East Coast Rail Link (ECRL)

Factory of China Communications Construction that supply material for East Coast Rail Link - Photo from Shutterstock

East Coast Rail Link (ECRL)

This research reflects information available up until December 2020, it may not reflect developments after the date of assessment.

The East Coast Rail Link (ECRL) is a proposed railway infrastructure project designed to improve connectivity between Peninsular Malaysia’s East Coast states (Kelantan, Terengganu, and Pahang) and the West Coast states (Negeri Sembilan, Selangor, and the Federal Territory of Putrajaya), which is currently only partially connected by rail. The railway will be used for both passenger and freight transportation. The journey from Kota Bharu, in the north end of the rail line, to Gombak, the last few stations of the rail in the south, will take less than four hours as compared to seven hours by road. In addition to improved connectivity, the ECRL is intended to spur the development of the industrial, commercial, and tourism sectors along its route. A groundbreaking ceremony was held on August 9, 2017, to mark the start of construction. As of March 2021, 21.4 percent of the project had reportedly been completed. The rail line is scheduled to commence operation by 2027.

The ECRL is a key part of China’s Belt and Road Initiative (BRI) in Malaysia. The project is primarily funded by a loan from China’s state-owned Export-Import (EXIM) Bank. Given Malaysia’s close economic relationship with China, which is its largest trade partner, the country has appeared as a BRI focal point. The long-ruling United Malays National Organization (UMNO) signed a Memorandum of Understanding on BRI in 2015, making Malaysia an early BRI participant.

The expected total cost of the project has changed several times, reflecting a shifting domestic political landscape. When then-Prime Minister Najib Razak announced the project in 2016, its estimated cost was RM55 billion. In 2017, the cost increased to RM65.5 billion. The project then became part of the financial scandal that ensnared Razak amid allegations that its costs were inflated in order to bail out the troubled sovereign wealth fund 1Malaysia Development Berhad (1MDB). When the Pakatan Harapan (PH) assumed power in 2018, the new administration first planned to cancel it, but ultimately renegotiated the project and decreased the cost to RM44 billion.

In 2020, another government came into power. The new Perikatan Nasional (PN) administration largely reverted the route back to the original plan in April 2021; with this, the cost estimate was revised again to RM50 billion. The most recent announcement estimates the rail line to total 665 km in length.

 

The ECRL project is owned by Malaysia Rail Link Sdn. Bhd. (MRL), a special purpose vehicle (SPV) established in 2016 and wholly owned by the Ministry of Finance Incorporated, a corporate body owned by the Ministry of Finance and established by an act of parliament.

The estimated construction cost of the project was originally RM66.78 billion (USD $15.9 billion) until early 2019. Under the terms of the agreement, 85% of the estimated construction cost is to be funded by a loan from EXIM Bank – making the total loan equivalent to RM56.7 billion (around USD 13.5 billion). The EXIM Bank loan term is for 20 years at a 3.25 percent interest rate with a seven-year repayment moratorium. In 2016, the government decided to fund the remaining 15% of the cost via “a sukuk programme managed by local investment banks.

As part of the financing agreement with EXIM bank, the Malaysian government agreed to award the ECRL Engineering, Procurement, Construction, and Commissioning (EPCC) contract to the China Communications Construction Company (CCCC). In 2019, the Malaysian government renegotiated the agreement, reducing the total cost to RM44 billion (USD $10.5 billion). As part of this renegotiation, MRL signed a Supplementary Agreement (SA) with CCCC to form a joint venture company (MRL 50 percent: CCCC 50 percent) to undertake the operations and maintenance of the ECRL.

Non-competitive selection of main project contractor tied to loan

The EPCC contract was directly awarded to CCCC during the signing of agreements between Malaysian and Chinese government officials on November 1, 2016. CCCC’s appointment was part of the requirements for the loan. The Malaysian finance minister stated in answer to a question before Parliament in 2016 that “to qualify for this financing offered by China Exim Bank, the project had to be executed by CCCC.” CCCC’s selection attracted criticism not only because it is a direct appointment but also because the government has seemingly made few attempts to tender the project among Malaysian companies as well as for the perceived high cost of the project. CCCC remained the main project contractor after Pakatan Harapan renegotiated the deal in 2018.

