KUCHING: The new Pakatan Harapan (PH) government is expected by analysts to re-prioritise the implementation of infrastructure projects to reduce the foreign borrowings and contingent liabilities.
Affin Hwang Investment Bank Bhd (AffinHwang Capital) believed the projects that will likely be affected include the RM55 billion East Coast Rail Link (ECRL), RM60 billion Kuala Lumpur-Singapore High Speed Rail (HSR), RM45 billion Klang Valley Mass Rapid Transit Line 3 (MRT3) and RM9 billion Gemas-Johor Bahru Electrified Double Tracking Rail (EDT) projects.
“We believe the new government will likely re-prioritise the implementation of projects to reduce the foreign borrowings and contingent liabilities from government-guaranteed bonds to be issued to finance infrastructure projects.
“Government revenue will be reduced from its plan to abolish goods and services tax (GST) while operating expenditure will increase to compensate concessionaires for its plan to abolish toll collection on highways gradually and introduce petrol subsidies to targeted groups.
“Deferring the implementation of infrastructure projects to cap the federal government deficit during this period of adjustments in government policies,” the research firm said in a construction sector update.
That said, AffinHwang Capital believed ongoing projects such as the LRT3 (George Kent-MRCB joint venture), MRT2 (MMC Gamuda joint venture) and ECRL (China Communications Construction Co Ltd) will continue as PH will likely have to preserve the sanctity of contracts awarded by the government to ensure Malaysia’s international sovereign ratings are not adversely affected.
“However, the implementation of the project could be staggered with reduced scope of works to reduce cost,” it added.
“In summary, there will be delays in new infrastructure project implementation that will affect the medium-term prospects of the construction sector.”
The research house believed the development of the railway network nationwide will remain a priority to improve inter-city and intra-city connectivity, and expand freight cargo transportation using train services.
“The Port Klang-Kuantan Port stretch of ECRL and EDT will complete the East-West and North-South railway connectivity in Peninsular Malaysia, which we believe will proceed.
“The MRT3 Circle Line project will connect the lateral rail lines in Klang Valley, which is important to improve public transport ridership.”
However, the research firm also believed the project implementation could be delayed to ease the financing burden of the government given the ongoing MRT2 and LRT3 projects.
Overall, AffinHwang Capital opined that long-term prospects will likely remain positive for efficient contractors with strong track records as they will be competitive in bidding for contracts through open tender, such as Sunway Construction Group Bhd, WCT Holdings Bhd and IJM Corporation Bhd, which is professed by PH.
After a review of projects, the research firm believed most of the railway projects planned will likely go ahead as these projects will improve intra-city and inter-city public transport connectivity.
“PH will likely push ahead with the Penang Transport Master Plan (PTMP) that will benefit the Gamuda-led consortium that has been appointed as project delivery partner (PDP).”