknowledged that these are domestic affairs of the Malaysian. As such, there is little that Singapore can do as the first two factors are almost entirely out of its control. For example, land acquisition in Malaysia, estimated to be a considerable cost component, is under the purview of the Malaysians and there is almost no avenue for Singapore to take a more proactive role (see Channel NewsAsia, 2017). However, Singapore has played a positive role in managing the third factor. Indeed, the Singaporean government has consistently supported the project because of its transformative impacts on the region. During the signing of a memorandum of understanding for the HSR on 19 July 2016, witnessed by Singaporean Prime Minister Lee Hsien Loong and his then Malaysian counterpart, Najib Razak, the former stated that the HSR will more closely connect Malaysia and Singapore, resulting in a tighter relationship between the people and economies of both places. He also stressed that it is a worthwhile project that will mutually benefit Malaysia and Singapore (Lee, 2016). The Singaporean stance was underlined again on 14 December 2016 when both governments signed a legally binding agreement to push the HSR forward, following up on the signing of the memorandum of 4

5 understanding (Sim, 2016). Despite the best efforts of Singapore, it was ultimately undone by the inability of the BN administration to persuade the Malaysian public that the project s benefits outweigh its cost. III. Systemic Factor Leading to Project Postponement More prosaically, there is a need to understand the systemic reason leading to the postponement. Wong (2018) demonstrates that BN had maintained its stranglehold (at least until May 2018) of the federal government mainly through constituency delimitation, particularly since the 1970s. The means deployed include malapportionment, gerrymandering, and pre-delimitation boundary changes. As political competitiveness waned over the years, BN compensated by centralizing more power towards the federal government, especially the Prime Minister s Office (PMO) (Ostwald, 2017). As a result, Malaysia became one of Southeast Asia s most top-down, centrally-governed entity, despite possessing a federal structure that suggests substantial decentralization. This structural flaw is amplified by Malaysia s First-Past-the-Post (FPTP) electoral system (which is winner-takes-all in nature), its divided, multi-ethnic society, and a lack of checks and balances on the executive. These systemic fault lines imply that a decision (such as agreeing and continuing with the HSR) can be reversed should there be a change of federal government (or even a Prime Minister who is not aligned with his or her predecessor). This was played out vividly in the PH s bold and swift decision to shelf the HSR after gaining control of Putrajaya. Although the new administration has taken some measures to decentralize power away from the PMO and the federal government to its various state and local authorities, it is still early days and one cannot be entirely certain whether there exists sufficient political will to persist with such reforms over the long run. 1 Whichever the scenario, there is a need to better understand such a dynamic and its evolution in the coming years. To this end, Singapore can work more closely with the new administration in the interim to understand the latter s concerns. This is because the HSR might yet be resurrected in the future (in the present form or otherwise). Indeed, the latest development has provided cause for optimism. On 5 September 2018, both governments have agreed to suspend the construction of the HSR until May 2020, with Malaysia reimbursing 1 Some of the more prominent measures include the move to appoint a separate minister to helm the Ministry of Finance. It has been customary for the Malaysian Prime Minister to concurrently head the Ministry of Finance since the latter years of Mahathir s first tenure. Another landmark move is to hold mayoral elections in all city councils, devolving power from Putrajaya to the local stakeholders (Sri Priya, 2018). 5

6 Singapore SGD 15mil for the suspension. This term, in addition to other clauses, were drawn out based on a new understanding between the PH administration and Singapore (Nik Anis, 2018). The decentralization process also has to be monitored closely. While it is only proper to engage with Putrajaya, there is also a need to have a close interaction with the state and local authorities, especially if the move to devolve power away from Putrajaya materializes. Closer to home, it makes even more sense to gauge the on-the-ground political sentiments by working with the Malaysians on the shorter Johor Bahru-Singapore Rapid Transit System (RTS) Link. This project is still in force and the Singaporean government has stated that it shall go on regardless of whoever is the government on either side (Channel NewsAsia, 2018a). IV. Analysis and Policy Implications In summary, the Kuala Lumpur-Singapore HSR is a critical project for both countries because of its immense potential to reshape the regional landscape. However, the new administration taking over Putrajaya has postponed it because of fiscal concerns and its perceived lack of benefit to the Malaysians. More fundamentally, Malaysia s outwardly robust political system is built upon a shaky foundation fuelled by constituency delimitation, power centralization, and other structural flaws. When power changed hands from BN to PH, the latter faced little to no resistance in shelving the HSR primarily because it merely inherited the winner-takes-all features of the political system. What does this mean for Singapore then? Assuming PH does make good on its promise to devolve power away from Putrajaya and the PMO back to the state and local level authorities, it can take a two-pronged approach in dealing with the situation. Firstly, Singapore has to cooperate more closely with the new administration at the federal level, although many members of the latter s cabinet are relatively inexperienced. This is to prepare for the possibility of the HSR s revival, in the original format or otherwise. A close working relationship with the Malaysians can ensure that the railway s planning and execution is properly done, ensuring fairness, transparency, and ultimately cost efficiency for both sides. One of the most important factors undergirding bilateral collaborations of such nature is Singapore s experience and track record in managing public transport, a feature that the Malaysians will likely appreciate. 6

