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| Construction work on the MRT along Jalan Duta, Kuala Lumpur. |
The inconvenience of squeezing roads and the resulting crawling rush hour traffic is the short-term price to pay for the country's most costly infrastructure project the Klang Valley My Rapid Transit (MRT) which is building the MRT line from Sungai Buloh that snakes its way through the city centre to Kajang.
The 51km project is being built at a cost of RM22.2bil and will be ready by either end-2016 or middle of 2017. Tunnelling work, where the big tunnel boring machines will chew through rock, limestone and earth has started. Once completed, the Sungai Buloh-Kajang (SBK) line will ferry 460,000 passengers a day.
By all accounts, work is on schedule and for now appears to have escaped any hiccups.
But now, it's decision time for further expansion of the MRT network. Feasibility studies on the second line has been completed by consultant Halcrow and is reported to be waiting the go-ahead by the newly formed Cabinet.
Analysts have penned in the continuation of building more lines for the MRT network in their assessment of the construction sector. The Government too has said it will continue to expand the MRT network but some economists wonder if the nod will be given now considering the huge bill the Government is now faced with to fulfil various election pledges in its manifesto.
Timing the approval
On Tuesday, the investment fraternity released a slew of reports on the second line of the MRT project. Those reports were issued after a meeting over lunch with Gamuda Bhd group managing director Datuk Lin Yun Ling where a case to proceed with the second line was made.
Maybank Investment Bank analyst Wong Chew Hann in her report says she came away feeling upbeat about the prospects of approval chances of expanding the Klang Valley MRT (KVMRT) project.
“Datuk Lin believes that the Government is highly committed to implementing KVMRT 2 and 3, as the socio-economic benefits that could be reaped from the KVMRT far outweigh its costs as compared to the Government's other development plans,” she says in her report.
Lin, in a interview with StarBizWeek, says the timing of approval for Line 2 is important as there is a lead time for regulatory processes to be satisfied before actual construction work can start.
“I am not sure when that will happen but when I say July this year, it's coming from this angle: If I look at the construction of the first line, bear in mind that the SBK line was approved in December 2010, it took almost two years for us to get it on the ground.
“And after Cabinet approval, what happened was that we did the land acquisition and engage with the stake holders like DBKL and the Selangor Government, come up with the alignment studies, put the railway scheme for public display and get their feedback and address their complaints if justified.
“These processes would take 2 years. And of course to call tenders as well. So to get Line 1 ready on the ground it took two years,” he says.
As it will take two years to get the shovels and tractors moving for Line 2, the timing of a Cabinet decision by July this year is important from another standpoint.
Civil work on the first MRT line is expected to be completed in July 2015 and approval by July this year will allow contractors who are already engaged on the first line to take their machines and staff onto the second line.
A long delay in approving the second line might see those contractors sell unused machines and even let go employees that have worked on the first line.
For Lin, that will be a waste.
“If I look at the civil works that is ongoing for Line 1, most of the contractors, even for the underground/tunnelling works, will finish the work by middle of 2015.
“If we want continuity onto Line 2, approval should be granted by the middle of this year,” says Lin, whose company is engaged in the tunnelling work for Line 1 and is the overall project delivery partner (PDP) for the Government.
He feels if approval is now granted according to timelines, then it can pose some problems when it comes to continuity of the project.
“That means that their plants and equipment, workers and staff who have all been trained in this kind of work will not be able to continue.
“Ideally, if we want continuity but not overlapping, the timing of the Cabinet approval should come around July so that by mid-2015, we can get the line on the ground already,” he says.
Details on Line 2
By all accounts, Line 2 will be even bigger than the first line. The new line is longer than the predecessor, it will have a longer underground section and more stations. That means it will cost more too.
Initial estimates peg the cost of Line 2 at RM24.9bil once the line is extended from Serdang to Putrajaya. Construction of the proposed second line will be done in two stages with the first stage up to Serdang. The cost of that will be similar to that of the first line.
The main difference between the first and second line though will be ridership.
Estimates show that 20% more people, or 550,000 passengers a day, will traverse through line 2 as opposed to 460,000 a day for Line 1.
