Malaysia Rail Link Sdn. Bhd. (MRL), wholly owned by Ministry of Finance (MoF) Malaysia, and China Communications Construction Company Ltd. (CCCC), wholly owned by the government of China, signed the $55 billion East Coast Rail Link (ECRL) contract back on 2nd November 2016.
The salient details of the 688 km DIRECTLY NEGOTIATED NO OPEN TENDER contract are:
1. Phase 1 – 600.3 km connecting Gombak in KL with Wakaf Baru in Kelantan.
2. Phase 2 – 87.7km connecting Gombak in KL with Port Kelang in Selangor.
3. Phase 1 & 2 cost – $55 billion.
4. Costs include $9 billion provision for rolling stock i.e. locomotives, carriages, wagons and other railroad vehicles. Rolling stock is to be purchased by CCCC. (Why on earth would a works contractor be asked to buy the rolling stock when it would be much, much more economical for MRL to buy direct from suppliers through open tender, unless of course, Najib plans to steal more money by inflating the true cost?).
5. Expected completion date – 2024.
6. Single electrified railway track built on double-tracking formation.
7. MRL will be the owner and operator of ECRL.
8. CCCC will be the main contractor responsible for engineering, procurement and construction management.
9. EXIM Bank of China will be providing MRL with a 20-year 3.25% p.a. $55 billion “soft-loan” package to finance the project.
10. MRL will NOT have pay the principal or interest for the first seven year of ECRL’s operation,s i.e. between 2025-2031.
11. MRL will repay the loan in full over the next thirteen years, i.e. between 2032-2044.
12. Projections prepared by Najib’s con men show that crucial to the profitability and cash flow of ECRL, is that freight loads will increase to 53 million metric tons by 2030. This is a wee bit optimistic, given that the entire rail freight business under Malayan Railways (KTMB) currently adds up to 6 million metric tons a year!
13. MRL has not disclosed if CCCC has been contractually bound to guarantee freight loads, given that it will be its main customer.
14. The ECRL contract cost works out at an astronomical $80 million per km. However one looks at it, this will turn about to be the most expensive railway line in the world!
NAJIB/UMNO/BN DELIBERATE MISINFORMATION
As there has been deliberate misinformation by Najib and his government of thieves, plunderers and looters about this largest government contract ever, it is necessary to remind all Malaysian that:
1. This is NOT a Foreign Direct Investment (FDI) project with money coming from China as an investment! CCCC will not be investing one cent in anything here.
2. CCCC will be engaged purely as contractors and the Malaysian Taxpayers will have their blood sucked out out of them.
3. The $55 billion will eventually leave Malaysian shores, of which at least $29 billion will be fraudulently used by that serial liar and defrauder Najib, to bail out 1MDB, as detailed in my earlier blog post. CLICK HERE.
4. By comparison, countries like Thailand are getting double tracking trains on double-tracking formation, with twice the speed for rail freight transportation, for costs that are not too far off from ECRL!!!
Of course, Najib’s PR blitz comes with all the usual bells and whistles:
1. GAME CHANGER! How? With a train stopping at over 20 stations at a top speed of 160km/hr and half that for freight coaches?
2. Zillions of jobs (CCCC will be engaging mainly their own sub-contractors for sure).
3. Opening up of the Ease Coast. With this kind of inflated costing, how will our poorer cousins afford the fares?
4. Guaranteed local participation (though when push comes to shove, CCCC will derail Najib’s Bumiputra dreams quicker than you can say char sui sui yoke!).
5. Alternative logistic route to Singapore (one wonders if there will really be any material cost savings in offloading and loading goods in Klang, the train time and downloading/loading in Kuantan).
6. Najib sycophant Minister Rahman Dahlan was quoted as saying “In a green-field rail project of this nature, other costs such as engineering studies for design speed, topography, geological conditions will be required.” (This is not been the normal world-wide for the last 40 years?)
One could not put it better than an excellent expose by ex-diplomat Ignatius Xavier. CLICK HERE.
TRUE LOAN & INTEREST COST
There is no free lunch. Interest, though not payable for 7 years, will be compounded and accrued for 2025-2031@ 3.25% p.a.
This means the $55 billion loan will balloon by another $13.8 billion to 68.8 billion by end 2031.
ECRL total cost will then be about $85 billion (rounded off to nearest billion), as follows:
1. Cost at 1.1.2025 – $55 billion.
2. Interest 1.1.2025-31.12.2031 on $55 billion compounded @ 3.25% p.a. – $14 billion.
3. Interest 1.1.2031-31.12.2044 on reducing loan repayment basis @ 3.25% p.a. – $16 billion.
Loan Principal and Interest to be serviced will amount to about $18 million and $6 million respectively PER DAY, for 13 years (156 months)!!!
If we add on 30% for land acquisition, price increase (inflation), Variation Orders (VO) and contingencies, we are easily looking at a cost in excess of $100 billion!!!???
Of course, once ECRL starts operations in 2025, presumably the revenue stream will start flowing in to service interest and capital loan repayments.
But, it’s safe to assume that for at least the first ten years, profits will be insufficient to service RM85 billion, given KTMB’s experience, where in some years it made a gross loss!
MORE DEBTS > $300 BILLION
So, in 2031 or so, MoF will have to start issuing bonds to pay EXIM Bank. Besides this $100 billion, there are other debts that can only be extinguished by MoF issuing more bonds now. These include:
1. 1MDB debt – $80 billion.
2. PFFI – $ 30 billion
3. LRT/MRT -$120 billion (?).
This is a route to bankruptcy. More so because, ECRL started off with a government forecast of $26 billion and when the Najib-spawned 1MDB $46 billion fraud got our of control, was inflated to $55 billion to rescue 1MDB! We have a madman at the nation’s helm.
When a country goes bust, it simple means it will face severe recession, wages will fall while living costs go through the roof, businesses will shrink or close down completely and millions will become jobless with no safety net!
Then, we will have to go begging to the IMF or World Bank for a massive loan to tide us over. With those loans will come stringent conditions which basically means the party is over.
Will Najib be there then to say sorry and make amends? No way! And that is the measure of the real evil in Najib and his government of thieves. They know it! They are willing to go for broke due to their utterly corrupt and murderous nature, their greed for money and the good life, totally at the Rakyat’s expense.
THEY CAN GET AWAY WITH IT, ONLY IF WE LET THEM!
WE MUST DERAIL THE EVIL AND SATAN THAT GOES BY THE NAME OF MO1!