Tuesday, May 7th, 2019
PETALING JAYA: MIDF Research estimates the revised and revived RM44 billion East Coast Rail Link (ECRL) project to contribute 2.7% to Malaysia’s economic growth.
“However, the full estimated GDP contribution will depend on the pace of spillover effects to other economic sectors,” the research house said in its thematic report on ECRL.
MIDF noted that moving forward, the railway project would affect economic expansion through both direct and indirect medium in the long run, partly by jobs creation, opening-up new areas, foreign direct investment, increase external trade activities and strengthening domestic demand.
It highlighted that there is a high output multiplier for railway investment as for each ringgit investment, it will generate RM2.05 of output to total economic activity.
However, it has a low value-added multiplier of only 33 sen, which means for every RM1 spent, it will only reward the Malaysian economy in terms of value-added by less than 50 sen.
“Nevertheless, we opine the investment in railway (ECRL) will spur economic growth and development in Malaysia amid of the strong output multiplier effects.”
With ECRL, MIDF believes it will generate more economic activities in other sectors hence shifting to a less government-reliant economy, in line with Prime Minister Tun Dr Mahathir Mohamad’s idea to downsize the public sector over a period of time through industrialisation amid increasing burden towards the nation’s financial health.
Apart from that, the research house sees possible spillover effects on ports from the ECRL, with Port Klang and Kuantan Port being the main beneficiaries.
“Despite the rerouting of the ECRL from Gombak to Negri Sembilan, we opine that this should not heavily impact the flow of freight traffic. We still believe that travel time taken from Shenzhen, China via Kuantan Port and ECRL to Port Klang could be reduced by slightly more than a day instead of passing by the Straits of Malacca.”
MIDF also sees ECRL having the potential to further spur Malaysia’s oil and gas industry as it links Malaysia’s financial hub in the west with the country’s oil and gas hub in the east.
“The ECRL will allow for human capital and goods to be easily transported from west to east, thus allowing for greater connectivity of goods from Port Klang to Kertih and Kemaman.”
Currently, the only mode of transportation from west to east is via road.
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KUALA LUMPUR: Malaysia’s trade figures for April are expected to improve despite the worsening global trade tensions, particularly between the US and China, said International Trade and Industry Deputy Minister Dr Ong Kian Ming.
“There was a slight drop overall in Malaysia’s import and export performance, but we also take note that the trade decline in February was much larger than March, when we look from a year-on-year comparison, and March has improved compared to February.
“That may indicate that the trade figures may improve in April,” he told a press conference after launching Semicon Southeast Asia 2019 today.
Ong elaborated that the latest remarks by US President Donald Trump on the trade negotiations would not affect Malaysia’s actual trade volume in the short term.
“For further impacts on Malaysia, we will wait and see what’s the actual policy announcement from a tariff perspective from the US and Chinese governments,” he said.
Market reaction is very short-term and if tomorrow China and US announce a positive resolution, the market will be up, he said.
Local exports decreased 0.5% to RM84 billion in March 2019 from a year earlier as the nation sold less electrical and electronic products and commodity-based items.
The country’s trade in February 2019 declined by 7.2% to RM122.15 billion compared to February 2018.
Ong said in the long term, the unsettled tensions between the two big economies would not be positive for Malaysia as the country is highly dependent on trade with them.
“Any negative effects on trade between the US and China will have a long-term negative impact on Malaysia’s trade in total. We hope for a positive conclusion so that this tariff war can be avoided,” he added.
Meanwhile, Malaysian Investment Development Authority CEO Datuk Azman Mahmud said the agency is looking at approved investments worth RM13 billion in the electrical and electronics segment for 2019.
“The figure is based on domestic and foreign investments and whether the trade tensions between the US and China is still an ongoing issue, but we can’t predict the future,” he said.
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