How the Najib scandals derailed the future of Malaysia’s rail network
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How the Najib scandals derailed the future of Malaysia’s rail network

BEFORE the May 9 election that swept Najib Razak and his Barisan Nasional coalition from power, the then prime minister of Malaysia presided over one of the largest and most expensive national rail construction projects ever undertaken in Asia.

The US$62 billion undertaking would build four new lines and extend two existing ones in Kuala Lumpur’s rail transit network, and add a combined 1,256 kilometers (780 miles) of new track throughout the country.

It would tie peninsular Malaysia’s west coast to its east coast with a fast line for passengers and cargo, and link to Singapore with a high-speed train from Kuala Lumpur and a second, shorter cross-border train.

Elections have consequences, though.

SEE ALSO: What’s next for Malaysia’s disgraced former PM?

In the weeks after the victory that returned him to the prime minister’s office he occupied from 1981 to 2003, the new prime minister, Dr Mahathir Mohamad, systematically drove his predecessor and one-time protégé’s transit program off the rails.

Citing escalating costs, and concern about China’s role in financing and building some of the new rail network, Dr Mahathir cancelled a 40-kilometer (25-mile), US$11.25 billion driverless subway line in Kuala Lumpur.

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Dr Mahathir has suspended several key projects, citing cost overruns and concerns about China’s involvement. In this Aug 1, 2018, picture, Dr Mahathir meets with China’s foreign minister Wang Li at his office in Putrajaya, Malaysia. Source: AFP

He suspended work on the US$17 billion, 350-kilometer (217-mile) Kuala Lumpur-Singapore high-speed line.

In early July, his administration announced the suspension of the projected US$14 billion East Coast Rail Link (ECRL), a 688-kilometer (428-mile) fast electric rail line from Kuala Lumpur’s port on the Strait of Malacca, across the Malaysian peninsula to northeastern port cities along the South China Sea.

SEE ALSO: Malaysia is the largest beneficiary of Chinese cash diplomacy

Malaysia also is pursuing a criminal investigation of fraud and malfeasance against a top transit official prompted by the transfer of valuable government-owned land close to a transit station at no cost to the developers.

Dr Mahathir’s actions impeded nearly 1,100 kilometers of new track and blocked more than US$42 billion in spending on his predecessor’s rail project.

However, Dr Mahathir has insisted that neither the high-speed rail line nor the ECRL are cancelled. Dr Mahathir said he would seek to negotiate new contracts with banks and contractors to significantly reduce costs, which he said were much higher than the previous administration’s estimates.

“In a way, it’s postponed,” Dr Mahathir told reporters during a visit in June to Japan.

“At this moment, we need to re-study and, if we are short of funds, we can delay the implementation of the project or reduce the scope of project.”

Dr Mahathir took one more step: He dissolved SPAD, the Land Public Transport Commission, the national agency charged with policy, planning and development of Najib’s ambitious rail plan. Though the edict surprised the commission’s top executives and its 1,000-member staff, the operational significance does not appear to be especially onerous.

Newly named Transport Minister Anthony Loke announced the formation of the APAD (Agensi Pengangkutan Awam Darat, or Land Public Transport Agency), a new planning body. The similarities run deeper than the near-identical names: the APAD will absorb the SPAD’s staff and assign similar responsibilities.

“For now, in terms of operations, direction, licensing and studies, SPAD is operating as normal,” Loke said at a news conference.

Dr Mahathir’s actions represented an extraordinary rebuke to his predecessor. The long rail links and shorter metro line were signal projects of the former prime minister. They were in various stages of international bidding for design and construction, and due to be finished by the mid-2020s.

The restructuring also has political value. It means that Dr Mahathir gets to attach his name and support to ongoing projects started by Najib, and be celebrated as an infrastructure champion if the suspended projects are revived.

The new administration’s objections, Dr Mahathir said, were rooted in a trail of corruption that was shaking all of Malaysia. Rail construction costs and losses from a national development fund supervised by Najib were part of the reason that Malaysia’s national debt had nearly doubled during Najib’s administration to US$250 billion, a level that threatened the country’s strong credit rating.

Dr Mahathir said he took action to “avoid being declared bankrupt.”

With his new power, Dr Mahathir could have made deeper strikes at his predecessor’s rail projects. Construction had begun on just one of the suspended projects, the trans-peninsular line. The government says about US$5 billion has already been spent on the line, which is being financed and built by Chinese companies.

To avoid even greater shocks to Malaysia’s economy and its international reputation, Dr Mahathir has taken no action to impede ongoing construction of two new metro lines in Kuala Lumpur or a new 3.4-kilometer (2.1-mile), US$1.34 billion electric commuter line from southern Malaysia to Singapore.

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The KLIA Express from the KL Sentral transport hub is the easiest and fastest way to get to the Kuala Lumpur Airport. Source: Shutterstock

While Dr Mahathir has effectively dismantled Najib’s national rail design, much of the former prime minister’s vision for new urban transit capacity remains intact in the Klang Valley, the fast-growing Kuala Lumpur region, which accounts for nearly 40 percent of Malaysia’s economic output.

