New economic corridor can boost investment, HSR chances, says Fitch Group unit

Economic Affairs Minister Datuk Seri Azmin Ali arrives at Parliament November 7, 2019. — Picture by Shafwan Zaidon
Economic Affairs Minister Datuk Seri Azmin Ali arrives at Parliament November 7, 2019. — Picture by Shafwan Zaidon

KUALA LUMPUR, Nov 15 — The proposed economic corridor from KL to Johor that Economic Affairs Minister Datuk Seri Azmin Ali disclosed could spur investments and the resumption of the KL-Singapore High-Speed Rail project, said a research organisation.

Fitch Solutions Macro Research (FSMR) said beneficiaries include towns and cities such as Port Dickson, Melaka, Muar and Batu Pahat, where investments will likely take the form of enhanced inter-city transportation links, such as improving the southern segment of the North-South Expressway, and real estate development within these cities.

“A key project that will likely be included in the proposed economic corridor will be the HSR, which was put on hold by the Pakatan Harapan government. The proposed economic corridor will likely run parallel to the proposed alignment of the project,” it said in a commentary report.

“If the proposed economic corridor moves forward, it will boost the HSR business case and present tailwinds to its implementation. However FSMR said the project is still suspended, with an announcement expected to be made in May 2020 regarding its fate.

“We note that a decision on the HSR project will still be heavily contingent on the government’s ability to lower the project cost, although the economic development linked to the corridor certainly presents a more attractive overall business case for its implementation.

“The proposed economic corridor itself will also have to overcome several hurdles before it receives formal approval from the federal government. Project costs have been the major factor in the suspension and cancellation of a number of high-value infrastructure projects in Malaysia over the last few years,” it said

In FSMR’s view, the proposed economic corridor may not get the government approval if funding requirements is too high.

“Furthermore, even if the proposed economic corridor was to be implemented, the pace of development will likely be lacklustre in the near term, especially in Johor, given that attention is currently centred on the development of the existing Iskandar Malaysia Economic Corridor, which itself is suffering from a few setbacks including a lack of funding and investor interest.

“The Tanjung Piai by-election will take place on November 16, with the result having implications for the fate of the proposed economic corridor. Also, more details are to follow with Minister Azmin Ali expected to present his proposal to the Economic Action Council and Prime Minister Mahathir Mohamed,” it said.

For the time being, FSMR maintains its growth forecast of Malaysia’s construction sector to hit 1.1 per cent, in real terms, in 2019 and at an annual average of 3.5 per cent through 2028.

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