Today when I was having lunch with my colleagues, one of them said, ‘Malaysia is asking China for more money. Now they will build the East Coast Rail Line for Malaysia.” I just smiled and continue enjoying my lunch. Just wanted to let everyone know that today, leaders of ANY country in the world whose economy is smaller than China would definitely want investments from China. Yes, that includes every other neighbouring countries in ASEAN including the most advanced nation as well. Just look at the founding members of Asian Infrastructure Investment Bank (AIIB) to understand why MANY of the advanced countries are joining. Do we want to conclude that these countries would still join if AIIB was not an initiative by the mighty China?
With regards to the East Coast Rail Line (ECRL) which will help to connect the east coast states in Malaysia, it will be built and financed by China. The deal was signed China Communication Construction Company Ltd (CCCC), with financing via soft loans from Export-Import (Exim) Bank of China. The estimated cost is RM55 billion and it will be one of the high-impact projects under the 11th Malaysia Plan. The length is 620km and it will connect Port Klang to the Integrated Transport Terminal (ITT) in Gombak; from ITT Gombak to Dungun; and from Dungun to Tumpat. Project will most probably start in early 2017 and will be build in three phases. The railway link would ensure travelling time, transportation costs are down while connectivity is up. More connections equals to more business linkages and subsequently more growth which is good for the few states. Of course, the prices of properties would also rise in tandem with economic activities.
In the near future, most probably some of these financing options can be through AIIB too and not just with China directly. It would be great if India or Tokyo can provide similar arrangements for any catalytic projects. Borrow from the U.S.? Well even the largest economy in the world is borrowing from China. Something I found on google. Please refer to image. Yes, I noted Federal Reserve’s optimism with the U.S. economic growth. As I have written before, I really hate it if there are bad news about the U.S. economy. Thus, I hope their economy does well so that there’s less uncertainty and the currency movements become more volatile which is disadvantageous to the ringgit. Happy following and yes, the household Debt to GDP for Malaysia is considered very high today. Do watch out for all other nations with high household debt vs GDP. Happy following.
written on 1 Nov 2016
Next suggested article: Household Debt Malaysia vs assets, as per Allianz Global Wealth Report
