Poser over ballooning costs for rail projects
Poser over ballooning costs for rail projects

Poser over ballooning costs for rail projects

PETALING JAYA: The recent news of the Rapid Transit System’s (RTS Link) cost increasing RM1.207bil from its projected RM4.038bil in 2018 has spurred analysts to question how this might impact the government’s current financial position.

According to findings from the Auditor-General’s Report 2/2024, the allocated amount from the government for the RTS as well as the Klang Valley Mass Rapid Transit had been spent according to approved public infrastructure projects.

Transport expert Rosli Azad Khan told StarBiz that based on the recent findings from the AG’s report on both the Mass Rapid Transit Line 1 (MRT1) and MRT2, the Mass Rapid Transit Corp Sdn Bhd (MRT Corp) must be held accountable by taking responsibility and providing detailed explanations on why costing was so excessive.

According to Rosli, previously, inflated demand estimates were used to justify the high costs for both the MRT1 and MRT2.

This has caused critics to question if similar issues may arise with other projects.

“I believe the government must take the AG’s report seriously, and consider putting these prestigious projects on hold.

“There is a need to review and prioritise them alongside other immediate needs such as dilapidated schools in Sarawak, water supply shortages in Sabah and Kelantan, insufficient hospitals in many states, and other basic social infrastructure lacking in many areas throughout the country, except the Klang Valley,” he said.

He added that there are also a number of other affordable alternatives in mass transportation that the government should consider other than the LRT and MRT projects.

“Examples of such systems can be seen in Kuching, Sarawak, and a similar system is being tested in Putrajaya. The government must have the courage to engage with experts and debate which systems should be adopted, especially in the current financial climate,” he said.

Rosli noted that opportunities for better mass transit systems tailored to each locality, consistent with passenger demand, and the gradual phase-out of new highways favouring car usage, must remain open for discussion and suggestions.

“The large amount of public funds invested in LRT3 and RTS, and the commitment to build Penang LRT and MRT3, are difficult to justify when cheaper alternatives have not been considered.

“If there is no change in the decision-making process for these prestigious projects, the next AG’s reports will likely highlight the same problems and losses,” he said.

Wan Agyl Wan Hassan, managing partner at Agyl and Partners agreed, stating that it has become crucial to adopt an approach that emphasises efficiency and accountability to keep costs in check and ensure timely completion for the greater good.

He said curbing costs can be implemented in a number of ways, including addressing potential corruption and mismanagement.

“We need stringent anti-corruption measures and independent oversight bodies with the power to investigate and prosecute malpractices without political interference. Transparency is key,” he said.

He also said procurement processes cannot be marred by favouritism, as contracts should be awarded based on merit and not connections.

Open bidding should be the norm, Wan Agyl said, and should contractors not perform, a penalty or replacements should be given to prevent costs from spiralling.

Wan Agyl said another factor to consider is bureaucratic inefficiencies, which need to be addressed to expedite progress and reduce costs.

“This means cutting through red tape, streamlining approval processes and eliminating unnecessary regulatory hurdles. Learning from international best practices is vital.

“If other countries can build similar infrastructure more efficiently, Malaysia must adopt those methods,” he said.

He added that to ensure the success of projects such as MRT3 and RTS, a straightforward approach that prioritises transparency, accountability and efficiency must be upheld at all levels.

“This is not just about fiscal responsibility; it’s about the nation’s progress and the well-being of its citizens,” he said.

On whether the country’s fiscal deficit will continue to be impacted by the ballooning costs of these projects, Wan Agyl said, in his view, the projects will increase the deficit.

He said when projects surpass their budgets, the government has to spend more and borrow more, leading to higher debt and less money for essential services like healthcare and education.

“Delays also mean we miss out on expected revenue, making the financial situation worse. To fix this, the government must control costs better and manage projects efficiently,” he said.

Additionally, Rosli said all budgets for projects fall under the development expenditure (DE), which is about RM90bil according to Budget 2024.

“Of the total budget, which was RM393.8bil, RM303.8bil was for operating expenditure (opex) and RM90bil for DE.

“I think with the fiscal deficit, the amount for DE next year will be a lot less, as the Finance Ministry can’t cut the opex,” he added.

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