GLOOMY PROSPECTS FOR THE KLANG VALLEY MASS RAPID TRANSPORT – updated 1

From the SPAD website:

http://www.spad.gov.my/index.php?option=com_content&view=article&id=127&Itemid=129&lang=en

“The Government approved the Klang Valley MRT Project on 17 December 2010. The first line of the network will run from Sungai Buloh in the northwest of Kuala Lumpur, to Kajang the Federal capital. The line is about 60km and will have around 35 stations. The line will serve a population of about 1.2 million people living in areas such as Sungai Buloh, Kota Damansara, Bandar Utama, Damansara Utama, Pusat Bandar Damansara, Taman Maluri, Cheras, Taman Bukit Ria, Taman Bukit Mewah, Taman Suntex, Bandar Hussein Onn and Kajang as well as the city centre of Kuala Lumpur. The expected ridership of the line is 442,000 passengers per day. Construction of the line is expected to begin in July 2011”

 From an online news portal:

http://bm.malaysia-chronicle.com/index.php?option=com_k2&view=item&id=17097:pembinaan-mrt-mungkin-bermula-januari-depan&Itemid=3

“KUALA LUMPUR Pembinaan MY Rapid Transit (MRT)yang bernilai berbilion ringgit kemungkinan dimulakan menjelang Januari tahun depan dan siap pada 2016, kata Ketua Jabatan Pengurusan Pemerolehan MRT Prasarana, Abdul Malik Azman.”

From The Malaysian Insider 11th Oct 2011:

http://www.themalaysianinsider.com/malaysia/article/kl-land-row-threatens-to-derail-mrt-project/

From The Malaysian Insider 12th Oct 2011:

http://www.themalaysianinsider.com/malaysia/article/construction-of-kvmrt-likely-to-start-next-year-mrt-co

From The Malaysian Insider 19th Nov 2011:

http://www.themalaysianinsider.com/malaysia/article/mrt-corp-says-land-dispute-may-delay-project-to-july-2017/

The whole KVMRT project could be a failure if not total disaster. This huge undertaking started with a blunder and there will be more blunders along the way. While it is intended to spur the economy, it could also be a burden. The whole project could be like the Bakun Dam. It will either be scaled down or abandoned.

  • The actual route or the final confirmed alignment still has not been determined as there are many complaints and uncertainties on the locations it will serve and the number of stations needed. The initial cost announced to be RM33 billion has now increased to RM50 billion. The cost for acquisition alone has been allocated at RM20 billion and the final figure is also still unknown. For example even though there has been an exercise to reduce the number of land acquisitions, recently the government agreed to strengthen the structures above the tunnels which were not taken into consideration in the initial stage.
  • The government doesn’t even know how much to pay for the Independent Check Consultant. The figure the government announced at 2% was picked from thin air resulting to a nonsensical amount of RM720 million which if computed logically will be no more than RM50 million.
  •  Malaysia has no more extra money to spend and funds are limited. RM50 billion is huge. RM20 billion is for land acquisition and the government has to pay in cash, but without the money, how can the acquisition be accomplished?
  • The whole process of land & property acquisition will eventually delay the whole project and inevitably raise the costs. There will be legal matters to be resolved, injunctions, caveats and appeals. By the time the land and property acquisitions are resolved, many of the contract’s value will not be sustainable with all the increase in costs. The contractors will simply not able to undertake their portion of the work at their original tender sum.
  • The cost of the whole project will just bloat to be non-economical anymore while the completion date will be delayed and operation will also be delayed. This will then be further aggravated by the shoddy workmanship and poor quality of the material used since the Malaysian motto is “Build Shoddy and Leave It to Rot”, thus even when the time comes for commissioning, these parts need to be replaced or rectified.
  • The main-contractors will also find it difficult to raise funds for the bridging finance. The government won’t be able to give any advanced payment either simply because other sectors need the government funds too. Many finance institutions won’t be so keen to arrange for the syndicated loans, and other financial services simply because of the present world economic scenario plus the Malaysian economic and political climates. Malaysian bonds are just junks. Maybe some amount could be raised through the Islamic Sukuk but it is not sufficient. Without the clear prospect of being able to complete the project on time and starting business on target, the returns will surely be uncertain. RM30 billion for the construction cost is too risky for the banks.
  • There are already certain crucial factors delaying the project. The government has now engaged another entity; MRT Co to take over PRASARANA in managing the project. The handing over of the responsibilities will create some friction and won’t be done smoothly. Whatever that had been agreed earlier between PRASARANA and the Gamuda-MMC group would be scrutinized and MRT Co would not want to take the responsibilities or be the scapegoat for wrong decisions not made by them. MRT Co being headed by someone very familiar with the MRT project as announced by the government will have better ideas and surely they will request changes and matters overlooked by PRASARANA. Changes could lead to shorter or longer construction period and it could not affect the schedule either but, this will need swift decision making which we all know the red tape is so entangled.
  • There is already a new deadline to start the project, instead of July 2011, it is now January 2012. I bet you there will be more postponements to come and my feeling is at least another four. These postponements reflect the complexity of the project which PRASARANA was not attuned to with their present set up that had created the blue print. It is also the results of political maneuvers.
  • Based on the present Malaysian construction environment, there could be several serious to major mishaps during construction. I hope I am wrong. The safety and quality practices in Malaysia are just on paper and never been implemented practically. Tunneling will be a major risk with buildings above ground, high water tables and poor soil properties and with the present Malaysian attitude it is the main ingredient for disaster.
  • The change of leadership if not government is another factor which cannot be ruled out. Those who have benefitted from the present government or political leaders will find it hard to deal with the new ones. This will hamper progress. We all know that the crooked bridge project was halted and scrapped off by Badawi while it was Mahathir’s initiative.
  • Malaysia has constructed so many mega projects from highways, ports, airports, oil refineries, new townships, huge complexes, power plants, tall buildings, tunnels, bridges, double track railways, LRT, dams and so many that can’t be listed here. Each time the government has made so many promises that all the mega projects will create employment, downstream and upstream businesses, and benefits for the locals and all sorts of craps. The people that were affected and need to be moved out were promised new and better lives, livelihood and living conditions. But so far none of the above comes true. Jobs were created for foreigners. Business activities were just transient, short lived. New homes are all badly constructed and lack all the proper facilities. Compensations were meager. The Malaysian economy still stays stagnant and in short we have all been taken for a ride. The same thing will happen with the KVMRT project.
  • There will be a lot of money changing hands and a lot of wastage. At present with the Malaysian ways of doing things, the minimum amount of wastage is about 15% in the construction industry. Fifteen percent (15%) of RM30 billion is a staggering RM4.5 billion, this is money down the drain or into some individuals’ pockets. (Japan’s norm is at 5%)
  • Then there will surely be a lot of scandals in selecting and purchasing of the train coaches. Delays will be inevitable. The operation will always have so many hiccups and as I mentioned earlier, maintenance cost will be exorbitant, service will be bad. Ultimately, the government has to come in and bail out the KVMRT and in the end it is still the rakyat that will have to bear the costs. We have all seen these scenarios before and with the present government and the present management set up, history will repeat itself and Malaysia has never learnt from history.

When things turn bad, please don’t tell me that I have not warned you before. My advice is to take whatever money that can be grabbed now and run, or hold on to your property as long as you can, the whole project could be abandoned.

Note: The government has admitted yesterday 25/8/11 that they need to acquire the land and property along the route and re-develop the areas and the profits will help to finance the KVMRT project. The government simply has no more money now.

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