SEE ALSO: Singapore to seek $184m from Malaysia if HSR project derails

During its nearly eight-year existence, the SPAD dived into a US$29 billion program meant to ease traffic congestion, curtail air pollution, elevate Malaysia’s international prestige, and build its national economy by essentially doubling metro rail transit capacity in the capital city region of 7.3 million residents.

Among the SPAD’s early achievements was the LRT Kelana Jaya line, one of the longest automated driverless metro lines in the world. At regular five-minute intervals, the LRT’s bright white cars slip past the SPAD’s office alongside KL Sentral, the capital’s main train station.

The commission supervised the US$1 billion expansion of the line to 46 kilometers (29 miles) and 37 stations, completing the work in 2016 on time and within budget. A new and third 37-kilometer (23-mile), 21-station, US$4 billion LRT3 line is under construction.

Blocks away, the trains of the 31-station MRT Line 1 stop in a deep underground station. The US$5 billion, 51-kilometer (32-mile) MRT Line 1 is the world’s second-longest driverless metro line. MRT Line 1 opened in 2017 after six years of design and construction that was on time and within the budgeted US$100 million per kilometer.

The figures compare favourably against the inordinate delays and exorbitant costs of rail transit development in the United States.

Authorities in New England, for example, have been working for more than 20 years to add 7 kilometers (4 miles) to a light rail line from Boston to reach two suburbs. The current estimated price: US$2.3 billion, or more than US$300 million per kilometer.

Past performance, though, is no guarantee of future success. Key to Dr Mahathir’s May 9 victory were three issues wound around Najib’s rail projects.

One concern played on the long-standing tensions between the Malay and Chinese communities. Dr Mahathir charged during the campaign that Najib was inviting China to expand its sphere of influence in Malaysia by recruiting Chinese companies to finance and build big portions of the rail network, and the mega ports, manufacturing centers and real-estate developments it would serve.

The second issue was their cost. That issue lies at the center of the Mahathir administration’s concerns about the rapidly escalating price that Malaysia was about to pay for the 37-kilometer LRT3 metro line under construction in Kuala Lumpur.

Initially, Prasarana Malaysia, the government-owned transit company and LRT3 developer, said the line would cost US$2.45 billion. In March, though, Prasarana sought US$5.4 billion more to finish the project.

SEE ALSO: Why Malaysia’s new government cannot meet its 100-days deadline

After the election, Dr Mahathir assigned the Finance Ministry, which oversees Prasarana, to review the LRT3 budget and contracts. Finance Minister Lim Guan Eng told a news conference in July that he was appalled by what his investigators found.

His office negotiated new contracts that reduced the number of stations, cut the number of trains and cars, eliminated a 2-kilometer tunnel and would finish the line for US$4 billion, a savings of nearly 50 percent.

“Why did they allow the project delivery partner to charge such high costs?” Lim told a news conference. “If there was no change in government, this money would be paid by our children. They were stealing our children’s future.”

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Japan was competing in this advertisement to build the high-speed rail line between Kuala Lumpur and Singapore. Prime Minister Dr Mahathir suspended work on the project soon after he was elected in May. Source: Keith Shneider/Mongabay

And the third conflict was how rail development converged with corruption around huge real-estate projects close to new transit stops.

The largest investigation focuses on 1Malaysia Development Berhad (1MDB), a national infrastructure development fund accused of corruption so deep that US$4.5 billion cannot be accounted for. Najib is accused of personally stealing US$731 million, a charge he denies.

1MDB gained control of and sold big parcels of public land in Kuala Lumpur for two master planned developments served by new transit stops. One of those projects, the US$10 billion, 28-hectare (70-acre) Tun Razak Exchange (TRX), is proceeding to completion in the early 2020s as Malaysia’s new financial center.

Land values at the exchange were significantly enhanced by a new station on the MRT3 line that opened last year to serve the development. Finance Minister Lim reported in June that US$750 million was “misappropriated” by 1MDB from the Tun Razak Exchange. The Mahathir administration, he said, had nevertheless decided to invest almost US$700 million more to complete the project.

“The Malaysian Cabinet has decided to support the TRX project to recoup all misappropriated funds, repay all borrowings, recover all funding investments and opportunity costs as well as potentially achieve a small surplus return,” Lim said in a statement.

Malaysian investigators also are looking closely at potential criminal activity connected to the transfer of 16 hectares (40 acres) of government-owned land in Kuala Lumpur close to the junction of two metro lines.

The land, valued at US$50 million, is the site of the Kuala Lumpur Vertical City, one of the many big mixed-use real estate projects in Malaysia’s capital. It was transferred in 2015 at no cost from Felda Investment Corporation, a unit of the government-owned Federal Land Development Authority, to Synergy Promenade Sdn Bhd (SPSB), a private developer.

