Research and analysis

Malaysia: visit by the minister for transport

Published 13 May 2014

0.1 Summary

A busy and productive visit by Mr Hammond in support of a UK rail mission and coinciding with the Rail Solutions Asia exhibition and conference. The visit further cements important relationships, opens new doors and provides useful insights into how we best exploit high value business opportunities in this multi billion pound sector.

0.2 Detail

Mr Hammond visited Malaysia on 6-7 May in support of a major UK rail mission. The Minister opened UKTI’s rail seminar jointly with Tan Sri Hamid, the Chairman of the Malaysian Land Public Transport Commission (SPAD). In their subsequent meeting Hamid (a former senior Cabinet Minister) reaffirmed Malaysia’s commitment to expand trade links with the UK consistent with the PMs’ target of doubling growth by 2016. He confirmed that Lines 2 and 3 of the KVMRT would be built. Construction of Line 1 was underway with Line 2 at the stage of a feasibility study for the final route. International tendering for Line 2 was likely towards the end of 2014. As anticipated, any company bidding would need to do so with or through a Bumiputera (Malay owned) company. As a sign of its ambition to achieve fully developed nation status by 2020, Malaysia would be investing some RM160bn (£30bn) in rail over the coming 10 years. Some UK companies had been successful in winning business but others needed to increase their visibility in Malaysia. SPAD were happy to meet them and assist their understanding of how to win business.

Mr Hammond later met the MRT Co management team delivering Line 1 of the KVMRT. The clear commitment shown by UK rail services companies was commended. UK civil contractors and those providing components for the physical structure were encouraged to follow suit, and adopt a more “local” approach (eg working as sub-contractors with local Malaysian companies). At the Minister’s prompting, railway asset maintenance was noted as one area of opportunity for UK expertise. UK Export Finance was seen as a useful tool for UK companies in presenting an overall package of work, finance and, for larger contracts, offset.

There followed meetings with a Deputy Secretary-General at the Ministry of Transport and the Secretary-General at the Ministry of Finance. The first meeting confirmed that, for public transport, SPAD were in the lead. Much of the Ministry’s senior management was now engaged on MH370. At the Ministry of Finance, Mr Hammond explored Malaysia’s approach to financing major rail developments. The Secretary-General noted that the government would fund the KVMRT through conventional and shariah vehicles, including the use of retail sukuk and also sukuk that comprised GLC shares, future commodities and physical assets. The high-speed line from Singapore would be funded through a PFI/PPP model. UK companies were again encouraged to take a higher profile and more local approach.

At dinner, Mr Hammond met Idris Jala, Cabinet Minister in the PM’s Office responsible for the Economic Transformation Programme. Mr Hammond led a discussion ranging from public transport through to wider developments.

The Minister’s final engagement was to open the Rail Solutions Asia conference promoting UK capability to delegates from across the Region. Mr Hammond then met the media before touring the exhibition, meeting 17 UK companies and resulting in positive press about the UK’s world class rail sector.

0.3 Comment

The visit helped to raise the profile of the UK rail mission and to open doors with the Ministries of Transport and Finance. The latter, in particular, will have a major role to play over the awarding of contracts for rail and other large infrastructure projects. In the meantime, we will need to work with the larger British construction companies to help them understand better the mechanics of winning business in this sector.

0.4 Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.