In terms of passengers per km, Line 2 is expected to ferry 11,100 passengers per km compared with 10,000 passengers per km for Line 1.
Projections also show that Line 2 will carry 40% more people than Line 3, or the circle line, upon completion.
The reason for the higher ridership is that Line 2 will cut through more densely populated and lower income areas. Neighbourhoods such as Damansara Damai, Kepong, Batu Kampung Pandan, Kampung Baru, Sentul and Serdang are large catchment areas of people.
The alignment of Line 2 will also cut near to areas where PR1MA is expected to build affordable housing for Malaysians. Areas such as Sungai Buloh, Kentonmen and Serdang where PR1MA is expected to build mass affordable housing
“This line is probably more needed if you ask me. It is important in terms of ridership and the nature of the lower income catchment,” says Lin.
Both Line 1 and 2 are expected to converge at the Tun Razak Exchange which will enable passengers to interchange onto other lines.
Line 2 will also serve the KLCC area as it will cut through the middle of the city centre as opposed to the Light Rail Transit line that serves the northern part of the development.
A decision to proceed with Line 2, which is a radial line instead of the circle comes down to catchment and ridership.
“Normally, like in the case of Singapore, the circle line will come last. They will do the radial lines first. It's because the radial lines will help you build up the catchment and ridership. The circle line just connects the lines for you,” says Lin.
“The priority is to first build the network and its catchment.”
Ringgit and sen wise, Gamuda points to the study by Halcrow on the economic internal rate of return (EIRR). It claims that the consultant had put an EIRR at 27% which captures the social benefits of the project, value of time and the multiplier impact of the MRT project.
“Given the cost, it is worth spending. It is for the sustainability of Klang Valley development. We'll need an infrastructure like this. I mean just look at our daily traffic in Klang Valley and you know that we really need this. We cannot sustain any more growth,” says Lin.
Does Gamuda have an edge?
Analysts seem to think that Gamuda has the edge of being appointed the PDP for Line 2.
“So far, the consortium has received positive feedback from the clients and authorities (i.e. MRT Corp, SPAD, and Pemandu), thanks to its good track record on the MRT1 project,” says Kenanga Research in its note on Tuesday.
For Lin, it's more down to the work it has done as the PDP for Line 1 that should be weighed upon when deciding the winner of the PDP for Line 2.
“Because the concept is quite new and if you look at how we are able to cut out the works to 90 packages, that means that we have created a good spread to the local contractors. I think that carries immense benefits,” says Lin.
A PDP is like a conductor of an orchestra. It has to handle all issues and disputes, and standardise the entire project according to specification.
“It's an undertaking to the Government that it will be done within budget and time, otherwise fees will be slashed. I think this is what we have achieved.”
Gamuda won the tunnelling job for Line 1 and is surely interested for that scope of work for the second line.
Lin feels the company will have to bid for that job like everybody else and does welcome a Swiss challenge for the tunnelling portion for Line 2 if it is thrown at the company. He feels local companies should be given the preference for jobs involving construction of the MRT.
Can the Government afford Line 2 or Line 3 now?
Although the paperwork is now before the Cabinet for the endorsement of Line 2, economists wonder if the Government will be able to bankroll the project without putting more strain on its fiscal position.
“The Government needs to work within its fiscal constraints. A lot of promises were made in the run-up to the general election and there is always the question of financing,” says an economist.
“Something has to give.”
It's reported that the cost of fulfilling the Barisan Nasional manifesto will be around RM12.5bil. With government revenue expected to rise a shade over RM1bil in 2013 and expenditure by less than that, giving the nod to a RM25bil project together with other election promises will likely cause a strain on the fiscal deficit.
“Spinoffs and the benefits of a better transportation system has to be weighed against such constraints,” says an analyst.
Lin feels the Government will be able to finance construction of Line 2, but he makes certain assumptions on his opinion.
“Very few countries can offer this level of public transport service and still keep fuel subsidy to this level. Any Government will spend until what they can afford or slightly more than that.
“If you do not spend on something which is of a high social economic benefit, the money will be spent on something else with a lower economic return. At the end of the day, the Government has to prioritise,” says Lin. - The Star Biz
Saturday May 18, 2013