 

Repeated changes to the scope of the project without disclosure of feasibility studies

Three administrations that have so far overseen the development of the railway have all failed to disclose adequate information about the feasibility studies. Since its initial proposal in 2007, extensive planning, financing modelling, market sensing exercises, and studies have been done to assess the feasibility of the project. Under the Najib administration, at least two feasibility studies were conducted for the project: the first by HSS Integrated Sdn Bhd in 2009 and completed in December 2015, and the second by McKinsey in 2016. Following the renegotiation of the ECRL scope, MRL started working on a new feasibility study and environmental impact assessment for the new alignment of the ECRL that includes the Southern alignment and realignment on certain stretches. However, none of these feasibility studies have been made publicly available. The significant cost reduction from RM65.5 billion to RM44 billion was based on a comprehensive value engineering exercise, but no report on the exercise has ever been published. The new government that adjusted the route and cost has not disclosed any plan to conduct further feasibility studies or other exercises to justify the changes.

Average Transparency Score:
2.52/6
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Project & Contract Phase Project Information Score Response Link to Information
Project Identification Project owner Malaysia Rail Link Sdn Bhd MRL Website: http://www.mrl.com.my/en/ecrl/overview/
Sector, subsector Transport; High Speed Railways MRL Website: http://www.mrl.com.my/en/ecrl/overview/
Project name East Cost Rail Link (ECRL) MRL Website: http://www.mrl.com.my/en/ecrl/overview/
Project Location 640km; running through 20 stations from the east coast Kota Bahru to Port Klang in Selangor, passing through Kelantan, Terengganu, Pahang, Negeri Sembilan, Selangor, Federal Territory of Putrajaya MRL Website: http://www.mrl.com.my/en/ecrl/overview/
Purpose “To provide a much-improved connectivity throughout the East Coast region, as well as connecting it to the West Coast, while at the same time taking into consideration the potential growth for the industrial, commercial, and tourism sectors along the ECRL corridor.” MRL Website: http://www.mrl.com.my/en/ecrl/overview/
Project description After Supplementary Agreement dated 12th April 2019: The ECRL will comprise of 20 stations, including 14 passenger stations, five combined passenger and freight stations, and one freight station. The route will have approximately 40 tunnels from Kota Bharu to Port Klang. The line will also feature multiple viaducts of approximately 100km in length. MRL Website: http://www.mrl.com.my/en/ecrl/overview/
Project Preparation Project Scope (main output) “Key outputs have been disclosed, but full details (type, quantity, unit) unreleased
– 20 stations
– Standard gauge, double-tracking
– 30-40 tunnels
– 6-car train set for the EMUs, no specified number of EMUs
– Viaducts in Terengganu”
Technical specifications in MRL’s ECRL FAQ: http://www.mrl.com.my/en/faq/
Environmental impact Sinar Project: https://govdocs.sinarproject.org/documents/ministry-of-natural-resources-and-environment/eia-reports/362980465-ecrl-volume-1-executive-summary.pdf/view
Land and settlement impact Sinar Project: https://govdocs.sinarproject.org/documents/ministry-of-natural-resources-and-environment/eia-reports/362980465-ecrl-volume-1-executive-summary.pdf/view
Contact details “Malaysia Rail Link Sdn Bhd
Level 15, Menara 1 Dutamas, Solaris Dutamas,
No. 1, Jalan Dutamas 1, 50480 Kuala LumpurWebsite: http://www.mrl.com.my
General Line: +603 6411 5800 (9am – 5pm)
Fax: +603 6411 5822
Email: [email protected]
