China's $13bn Malaysian ‘game changer’ shows ambition of BRI to reshape global trade

Quartz Creative on behalf of HSBC

Calling the Chinese-backed East Coast Rail Link a “game changer,” Malaysian Prime Minister Najib Razak broke ground on his country’s most expensive infrastructure project ever with Chinese state councillor Wang Yong at his side last August. The RM55 billion ($13bn) rail link is projected to carry 5.4 million passengers and 53 million tonnes of cargo from Port Klang on the country’s west coast to a new Chinese-developed deepwater port on the South China Sea in Kuantan.

The overall effect will be to establish a new cargo route alleviating pressure on the Straits of Malacca and the port of Singapore, one of the world’s top shipping chokepoints, cutting shipping times from the South China Sea to the Indian Ocean and increasing connectivity between the Chinese market and markets further west.

The relatively under-developed east coast of Peninsular Malaysia will also see benefits, with a spur traveling up the states of Kelantan and Terengganu to the Thai border at Tumpat. The 668 km railway will raise economic growth on the east coast by 1.5 per cent a year, Razak said, predicting it will be “a catalyst for economic equality between the west and east coast as it will stimulate investment, spur commercial activities, create ample jobs, facilitate quality education and boost tourism.”

The electrified line is intended to remove cars and trucks from the road, which have become increasingly congested, eventually serving as the primary mode of east–west transport. Cutting through the Malaysian peninsula’s mountainous backbone, the project will nonetheless avoid the route of the previous single-track diesel railway that has served as a link between east and west since it was built in the 1930s. A series of tunnels and elevated tracks will minimize the environmental impact.

85 per cent of the ECR’s $13bn will be financed by a Chinese bank at 3.5 per cent interest, with the remaining 15 per cent being covered by Malaysian zakat, or Islamic bonds administered by local banks. It will be principally built by the China Communications Construction Company, though Razak secured an agreement that 30 per cent of the contracts will go to Malaysian firms.

As a jewel in China’s Belt and Road Initiative, the ECR shows the scope and ambition of China’s infrastructural leadership. If successful, this rail link could fundamentally alter one of the world’s most strategic shipping lanes, founding an “alternative trade route,” in Razak’s words. For his part, Chinese state councilor Wang Yong said simply that China “has always considered Malaysia a dear neighbour and trustworthy partner who is committed to seeking mutually beneficial cooperation and common development in the country,” and that the ECR was a flagship of ASEAN connectivity.

Malaysia's East Coast Rail Line
A feature by Quartz Creative