7 Secondly, it is imperative to have a close interaction with the state and local authorities, preparing for a potential devolution of power and responsibility from Putrajaya. The most immediate project that can be managed in such a way is the Johor Bahru-Singapore RTS Link. It is relatively smaller and lower budget than the HSR, but it is the first capitalintensive project involving both countries since PH s rise to power. The success of the RTS Link cannot be overstated as it will likely be the bellwether for future infrastructure projects between Singapore and Malaysia. References Bedi, R., & Sivanandam, H. (2018, 29 May). Govt Cancels HSR Mega Project. Retrieved from Bhattacharyay, B. N. (2009). Infrastructure Development for ASEAN Economic Integration. Tokyo: Asian Development Bank Institute. Channel NewsAsia. (2017, 17 October). PM Najib Unveils Concept Designs for KL- Singapore High-Speed Rail Stations. Retrieved from Channel NewsAsia. (2018a, 29 May). KL-Singapore HSR: What You Need to Know. Retrieved from Channel NewsAsia. (2018b, 25 May). Najib Criticises how Malaysia's RM1 Trillion Debt is Calculated, says Government Spooked Markets. Retrieved from trillion-debt-is-calculated Hutchinson, F. (2016, 1 April). Challenges Ahead for the KL-S pore High-Speed Rail. Retrieved from Land Transport Authority. (2018, 23 January). Kuala Lumpur-Singapore High Speed Rail. Retrieved from Lee, U.-W. (2016, 20 July). Singapore to KL in 90 Minutes: High-Speed Rail Targets 2026 Start Date. Retrieved from Leong, T. (2018, 12 June). KL-Singapore High-Speed Rail Postponed, Not Scrapped: Malaysian PM Mahathir. Retrieved from Liu, H., & Lim, G. (2018). The Political Economy of a Rising China in Southeast Asia: Malaysia s Response to the Belt and Road Initiative. Journal of Contemporary China, DOI: / New Straits Times. (2018, 29 May). Government Making Big Mistake by Cancelling HSR, says Rahman Dahlan. Retrieved from Nik Anis, M. (2018, 5 September). Azmin: HSR Construction Off until May The Star. Retrieved from 7

8 Ostwald, K. (2017). Federalism without Decentralization: Power Consolidation in Malaysia. Journal of Southeast Asian Economies, 34(3), Pitakdumrongkit, K. (2016). After AIIB, What s Next? (RSIS Commentary, No. 079, 8 April 2016). RSIS Commentaries. Singapore: Nanyang Technological University. Sim, R. (2016, 14 December). PM Lee: High-Speed Rail Agreement Significant Milestone. Retrieved from Sri Priya, S. (2018, 14 May). Maria Wants Elected Mayors. Retrieved from The Star. (2013, 5 October). China Shows Interest in KL-Singapore High-Speed Rail Project. Retrieved from TODAY. (2018, 28 May). Decision to Scrap KL-S pore HSR is 'Final', says Mahathir Retrieved from Wong, C. H. (2018). Constituency Delimitation and Electoral Authoritarianism in Malaysia. The Round Table, 107(1), Wu, S.-S. (2016, 17 June). Singapore-Kunming Rail Link: A 'Belt and Road' Case Study. Retrieved from Yu, H. (2017). Motivation behind China s One Belt, One Road Initiatives and Establishment of the Asian Infrastructure Investment Bank. Journal of Contemporary China, 26(105),