Essay About East Coast Rail Line And Local Investment Banks

Malaysia – International Business Issues and Policies
The East Coast Rail Line is a 688 kilometre electrified line, connecting Kuala Lumpur to eastern coast states like Pahang, Terengganu and Kelantan to boost economic growth in the east cost. The ECRL is estimated to cost RM55 billion, with 85% of the funding provided by Exim Bank with 3.5% rate, seven-year moratorium and 20-year repayment period, and the remaining 15% funded through a sukuk programme managed by local investment banks (Penington,2018). East coast railway- increased investment with China appreciated the ringgit however at the expense of geopolitical and environmental concerns, local businesses and national debt. A more thorough review is needed to ensure both parties benefit equally. This paragraph seeks to evaluate the economic benefits of the project because we need to re-evaluate the benefits whether it discriminates or favours our economy. Investments are crucial to our economic progress but it has to be a two-way bridge that benefits the citizens and carried out in transparent manner to promote Malaysias economic growth. There are a few reasons on why the ECRL project is not economically feasible and the first reason would be contractors that are utilised through out the project. There will only be 30% of local Malaysian workers hired and Chinese from China will cover the remaining 70%. Thus it will not benefit the local businesses and consumption in any way because there will not be much decrement in the unemployment rate and this will directly give an impact to our country’s economy. Besides that, Malaysia will be too dependant on the country China and this can cause us to lose our political leverage in fashioning independent foreign policy. Besides that, it will only benefit one country, China that is seeking to cut shipping cost to a very much cheaper price by only shipping their import and exports via the new rail from Kuala Lumpur to Kuantan (Wan Jan, 2018). The last point would be the project is not financially viable as one of the bank in China Eximbank will loan RM55 billion to Malaysia for the project and Malaysia will only start the payback after 7 years when only the project is nearly complete and will pay for over 20 years. Aside from that, Malaysia government will be the guarantor for the railway project. Even when the China Communication Construction Company (CCCC) have to open tender for some local companies for small portion of the project, they still own the remaining large portion and Malaysia still have to borrow money from PRC to pay them back with large sum of money. After 7 years, our country will still have to payback the loans including the interest back again to PRC. The company PRC will not only gain back the money they lended to Malaysia but actually way more than they borrowed when receiving it with interest. This shows that there will be more outflows instead of inflows that will definitely give a bad impact to our country’s economy (Saravanamutu, 2018).