More Highway Projects?

 

Of the highway projects mentioned in Budget 2025, the West Ipoh Span Expressway (WISE) and the extension of the West Coast Expressway (WCE) have raised some questions. In the case of WISE, concerns revolve around its viability, both financially and operationally. This is partly due to the fact a little-known company called East Coast Road Sdn Bhd (ECR) will be undertaking the RM6.2bil project.

The cost of WISE has increased by almost half-a-billion ringgit from RM5.75bil estimated before. At RM6.2bil for a stretch of 60.88km, this translates to roughly RM101.8mil per kilometre. Expressways typically cost RM30mil to RM40mil per kilometre, although this may vary according to project specifications, the type of terrain as well as land acquisitions. For elevated expressways, the cost will be higher at RM50mil to RM60mil per kilometre.

 

Source: https://en.wikipedia.org

 WISE starts from the North-South Expressway (NSE) in Gopeng, bypasses the accident prone-Menora Tunnel section and then re-joins the NSE in Kuala Kangsar. The traffic projections for WISE are questionable after Works Minister recently said it would reduce congestion along the NSE by up to 40%. The average daily traffic (ADT) economics for WISE does not seem to work out. This is considering WISE’s relatively short distance where traffic volume may not be significant. 

The CA stipulates a fixed toll rate of 23 sen per kilometre throughout the concession period. This is more than double the NSE’s rate of 11 sen per kilometre, set to remain until the end of its concession. 

It was recently reported the government, represented by Works Ministry secretary-general, signed a 55-year CA for WISE with ECR on Sept 5. Interestingly, the secretary general was transferred from the Prime Minister’s Department to the Works Ministry on the same date. ECR will surely rely on external funding in the absence of equity injection by its owners to undertake the project. 

The toll rate for the WCE, on the other hand, is 16 sen per kilometre, which will be revised every three years based on a step-up formula. 

By the time of completion in 2026, the cost of the WCE is expected to exceed RM8bil, according to an earlier report by RAM Ratings. The WCE, which is 94% completed, connects Banting in Selangor to Taiping, Perak. 

The WCE, which is set to be completed in 2026, is also an alternative route to the NSE, connecting Taiping, Perak, to Banting, Selangor. In his Budget 2025 speech, Prime Minister announced the expressway will be extended from Banting to Gelang Patah, Johor. While the extension was briefly mentioned in the Public-Private Partnership Master Plan 2030 released in September, it hardly garnered media attention then. 

With WCE yet to turn profitable, the company may not have the financial muscle to undertake the project without additional equity injection from its shareholders. Shareholders originally injected RM1.2bil into WCE Holdings, including the single-largest shareholder IJM Corp Bhd, which controls a 26.7% stake. 

However, due to project delays, the equity injection has ballooned to RM1.9bil so far.

WCE Holdings also had to sell its 40% stake in the Bandar Rimbayu development to raise cash to meet the funding needs of the coastal expressway. 

The project extension, assuming it is undertaken by WCE Holdings, may extend the break-even period for the expressway. Previously, WCE Holdings chief executive officer said WCE may take five to seven years to break even. This is not inclusive of the proposed extension. WCE Holdings has begun a restructuring exercise with the government and the company’s existing lenders to raise the capital required to complete the project by 2026. 

We need connectivity but do we need more toll highways? The PH or Madani Government was against tolled highways. At one time they wanted the total removal of all tolls. Now the tune is different! What about trains? Malaysia is fixated with cars, like the United States. It’s time for trains whether high-speed or otherwise! 

Reference:

Highway projects at a crossroads? Ganeshwaran Kana, The Star, 4 November 2024