MRL Website: http://www.mrl.com.my/en/contact-us/
Funding sources Original agreement was: 85% financed through 20-year EXIM Bank loan at 3.25% interest with 7-year moratorium. The residual 15% is government-funded through issuance of Sukuk bonds. However, the loan with EXIM bank has been renegotiated during 2019 but the financial/contract details of which have not been disclosed (as of 30th June 2020). “With the improved ECRL at MYR44 billion, the loan amount from China EXIM bank will be reduced substantially. The reduced amount is still being negotiated with China-EXIM Bank and we envisage that this will result in lessening the financial burden of the Government in terms of the principal repayment amount, total interest costs and other fees.” PM Press Statement (15/4/2019): https://www.pmo.gov.my/wp-content/uploads/2019/04/Press-Statement-by-PM-on-ECRL_15April2019.pdf
Project Budget New project cost of MYR44,000,000,000 – Full cost details unreleased MRL’s ECRL FAQ: http://www.mrl.com.my/en/faq/
Project budget approval date 12th April 2019. Supplementary agreement (SA) to the EPCC contract was signed on 12th April 2019, stating the project cost at MYR44 billion. The Contract was signed between MRLSB and CCCC, with negotiations led by PM’s Special Envoy Daim Zainuddin. PM Press Statement (12/4/2019): https://www.pmo.gov.my/wp-content/uploads/2019/04/PRESS-RELEASE-ECRL-12-APRIL-2019.pdf
Project Completion Project status (current) Live, construction stage May 14 – ECRL receives approval from APAD for construction to start: https://www.thestar.com.my/business/business-news/2020/05/19/ecrl-gets-approval
Completion cost (projected) New project cost of MYR44,000,000,000 – Full cost details unreleased MRL’s ECRL FAQ: http://www.mrl.com.my/en/faq/
Completion date (projected) 31st December, 2026 PM Press Statement (15/4/2019): https://www.pmo.gov.my/wp-content/uploads/2019/04/Press-Statement-by-PM-on-ECRL_15April2019.pdf
Scope at completion Key outputs have been disclosed, but full details unreleased:
– Standard gauge and double-tracking
– 640km inclusive of spur lines
– 20 stations, passing through 5 states
– Link between Kuantan Port and Port Klang
– 3 interchange stations – Putrajaya Sentral, Bangi/Kajang, Mentakab
PM Press Statement (15/4/2019): https://www.pmo.gov.my/wp-content/uploads/2019/04/Press-Statement-by-PM-on-ECRL_15April2019.pdf
Reasons for project changes The PH Government’s main objection to the original East Coast Rail Link (ECRL) project was premised on the way and speed at which the original contract was negotiated and signed in 2016. It was an unjustified, hefty lump sum price which lacked clarity in terms of technical specifications, price and, by extension, economic justification. PM Press Statement (15/4/2019): https://www.pmo.gov.my/wp-content/uploads/2019/04/Press-Statement-by-PM-on-ECRL_15April2019.pdf
Reference to audit and evaluation reports Not available
Procurement Procuring entity EPCC: China Communications Construction Co Ltd Period; China Communications Construction Company (M) Sdn BhdStudy Consultant: HSS Engineers Berhad
Project Owner: Malaysia Rail Link Sdn Bhd
Project Manager: AECOM; HSS Integrated Sdn Bhd
Planning Authority: ECERD; SPAD; MOT
Design Consultant: HSS Integrated Sdn Bhd
China Communication Construction Co Ltd and China Communication Construction Company (M) Sdn Bhd
Procuring entity contact details Block A5, Level 13A, Menara 1 Dutamas,
Solaris Dutamas, No. 1, Jalan Dutamas 1,
50480 Kuala Lumpur, Malaysia.Tel: +603-62063965
Email: [email protected]
CCC-ECRL Website: https://www.cccecrl.com/
Procurement process Contract to CCCC was done through direct award
CCCC’s procurement of materials and equipment (40% to locals) are done via competitive bidding with a shortlist of suppliers selected after pre-qualification phase
