Sunday, March 13, 2011

Sg Buloh-Kajang MRT Line, Why So Expensive?

Sigh ... why ask the question when we all know the answers anyway. Should we just stop asking questions? Should we ask questions and then nonsensical answers come back, and we all go back to our routine? Then ask questions again, and the same virtous cycle repeats itself. This is not the first, nor is this the 100th project to trigger alarm bells. Seems like the 2008 election results is not enough to jolt some people to do better - so fellow Malaysians, you should know how to do better if they do not know how.

First, make sure you register as a voter, and then make sure your family and relatives register as well. Then make sure your friends register. The voting in 2008 is actually 48%-52% for/against ... and 4m eligible voters DID NOT register to vote at all!

When the MRT proposal was first released, I am in general supportive of the deal. The idea of having a MRT line is great. Plus, I have done some calculation, the project cost seems to be in line with the cost of constructing the MRT in other countries. The initial estimate by MMC-Gamuda, although slightly more expensive, it is still within the ball park range. Then, today, newspaper said that the line would cost much more, almost 50% more. Now, our MRT line is not slightly more expensive, it is very very expensive. I am talking about the cost of Sg.Buloh-Kajang line, as the details of other line have not been released yet, so it would be quite stupid and silly to estimate the cost as we do not know how much of the rest of the line would be underground, like our friends in CIMB just did.

First, let's look at what CIMB said about the proposal since they are the only documents that I have on hand that talk about the Pasarana's MRT briefing in details.

As mentioned in the CIMB report, the cost of the line has gone up by nearly RM6b or 50% more than the initial estimates. The analyst explain the price hike as caused by inflation. Very clever. In less than 2 years, price increase by 50% or an inflation rate of around 25% ( arithmetic average). If the cost of construction materials really increase at 25% per annum, a lot of our property and construction players would be in a loss-making position. Property prices, across the country (not in selected spot), would have gone up by 50%. Did we see that type of increase? I don't think so. Assuming the analyst is correct, at a 25% per annum inflation rate going forward, the final cost of the MRT project would be staggering. 25% per annum inflation basically means that the cost will double in slightly less than 3 years. Our MRT is a ten year project, so, within the time frame of the project, the cost will be more than 8x the original estimate or around RM290b. He is not surprised, I wonder what will make him surprised. Plus, the engineers and QS in MMC-Gamuda are very smart people too, they make projections without considering inflation. Or did these people purposely understate the price to get buy in from government, then only tell the government that the actual cost of the line? If that is the case, it makes our government looks quite stupid.

I am comparing our cost with the recent MRT line with that of the recently completed circle line in Singapore. I am not comparing with China because it would make the Singapore line looks expensive and our Klang Valley MRT ridiculously expensive. Let's just says that China are constructing their MRT lines at a tiny fraction of the cost of our Klang Valley MRT. Perhaps I should, since we are paying our Bangladeshi workers similar wages as the Chinese paid their construction workers. But, China is having at least 15 subway lines being built simultaneously, so, they probably would have some economies of scale there.

Singapore completed their circle line last year at a cost of SGD10b. It is 35.7km fully underground line. According to Prasarana CEO, an underground portion cost 5-10x more than the elevated portion of the line. So, I will take 5x as benchmark, that is, I make the Singapore line looks more expensive although the estimates coming out indicate that the underground portion is 10x more expensive. Who is doing the underground portion? know what I am thinking right. So, at SGD10b for 35.7km, we will get a cost of RM669m/km for underground and RM133m/km for the elevated section. So, the Sg.Buloh to Kajang line cost RM11b if we use Singapore circle line cost as benchmark. It seems that kiasuland can build their MRT almost 40% cheaper than boleh land even though their engineers and their Bangladeshi workers are paid at least twice as much as Malaysia paid our engineers and Bangladeshi workers.

A little bit background on the Circle Line, the SGD 10b construction includes cost overuns. The intial cost is just SGD6.7b. This is uncharacteristic of a Singapore public project as they normally complete their project below the initial estimate and yet, our Klang Valley MRT line costs 60% more on per-km basis. I wonder whether our Malaysian geography is so different than Singapore that it cost 60% more. In addition, the Circle line construction faces quite a lot of problems. It was constructed at the same time as the two Integrated Resorts.

At that time, Singapore faces a shortage of constructions workers, so construction cost skyrocketed. Furthermore, at that time, Singapore faces a shortage of sands as they manage to piss off a few of their neighbors including Malaysia. So, no one are selling sands to them. Even Genting Singapore construction is delayed even though they sign an exclusive agreement with the Singapore arm of YTL Cement to ensure fixed supply. LVS do not have this sort of agreement and causes them to open much later than Genting Singapore. The shortage of sands is so acute that most Singapore property built on that period uses glass to replace wall to cut cost. A construction project in my university was delayed to ease the demand for construction workers and sands.

