PUTRAJAYA: China has finally got a piece of the electrified double-tracking railway project in the country after the Malaysian government agreed in principle for Chinese contractors to build the stretch between Gemas and Johor Bahru.

Apart from the Gemas-JB railway job, a Chinese company is set to land the RM1.2 billion project to expand the Mengkuang Dam in Penang.

“We have given our commitment to grant to a Chinese company the construction of the Mengkuang Dam,” Prime Minister Datuk Seri Najib Razak said at a joint press conference with visiting Chinese President Hu Jintao here yesterday.

The 250km Gemas-JB stretch is the only portion of the North-South double-track railway project that is left to be awarded.

In the late 1990s, China and India were supposed to undertake the Padang Besar-JB double-tracking railway project estimated at RM44 billion then. It was a government-to-government initiative and to be paid for in crude palm oil.

But an MMC Corp Bhd-Gamuda Bhd joint venture managed to win the job in 2003 at a late juncture with a RM14.3 billion proposal. It was something that did not go down well with the Chinese and Indian contractors who claimed that their plans were “hijacked”.

The project, which was shelved in November 2003, resumed last year. MMC-Gamuda was given the stretch from Ipoh to Padang Besar for RM12.5 billion. Indian Railway Construction (Ircon) was awarded the Seremban-Gemas job at RM3.5 billion.

The announcement by Najib yesterday effectively means all three parties which had been vying for the railway job will get a share of it.

The Mengkuang Dam, likewse, has had its hiccups. It was shelved during the mid-term review of the Ninth Malaysia Plan last year only to be revived in July this year. The expansion will increase the dam’s capacity from 23 million cubic metres to 78 million cubic metres, to cater for the needs of Penang folk until 2020.

Najib also announced two other projects where there is scope for cooperation with Chinese companies. They are an aluminium smelter and a pulp and paper plant, both in Sarawak.

At the moment, the well-connected Cahya Mata Sarawak Bhd (CMS) is working with Rio Tinto Aluminium Ltd to build an aluminium smelter with a capacity of at least 750,000 tonnes.

The joint venture, however, has not had much progress in terms of securing a power purchase agreement (PPA) from Sarawak Energy Bhd for the supply of electricity. Prior to Rio Tinto coming into the picture, CMS had wanted to work with a Chinese company to build a smelter but the plan did not take off. But with the new initiative, it is likely that another smelter would be built in Sarawak.

As for the second project, it has been reported that China wants to relocate its pulp and paper plant from Thailand to Sarawak because of lower land cost. The plant is said to require 3.5 million tonnes of eucalyptus pulp a year to produce 700,000 tonnes of paper, mainly for export to China.

The Gemas-JB double track project is estimated to cost more than RM5 billion as it involves the construction of more than just railway tracks. The project is also said to involve a transportation hub in Johor Bahru with possible links to the Mass Rapid Transit in Singapore.

The job is much-sought-after by both listed and unlisted companies, with the Malay Chambers of Commerce seeking a piece of the action.

However, the favourite is a local company, Global Rail Sdn Bhd that is owned by Zulkifli Md Hussain, Fan Boon Heng and Hau Choo Kiat. Global Rail had proposed to undertake the Gemas-JB project a few months ago with China Infraglobe Consortium of China.

Zulkifli is Global Rail’s largest shareholder with a 51% stake while Fan and Hau hold 30% and 20% respectively.

Fan has experience in railway jobs as he was previously the managing director of Balfour Beatty Rail Sdn Bhd and in ABB Daimler Benz Sdn Bhd, which also had its mainstay in the railway business.    

Its partner, China Infraglobe Consortium, is a state-controlled agency, which also has plans to set up a mineral processing outfit and metal production facility in Johor.

The much-speculated foray of Chinese companies into the plantation and banking sectors did not materialise.

Before Hu’s visit, speculation was rife that the premier would announce the purchase of a 10% block by a state-owned Chinese company in Sime Darby Bhd, the world’s largest listed plantation company.

Malaysia was also expected to announce the award of a full commercial banking licence to a Chinese bank — tipped to be Industrial and Commercial Bank of China.

Najib said yesterday Hu wanted to increase trade between Malaysia and China in palm oil and timber.


This article appeared in The Edge Financial Daily, November 12, 2009.