The government announced last year that it had opened an investigation for “criminal breach of trust” that targeted members of the 2014 Felda Investment Corporation board, including its chairman Tan Sri Isa Samad, who resigned in June 2017. Isa also was the chairman of the SPAD board before he was forced by Dr Mahathir to resign in May. There have been no prosecutions in the case.

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Mohammad Azharuddin Mat Sah, SPAD’s chief executive, before the agency was disbanded by Prime Minister Dr Mahathir. Source: Keith Shneider/Mongabay

Storm of change not anticipated

Weeks before the May election, none of the approaching disruption was apparent in the SPAD office.

During an interview in April, the commission’s chief executive, Mohammad Azharuddin Mat Sah, displayed the characteristic confidence of a top government manager doing his job well.

Azharuddin said that in 2010, the year the SPAD was formed, just 11 percent of the trips in and around the Kuala Lumpur metropolitan region were made on public transit.

The goal, which included one of the new lines cancelled by Dr Mahathir, was “expected to increase the bus and train travel’s market share to 60 to 70 percent,” he said.

The SPAD went to work on a master plan to make rail transit in Kuala Lumpur efficient, affordable, even chic.

Design and construction contracts called for spending an estimated US$36 billion to add 144 new stations and 269 more kilometers (167 miles) of track to the existing rail network. Essentially, the SPAD set out to double the size of the city’s transit system, and more than double ridership to 2 million a day.

The majority of the proposed budget was devoted to building two roughly 50-kilometer (31-mile) rapid transit lines that crisscrossed the city, and a third 40-kilometer line that ringed the city and intersected with almost all of the existing and planned rail lines.

“The government saw that we needed people to move seamlessly. Mobility was key,” Azharuddin said.

“We realised we had to move people from just being in cars and towards mass transit. It is very clear. If you see Kuala Lumpur, it’s a thriving city. We have ambitions to be a global city. A top 20 city. You need to have not just cars but also a great public transport network do that.”

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The US$5 billion, 31-station, driverless MRT Line 1, opened in 2017. Source: Shutterstock

The first of those mass transit lines, the US$5 billion, 31-station, driverless MRT Line 1, opened last year. A second of similar size and cost is under construction and due to be finished in three years.

The third MRT line was just cancelled but could be brought back from the dead because of how much planning had already been undertaken by the SPAD.

The relative speed of Kuala Lumpur’s rail development is impressive.

SPAD responded to public anxiety in 2011 about dust, disruption, and home demolition by explaining that track alignments would follow existing road corridors.

Moderate traffic congestion in metro Kuala Lumpur, at least compared to other big Asian cities, is evidence that public transport is helping keep cars off the streets and highways. SPAD’s research indicates that its nearly 700,000 daily rail riders pull at least 200,000 cars a day off Kuala Lumpur’s roads and highways.

A study published last year in the Journal of Transportation and Health estimated that if MRT lines 1 and 2 reach their full capacity of more than 1 million daily riders, 228,000 more vehicles would be left at home, and 242,000 metric tons of carbon dioxide and nearly 68,000 grams of dangerous particulates would not be turned loose into the atmosphere.

How long that will take is not known.

The MRT1 transports 150,000 passengers a day now, said Azharuddin. That’s ahead of the agency’s projections.

Before it was disbanded SPAD recorded a 7.5 percent increase in the average daily rail ridership from 2016 to 2017, which was principally due to opening MRT1, he said.

The improvements to the transit system have even started winning over upper-class commuters, who previously “didn’t want to be smashed up in a small car with a whole lot of blue-collar workers,” said Christine Yeap, the communications director for the Kuala Lumpur office of the Mulia Group, a Jakarta-based real-estate developer.

“The MRT came along and it takes you through some of the most expensive parts of Kuala Lumpur. The people there are riding it now. Then the young ones who come back from studying in the UK or the US, they decide, ‘OK, I’m not driving, I’m taking the train.’ So I see the opportunity now.”

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Evening rush hour in KL Sentral train station in Kuala Lumpur. Source: Keith Shneider/Mongabay

Najib’s expensive transit vision for Kuala Lumpur was predicated on assuring drivers that using the train was good for them, and for the country. What has emerged since the 1MDB scandal first became public three years ago, and more clearly since the May 9 election, is a matrix of deceit.

Important decisions about selling big parcels of government-owned land for development may have been influenced by insider knowledge of planned rail line routes, and the location of new train stations.

SEE ALSO: Malaysian former PM Najib faces decades in prison

Similarly, choices about routes and train stations may have been influenced by the proximity to big parcels of government-owned land eligible for major real estate development.

The extent of corruption appears to have deep enough to make it difficult to understand where projects designed for the public good ended, and where the quest for illicit gain began.

Evidence yet to be introduced in Malaysia’s criminal courts will presumably clarify how much of Malaysia’s new rail transit was truly meant to improve the quality of life, and how much was influenced by insider fraud and abuse.

By Keith Shneider, an international correspondent specialising in global trends related to water, energy, and food. This article first appeared on Mongabay.