The circle line also faces problem in the form of part of the section of the tunnel collapsed, causing delays and re-alignment midway through the project. With all these problems happening during the time of the project, their final cost is still 60% cheaper than our MRT cost at planning stage. I wonder how come our MRT line is so expensive? Should we just tell the people that construct the Singapore MRT to help us construct our MRT then? I think their MRT is built by some Japanese firm, so, there are no question of political feasibility. The old man like to look east, so, he won't make noise.

The complains about the line recently is mostly about the placement of the stations. But, the press painted them as these people do not want the MRT line at all. They make it a rich versus poor thing. We are already being segregated based on race and religion, now they want to separate us based on wealth. Banyak pandai punya media. These people are basically complaining about the placement of the stations, the implementation of the project. They do not say that they want to cancel the project. In fact, some of the station placement is so poor that it is laughable.

Based on their maps, one station in the so-called "poor" part painted by the media is actually place after a toll and it is a park and ride facilities. So, if I am a resident of nearby Taman, I want to take MRT to work, I need to pay toll to access the station. Unless they want to buy up the entire residential estate that is situated behind the station, I do not think the residents in that area can access the station without paying toll. A few hundreds meters down the line, there is a decent patch of land that avoid the toll. Very clever indeed.

They said that the tunneling works would be based on open tender basis. But, the devil is in the details, it may be that the details will favour a MMC-Gamuda bid. By the way, since when does a company that have only dug two tunnels in their entire life can be considered an experienced player? Hmm, you mean those Chinese firms that have 60 TBMs working on a single subway line should be considered grand master? Do we want a grand master to build our underground portion or you want an experienced player with 2 tunnels under their belt? Would it be better for our companies to learn from these grand master and hold minority stake in the project. Next time, with these knowledge, they can go to India or Africa and win tunneling project.

So macam mana?


snowball said...

Hi Dali,

I think they are generally more people especially the younger generation registering to vote after they realize how close we were during the 2008 elections.

Some online comments mention that the cost differential between Malaysia and Singapore can be attributable to the soil condition in Malaysia and Singapore. Apparently, the Malaysia soil condition is more expensive to tunnel through. But, this is not the first time that MMC-Gamuda is tunneling through KL, the initial estimates should not be off by 50%.

Joan Doe said...

macam mana? buy Garmuda share lo. If you can't beat them, join em'

solomon said...

Inflation or another Highway clause which ripped the normal citizen? Yup, I think we should quietly accept inflation.....When detailed in skill and costing, I think this is another national project experience, seemed appear to many like the making yet another national car, but now train line. It may benefit the companies who involved and the country later if these companies managed to sell their skills overseas.

If we get another ticket price increase at train every 2years like highway, can someone suggest to me why we should not consider them other PFI like YTL, why it need to burden the national budget?? By now, the answer might be even clearer....

Mo Ngan Tai said...

Really like this article and the analysis that was done. If the pulic can do this type of analysis, what are the government analysts doing? I wonder how much more will the government spend the hard-earned tax payeers' money without doing comparison with what other countries had done.

eddy said...

The new Klang Valley is a good idea that threatens to go out of control.

Malaysia just cannot sustain the kind of money that is being bandied about by SPAD to built the new LRT.

Our SPAD and its head Tan Sri Syed Hamid should all go to Singapore and learn a thing or two in cost and project management from their Singaporean counterpart.

Syed Hamid as head of SPAD should take early retirement if he cannot tackle this cost issue head on.

Rye said...

a substantial article that put thought into the back of the fragile state of mind.

not much information has been revealed and released on the etps but the government wants to 'show' that there is a lot going on for the economy. call it ambitious or a cry for power but bulldozing the path without proper planning is a disastrous recipe. it is like boiling soup without water. up till now, no one is sure what is going to happen in their neighbourhood.

i will vote wisely. not to the person who is in the opposition party or the governing party but by the merit of who can serve the constituency better. i just hope credible candidates with substance are running to take my vote instead of the usual uncles and aunties.

Soo said...

is this the most costly MRT (per km) in the world??

animous said...

very good article!

r@dical-ist said...

@snowball - I was 28 in 2008, but never registered as a voter. GE08 was definitely a wake up slap..n I've since registered and encouraged peers to be concerned for our next gen, if not for ourselves. This MRT budgetary is as glaring a con case as it gets. I may be one, but one of the cumulative new force.