CCC-ECRL Website: https://www.cccecrl.com/local-participation/
CCC-ECRL’s ECRL Materials and Equipment Purchasing System: http://me.cccecrl.com/
Contract type Engineering, Procurement, Construction, Commissioning (EPCC) MRL’s ECRL FAQ: http://www.mrl.com.my/en/faq/
Contract status (current) Active PM Press Statement (15/4/2019): https://www.pmo.gov.my/wp-content/uploads/2019/04/Press-Statement-by-PM-on-ECRL_15April2019.pdf
Number of firms tendering Not available The Star, 2019: https://www.thestar.com.my/business/business-news/2017/10/25/some-1000-subcontractors-vie-for-rm55bil-ecrl-work-packages/
The Straits Times, 2019: https://www.nst.com.my/business/2019/08/509407/ecrl-tenders-pre-qualified-contractors-start-q4-2019
CCC-ECRL’s ECRL Materials and Equipment Purchasing System: http://me.cccecrl.com/opms/en.shtml?id=B9/z1llZU6nydPmyGG5Q+b6uDA396+BL+28goW7OZhQzC7zrPvxGmau8QwWLIAdE
Cost estimate Not available
Contract administration entity Not available
Contract title Not available
Contract firm(s) Not available
Contract price Not available
Contract scope of work Not available
Contract start date and duration Not available
Implementation Variation to contract price Difference: MYR21.5 billion
Original EPCC contract: MYR65.5 billion
SA (12th April 2019): RM44 billion
PM Press Statement (15/4/2019): https://www.pmo.gov.my/wp-content/uploads/2019/04/Press-Statement-by-PM-on-ECRL_15April2019.pdf
Escalation of contract price Not available
Variation to contract duration Exact start date of contract unknown, but construction completion extended by 30 months
Original completion date: 30th June 2024
New completion date (SA 12th April 2019): 31st December 2026
PM Press Statement (15/4/2019): https://www.pmo.gov.my/wp-content/uploads/2019/04/Press-Statement-by-PM-on-ECRL_15April2019.pdf
Variation to contract scope Changes:
– The ECRL rail project was originally planned to be developed in two phases, with phase one covering 600km of track and phase two with an 88km stretch. It will now be built in a single phase, with the whole alignment expected to be completed December 2026.
– Some modifications have been made to the alignment due to cultural, heritage, and environmental concerns. The realigned stretch will run from Mentakab to Port Klang via Negeri Sembilan to avoid traverse through the Klang Gate Quartz Ridge. The new alignment through N. Sembilan was also due to the lower cost of land acquisition.
– The new alignment also resulted in a significant reduction in construction costs from MYR65.5 billion (USD15.8 billion) to MYR44 billion (USD10 billion), based on a comprehensive value engineering exercise.
MRL’s ECRL FAQ: http://www.mrl.com.my/en/faq/
Reasons for price changes The improved ECRL is in line with PH Government’s manifesto to review and revisit all mega projects signed by the previous administration. The conclusion of the negotiations, which began in July 2018, has resulted in substantial savings for the country, which was the ultimate aim of the PH administration when it initiated the negotiation process with China. PM Press Statement (15/4/2019): https://www.pmo.gov.my/wp-content/uploads/2019/04/Press-Statement-by-PM-on-ECRL_15April2019.pdf
Reasons for scope & duration changes Primary change: total length reduction from 688km to 640km and new rail alignments
– New alignment to avoid Klang Gate Quarts Ridge
– No more Southern Extension (Gombak North-Serendah-Port Klang) as new alignment also runs to Port Klang through Bangi-Putrajaya-Port Klang
– No more North Extension (Kota Bharu-Wakaf Bharu-Pengkalan Kubor) as it does not add substantial value to the transportation network
MRL’s ECRL FAQ: http://www.mrl.com.my/en/faq/

East Coast Railway Link (ECRL)