Leasing passenger trains from China has downsides, says transport expert

 

FMT:

Leasing passenger trains

from China has downsides,

says transport expert

Natasha Busst

-25 Aug 2024, 09:15 AM

Wan Agyl Wan Hassan says it may come with potentially high hidden costs such as maintenance expenses.

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On August 14, transport minister Loke Siew Fook announced that the government intends to lease 62 passenger trains from China at a cost of RM10.7 billion.

PETALING JAYA: 

A transport consultant has expressed concern about Malaysia’s RM10.7 billion passenger train leasing agreement with China, saying the financial benefits it offers may only be short-term.

Wan Agyl Wan Hassan cautioned that while the arrangement may offer 

quick financial relief

, it may end up saddling the government with long-term hidden costs, including for maintenance and technological upgrades, resulting in a strain on national resources.

He also said the government should consider the geopolitical risks involved, adding that it may be unwise to structure a deal which is dependent on China being the sole supplier.

Especially with the ongoing US-China rivalry, committing to a 30-year lease with China could weaken Malaysia’s negotiating strength and expose it to geopolitical tensions,

 he told FMT.

Wan Agyl suggested that Malaysia adopt a more 

balanced approach

 to train management, similar to that used by France.

Over the years, France has combined new purchases with refurbishing older trains, proving to be cost-effective. For Malaysia, a similar strategy could be beneficial,

 he said.

On Aug 14, transport minister Loke Siew Fook announced the acquisition of 62 new passenger trains for Keretapi Tanah Melayu Berhad in a RM10.7 billion agreement, with payments to be made over 30 years.

He said the total cost, which will cover related aspects such as maintenance, repairs and staffing, will be finalised after negotiations with China.

Transport consultant Rosli Khan echoed Wan Agyl’s concerns, saying that while leasing may be an effective short-term solution, it could become costly in the long run, particularly if the lease terms were unfavourable.

The upfront costs for purchasing or upgrading the trains may be higher, but ownership could lead to long-term savings,

 he said.

Invest in local coachbuilding instead

Rosli said that the government should consider limiting its purchase to wagon components and invest in building train coaches locally, saying it could reduce the costs involved substantially.

“Building the coaches locally would also create jobs and foster skill development in high value manufacturing.

Investing in local coachbuilding could also stimulate growth in related industries, such as steel, electronics and design. It will create a more robust domestic supply chain and reduce dependence on foreign suppliers,

 he said.

He said partnerships with foreign companies could lead to technology transfer, allowing Malaysian companies to innovate in train design and construction, potentially opening up new markets.

Given Malaysia’s experience in automotive manufacturing, particularly with Proton, transitioning to train coach manufacturing would not be too technically demanding,

 he said.

Acknowledging the challenges involved, such as the need for significant investment in training and technology, Rosli said developing local capabilities would reduce the country’s reliance on foreign companies for future rail projects.

This strategy could indeed lead to substantial savings. It will also foster industrial growth, and enhance technological capabilities in Malaysia,

 he said.