Kuala Lumpur-to-Singapore rail link planned
International Herald Tribune
JULY 4, 2006
Linus Chua and Haslinda Amin

KUALA LUMPUR YTL, owner of the railway that runs from Kuala Lumpur International Airport to the city, said it was in talks with the government for a rail link to Singapore.

The company plans to take the rail unit public to raise between 6 billion ringgit, or $1.6 billion, and 8 billion ringgit to fund the project if it gets the concession for the line to Singapore.

"I have received indications from a lot of fund managers around the world looking at it and saying it's a no-brainer," Francis Yeoh, managing director of YTL, said in an interview. "This is one project that everybody knows can work. Our government is very serious about this and they're encouraging us to look at it."

The rail link could increase travel between the two countries, which offer a total of 31 flights between Singapore and Kuala Lumpur daily on plane rides that last less than an hour. Last year, 7.3 million Malaysians visited Singapore while 9.6 million from the city-state traveled to Malaysia, government data showed.

YTL expects to reach an agreement on the railway in two years, Yeoh said.

"The traffic between the two countries is huge, so if you talk about the dollars and cents, there's a viable business to be done," said Scott Lim, a fund manager at CMS Dresdner Asset Management in Kuala Lumpur. "It's just whether there's a political will to make that happen."

The project comes amid warmer ties between the two nations since Abdullah Ahmad Badawi took over as Malaysian prime minister in October 2003. Both countries were part of a union until Singapore was expelled four decades ago, and the two have disagreed over issues from the price of water from Malaysia to the site of a railway immigration checkpoint in the city-state.

The rail tracks into Singapore were set as early as 1913, when both countries were under British rule.

A direct rail link between Kuala Lumpur to Singapore would increase the convenience to commuters, as the current train takes about seven hours between both cities because of stops along the way. That's almost twice the four-hour drive on the highway.

The train ride from London to Paris, which are about 340 kilometers, or 213 miles, apart, takes less than three hours, according to Eurostar's Web site.

YTL's rail service from the airport to the city has given the company an edge over rivals, said Tursina Yaacob, an analyst at Avenue Securities, which has an "outperform" recommendation on YTL.

"They're in a better position because the airport-to-city rail link has been very successful," she said. "That's enough to tell the government they're capable of such a project."

The airport rail, which began operations in June 2002, had more than 10 million passengers in November 2005, according to its Web site.

A political spat between Abdullah and former Prime Minister Mahathir Mohamad could hamper efforts to build the rail link, said David Cohen, an economist at Action Economics in Singapore.

Malaysia in April decided to end talks for a new bridge linking the two countries to prevent both sides from becoming "embroiled in endless political bickering and legal disputes."

Mahathir has criticized his successor for the decision, saying Malaysia had the legal right to build the bridge and scrapping the plan has cost the country billions of ringgit.

"It's a little tricky with the causeway and the extra political wrangling in Kuala Lumpur, and how these would play into that," Cohen said. "It just makes it a little more complicated and I wouldn't look for any quick resolution."

Yeoh said that he's optimistic because of the economic links between the two countries. He also plans to draw so-called cornerstone investors from both countries to take a larger stake in the project, including Singapore Airlines and Malaysian Airline System, as well as the two cities' airports, which he says should not see this as a threat. "The economic integration between Malaysia and Singapore and ASEAN as a region is very real and very necessary," he said.

Cross-border investments have increased since Abdullah became prime minister. The Singapore government's investment holding company Temasek Holdings has invested in Malaysian companies, including 5 percent of Telekom Malaysia, the nation's biggest phone company, which it bought for 1.6 billion ringgit.

Copyright © 2006 the International Herald Tribune