Prime Minister Dr Mahathir Mohamad recently announced that the RM110 billion 350km HSR project would be cancelled as it was too costly and the benefits too few. The project was planned for completion in 2026.
CNBC said among the firms that would likely suffer losses were builder Gamuda Bhd and infrastructure and property firm Malaysian Resources Corp Bhd (MRCB), which had been appointed as civil infrastructure project delivery partners for the northern section of the project. YTL, chosen for the southern section, will also be affected.
The companies said in filings to the Malaysian stock exchange last week that they had received notice of the cancellation and that all negotiations were suspended.
It was earlier reported that the MRCB–Gamuda Bhd consortium (MRCB Gamuda Consortium) and the Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd–TH Properties Sdn Bhd consortium (YTL-THP) had been appointed as project delivery partners for the civil works portion.
The CNBC report said major rail companies that had jockeyed to build, operate and finance the railway – including top names from China and Japan – would also be disappointed.
However, it quoted Corrine Png, chief executive of Crucial Perspectives, as saying the cancellation was good news for airlines.
“Investors have been discounting that (certain airlines would) lose a lot of traffic to rail when this happens because for short-haul flights, the economics make sense for passengers to switch to rail.”
Those expected to benefit include Jetstar Asia, which counts 10% of its traffic from the Kuala Lumpur-Singapore route, AirAsia and Singapore Airlines.
Aside from airlines, Png said, industries related to the sector such as airports and service providers, including ground handling firm SATs and line maintenance service provider SIA Engineering, were expected to benefit.
Meanwhile, the CNBC report said concerns that the Jurong Lake District development in Singapore – to create a second major business district – would be badly affected as the HSR terminus was to have been located there, might have been exaggerated.
Tay Huey Ying, head of research and consultancy at JLL Singapore, told CNBC: “As multiplier effects (potentially generated by the Jurong East terminus) would come about only after the commencement of the (high-speed rail) originally scheduled for 2026, the impact on existing businesses and developments is minimal.”
Alice Tan, head of consultancy and research at Knight Frank Singapore, called the railway project “just a bonus” to the area. She added that “with or without” the rail terminus, there were “already a plethora of plans” to develop the second central business district.
However, the report said that Genting Hotel Jurong, which opened in 2015 and is located within walking distance of where the Singapore Jurong East high-speed railway terminus would have been developed, might be adversely affected.
CNBC quoted Alex Holmes, Asia economist at Capital Economics, as saying in a note sent before news of the high-speed rail cancellation: “Given Malaysia’s weak fiscal position and that some of these projects are of dubious economic value, (cancelling some huge infrastructure projects) may be no bad thing.”
He added that although investment growth would likely “drop sharply” if Malaysia began scrapping infrastructure projects, the cancellations could be in the best interests of the country.
Malaysia’s economy, he said, had been at risk of overheating given its robust growth, and infrastructure projects could worsen the country’s fiscal position.