The scrapping of the MRT3 project has shocked experts and market watchers as most investors believed that the government will only defer it, reported The Edge.
“The scrapping of the MRT3 was a surprise, given that the MRT project is seen as an essential public good, and there has been wide public approval of MRT1,” said UOB Kay Hian Analyst and Research Head Vincent Khoo on Thursday (31 May).
On Wednesday (30 May), Prime Minister Tun Dr Mahathir Mohamad said they plan to terminate the MRT3 project, which was expected to cost between RM35 billion and RM40 billion to control the country’s high debt of RM1.087 trillion worsened by the 1MDB corruption scandal.
“Fears continue to play on the government’s high indebtedness,” noted Khoo.
Given that the new Pakatan Harapan government has axed the MRT3 project and the RM110 billion Singapore-Kuala Lumpur High Speed Rail (HSR), CIMB Investment Bank thinks that other major rail projects are in danger of getting terminated, like the RM60 billion East Coast Rail Link (ECRL) and the RM8.9 billion Gemas-Johor Bahru Electrified Double Tracking (EDT) project.
“We believe any upcoming big-ticket rail projects are now at risk of deferment, renegotiation or outright cancellation These include the Gemas-Johor Bahru EDT project and the ECRL,” said CIMB Analysts Sharizan Rosely and Kamarul Anwar.
With the cancellation of the HSR and MRT3 project plus the likelihood of other rail projects getting axed, contractors and manufacturers of building materials will be significantly affected.
Among the companies bearing the brunt of the impact are those specialising rail-related construction jobs and those with existing “rail exposure” like Gamuda, MMC Corp and George Kent.
It will also hit the rail job prospects of WCT Holdings, Gabungan AQRS, Sunway Construction Group, and the Malaysian Resources Corp Bhd (MRCB). Other severely affected companies include cement maker Lafarge Malaysia and Kimlun Corp, a maker of segmental box girders and tunnel-lining segments.
Furthermore, Fitch’s subsidiary BMI Research revealed that Malaysia’s construction sector is likely to grow by only 4.3 percent per annum until 2022 sans the HSR and ECRL projects.
The loss of both projects, which it estimates to have an overall investment value of US$40 billion (RM158.8 billion), would negatively impact the real estate development along the places they would have run through.
“The HSR not only represent a significant component of Malaysia’s transport infrastructure growth, stations along the railway would have served as anchors for new commercial, residential and industrial developments Malaysia and Singapore,” added BMI.
This article was edited by the editorial team of PropertyGuru. To contact them about this or other stories email editorialteam@propertyguru.com.my
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