Major railway projects in Southeast Asia to increase intra-regional trade efficiency, productivity: HSBC

KUALA LUMPUR -- Major rail lines, under construction or to be developed under the Belt and Road Initiative, will increase volume and efficiency of intra-regional trade, and promote the productivity of the region with a more efficient transportation, said HSBC Bank Malaysia's Chief Executive Officer Mukhtar Hussain Tuesday.

Referring to the railway projects as the Southeast Asian railway network, Mukhtar told a media briefing that infrastructure projects, when finished construction, can generate significant economic value over time, although in short-term, it may represent (financial) burden (for some countries).

The railway network has the potential to increase volume and efficiency of intra-regional trade, apart from removing bottlenecks in the flow of goods between China and Southeast Asia, he said.

"While rail will never replace shipping for its cost efficiency, it will mean more effectively getting goods to ports as well as the ability to compete with air routes, especially for heavy duty freight that might be too heavy for air transportation," he said, adding that the Southeast Asian railway system will increase the productivity of each country across the region through the more efficient transportation.

The construction of these projects will bring potential opportunities for corporates and investors across the globe, Mukhtar added.

Cited the two high-speed rail projects in Thailand and Indonesia as examples, he said these projects are attracting subcontractors, capital equipment providers, and professional services firms from United Arab Emirates, Australia, Germany, Japan, South Korea, Spain, Canada, France, and Britain.

It is also noted that Singapore and Malaysian governments are seeking international investment with a global range of companies, including Chinese, Japanese, South Korean, European firms for the Kuala Lumpur-Singapore high speed rail.

"These projects will also generate down-stream opportunities beyond the rail construction," Mukhtar said.

HSBC estimated that the major railway projects between ASEAN's largest economies and China are worth some $41 billion.

"These projects will deliver long-term benefits of closer physical ties between ASEAN's 10 member countries and with neighboring China -- reinforcing the economic narrative of one of the world's most dynamic economic regions," Mukhtar said.

The activity around the Southeast Asian railway network presents an excellent opportunity for ASEAN countries to demonstrate their ability to coordinate and deliver complex cross-border projects.

According to HSBC's study, the Southeast Asian railway network encompasses more than 3,000 kilometres of rail lines from China's Yunnan province through Laos, Cambodia, Thailand, Malaysia, Singapore and Indonesia, as well as spin-off lines linking these countries' industrial and commodities zones with major shipping ports.

As for Malaysia, China's led rail projects include the $2 billion Double Tracking Rail project, which linking Gemas to Johor Baru, and the $13 billion East Coast Rail Link that connecting ports on Malaysia's east and west coasts.