Malaysia to cut cost of Klang light rail system by almost $4bn

The thrifty new Malaysian government of Mahathir Mohamad announced today that it planned to cut the cost of a light rail project to link Kuala Lumpur with the port of Klang by almost half, on the grounds that the previous regime had caused the price to soar with unaffordable features it could do without.

The 37km Light Rail Transit 3 line (LRT3), which would connect Bandar Utama on the outskirts of the capital to Klang, had risen in cost to $7.8bn from an original budget of $2.2bn, but its budget has now been cut to $4.1bn.

The reduction has been achieved by narrowing the scope of the project. It will now have 21 rather than 26 stations, and a 2km tunnel has been dropped.

The project, which began on site in 2016, has also had its construction period extended to 2024 from 2020 to avoid "acceleration costs", and the system will be operated by 22 three-car trains, rather than 42 six-car units.

The losers from the decision will be Malaysian Resources Corporation, a "transport oriented" property developer, and contractor George Kent, who together were appointed project delivery partner in 2015.

The suppliers of the trains and signalling systems will also have their work cut. These include China’s CRRC Zhuzhou Locomotive, Germany’s Siemens and a Malaysian company called Tegap Dinamik.

According to Malaysian newspaper The Star, work packages totalling $3.7bn have already been let.

Lim Guan Eng, the finance minister of the new government (Firdaus Latif/Creative Commons)

Since becoming prime minister in May, Mahathir has taken steps to cut Malaysia’s expenditure on infrastructure schemes initiated by the government of former prime minister Najib Razak, who is now facing charges of corruption, which Najib denies.

Lim Guan Eng, the minister for finance in the new government, said "poor management" on the part of state-owned operator Prasarana Malaysia was responsible for the cost increase. He said: "The ministry will not support any additional funding required for the project unless the cost is significantly rationalised without compromising on the integrity of the rail network as well as the safety and the quality of service provided."

Malaysia’s government debt, as well as its upcoming public-private partnership liabilities and state guarantees, now stands at about 80% of GDP. Lim said this was a worrying amount, and that the government should "bite the bullet now and work hard to solve our problems, rather than let them explode in our faces at a later date".

So far, approximately $23bn worth of China-backed projects have been suspended and are liable to renegotiation. These include the East Coast Rail link, which the government says has ballooned in cost to $20bn, and two pipeline schemes together worth $2.3bn.

Top image: The Klang Valley Integrated Transit System has KL Sentral station as its hub  (Akira Mitsuda/Creative Commons)

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