The high-speed railway is part of Mrails' bigger plan to build a cross-border high-speed railway link between Singapore and Thailand - Jeyakumar

Low-profile MRails International Sdn Bhd has recently proposed to the federal government the development of a high-speed railway line connecting Kuala Lumpur to Johor Baru, Padang Besar and Kuantan.

Mrails is 75%-owned by Malaysians and 25% by China’s CNR Tangshan Railway Vehicle Co Ltd. It gained prominence recently when it was given the nod to build a monorail test track in Batu Kawan, Penang. The Malaysian owners of the company are Datuk Jeyakumar Varathan and a member of the Pahang royal family.

Tangshan, touted as China’s second largest railway company, is a subsidiary of Shanghai-listed China CNR Corp Ltd, which in turn is 61%-owned by state-owned China North Locomotive & Rolling Stock Industry (Group) Corp.

Jeyakumar and Tangshan executives met with Prime Minister Datuk Seri Najib Razak last week to discuss their proposal, and what the joint venture can offer to ensure the project takes off if the government agrees. The cost of the project has not been determined yet, but it could easily be about RM20 billion or more.

Jeyakumar says the technology and funding will come from the Chinese government.
“That is why we tied-up with the Chinese because only they have that kind of funds. They also have the technology,” he tells The Edge.

Jeyakumar says that the high-speed railway is a part of  Mrails’ bigger plan to build a cross-border high-speed railway link between Singapore and Thailand.

The government has already awarded jobs to build a double-track electric railway system from Padang Besar in the north to Gemas in Johor. The Gemas-Johor Baru portion has not been awarded yet.

Although details are still sketchy, Mrails’ proposal does not require laying a completely new set of tracks for the high-speed trains that require a standard gauge.

The idea is for the MRails JV to build a line parallel to existing or new railway tracks that are under construction. The existing tracks are a one-metre gauge that cannot cater for high-speed trains.

“This way both the normal and high-speed trains can use the existing alignment,” says Jeyakumar.

That way, MRails will not overlap with local contractors such as MMC-Gamuda Joint Venture Bhd that is working on the Ipoh-Padang Besar double-tracking project.

Jeyakumar says MRails has also met with Keretapi Tanah Melayu Bhd (KTMB) to discuss the high-speed project.

Addressing any financing issues that may arise at a time when the government is being prudent on fiscal deficits, Jeyakumar says the entire funding of the projects will come from Chinese investors.

But there are issues because the low-cost funding will eventually have to be repaid by the government. Considering the tight budget, it remains to be seen whether this project will become a priority.

A local Chinese daily reported last month that the Chinese Railways Ministry has signed an agreement with Industrial and Commercial Bank of China (ICBC) to aid in Tangshan’s bid for Malaysian railway contracts.

Tangshan executives declined to elaborate when asked about the financing of the projects.
So far, Chinese funding has been channelled to the Second Penang Bridge project, which received a US$800 million soft loan said to be at a rate of 3%. In return the government gave a big chunk of the job to a state-owned Chinese contractor.

A similar arrangement would probably be made if the government agrees to the construction of the high-speed train. But unlike the second Penang Bridge, which was seen as a necessity because of the congestion on the existing bridge, there is a view that Malaysia does not need a high-speed train connection in the next few years.

“There is no necessity for Malaysia to have high-speed trains,” opines an industry observer.
It must be noted that the YTL group also proposed a high-speed rail connection between Kuala Lumpur and Singapore but it did not take off.

Furthermore, the projects face the risk of operational losses, consistent with most rail transport systems in the world.

Jeyakumar says MRails also plans to establish a facility to produce rolling stock, coaches and other components for the rail project in Tanjung Agas, Pahang.

The assembly plant, which is estimated to cost US$1 billion, will also supply coaches to its clients in South Africa and the Middle East.

Jeyakumar says feasibility studies can be conducted and presented as soon as MRails gets the nod from the government. MRails already has a presence in Angola, Sri Lanka,  Indonesia and India.

Tangshan is the largest high-speed train manufacturer in China. It produces steam and diesel locomotives, passenger coaches, multiple units and “maglev”, or magnetic levitation trains.

Tangshan built the 139km line connecting Beijing and Tianjin, which was operational just in time for the Olympics. The train travels at 350kph, making it one of the world’s fastest. Similar trains in Japan and Spain run at 320kph, while in France, Germany and Italy they run at 300kph. France’s TGV holds the record for the world’s fastest train at 574.8kph.

Tangshan also built the 1,069km Guangzhou-Wuhan high-speed railway and the intercity train in Shenzhen.

It is currently constructing the 1,200km Shanghai-Beijing line that is to be completed by 2012. The company is also in talks for similar projects in Mecca.

Based on Tangshan’s track record alone, it appears MRails has what it takes to make high-speed railways here a reality. After all, the company is run by well-connected people with a background in the business.

MRails management team comprises executive chairman Jeyakumar, a former employee of Mtrans Group, the country’s monorail provider, and CEO Peter Wyss, formerly a project manager with Siemens.

It remains to be seen whether this group can pull off such a mega project with the backing of the Chinese, especially as details are still sketchy and the economic viability is in question.

Regardless, it appears that MRails is working hard to get the endorsement of the government, which is the most important aspect of the whole attempt to make high-speed railway a reality here.

This article appeared in Corporate page, The Edge Malaysia, Issue 791, Feb 1-7, 2010