The latest scandal surrounding the double tracking contract given to Gamuda/MMC and our reneging on the letters of intent (LOI) with Indian Railway Construction Company (Ircon) and China Railway Engineering Corp (CREC) is not new to KTM. I had indeed raised questions in Parliament in the nineties regarding the privatisation of KTM and the consequential costs to Malaysian taxpayers in the long run.

When KTM was to be privatised, Renong-Marak Unggul (yet another crony company) was given the contract and the government absorbed their debt and while this company was running KTM into the ground, the government continued to pour millions to keep KTM afloat.

Now Gamuda/MMC has offered to take over control of KTM with investment of one billion ringgit but they want the government to absorb RM800 million of KTM's debt which will doubtless be paid for by Malaysian tax payers.

In this latest scandal, we further observe the cursory way our government treats government-to- government letters of intent. In typical Malaysian diplomacy, while the then deputy prime minister was busy visiting China promising the Chinese leaders good honest relations in the interest of enhanced trade and expecting the opening of the China market to Malaysian goods and services, the Malaysian government proceeded to renege on a government-to-government agreement.

The new transport minister has reminded everyone very clearly now that a letter of intent (LOI), like a Memorandum of Understanding is not legally binding, even if was signed under a government-to-government umbrella.

The repercussions are twofold. Firstly, if we can renege on LOIs with two of the biggest giants in railways, what happens to our obligations in Afta when any deal becomes inconvenient to interested parties as seems to be the case here?

Secondly, our government, in the unseemly haste to award the contract to Gamuda/MMC appears to be blithely oblivious of developments in the region. Through reneging on the LOIs, we stand to lose out on sharing the rail cake which is an exciting development in the whole region.

Unlike some of our neighbouring countries which have already signed Free Trade agreements with China and India, Malaysia has not been able to break into the China market. Any intelligent observer will note that the recent trade alliance between India and China and between China and certain South East countries is leading to China creating a new global trade alliance. And since MOUs signed with Malaysian companies are now not legally binding, Malaysia will be counted as having opted out of this alliance.

Questionable post tender offer

Familiar questions pop up whenever big contracts are awarded in Malaysia. Since Gamuda-MMC was not part of the original invitees to tender, how were they privy to the details of the tender? Why did the Government not then offer an open tender to all experienced railway builders? How realistic is the price offer of Gamuda-MMC's since they have never built a railway line before?

It is interesting to note that the so-called experts who compare Gamuda to these foreign companies do not seem to account for the fact that both Indian and Chinese companies together have built more railway networks than any other party in the world while Gamuda-MMC is only a house and road builder!

Why have the Indian Ircon and the Chinese CREC been highlighted as the culprits for raising the cost of building the high-speed metre gauge railway for KTM when they were not the main contractors and were forced to work with inexperienced local connected companies together with Siemens and Mitsui? By normal G to G standards, the deal should have had the Chinese and Indians as main contractors.

The often mentioned 'Statement of Needs' as the basis of tendering is very interesting since details of the variations to meet so-called high speed tilting train capacity are mired in that transparent shroud called the Official Secrets Act. Strange then that the other parties from Japan and Germany in the same group offering the bid with the Indian and Chinese are still in with Gamuda MMC. So the real aim of this exercise appears to be to remove Ircon and CREC from the deal.

Why? I might venture a possible theory. Ircon and CREC are two government players who are not going to play ball if asked to make unnecessary loading of rail prices which has been the practice over the last twenty years. In India, independent auditors will be monitoring actual quoted value, details of payments, declaration on revenues, etc. In China, their finance and commerce ministries also have independent monitoring of financial commitments.

Quoting the MD of Gamuda in a recent interview with The Edge, the reasoning for allowing them to become main contractor for this double track railway project is because they build houses and roads. The same justification was used when giving a lorry driver the biggest civil engineering contract to build the Bakun hydro dam and did we not see the huge loss to the Malaysian tax payer after that fiasco!

In past parliamentary replies to my questions on questionable contracts, the government in its infinite wisdom has provided us with the justification that a plumber and a heart surgeon are the same since both have experience with tubes and fluids and that a carpenter and an orthopedic surgeon are likewise similar since they both deal with joints.

Obviously, nothing seems to have been learnt during the last 12 years.

Missing the train

There are a number of stark differences between claims by Malaysian authorities and contractors and the reality in the global market. To justify the billions spent on double tracking the KTM railway without actually having a proper Railway Network Development Plan, the government keeps referring to the Trans Asia Railway as the reason for this rapid railway line.

Firstly, the railways in China operate on standard gauge railway (1.46m) while Malaysia is upgrading the railway to metre gauge railway (1.0m) to accommodate passenger railway to operate at 160 km/h. Freight on metre gauge cannot travel at these speeds. China freight operations are to upgrade to 160km/h and passenger operations to 300km/h.

China is spending more than US$36 billion in upgrading its railway and the Euro Asian link and according to China sources, is planning an independent rapid freight operation on standard gauge railway to Thailand. This was already made public as early in December 1995 in the Asia Times, months before Malaysia claimed to be building its Trans Asia link in 1996. Thailand has plans to upgrade the railway link to China via Laos on standard gauge with the Chinese Railway already undertaking the detailed system review.

This means that Malaysia's rapid railway will not connect to China's. And if China is directing freight to its own designated ports in Southeast Asia, Malaysia will not be carrying much transshipment traffic to and from China and especially from India under the new trade alliance.

Thailand already has plans to build certain lines on standard gauge and are independently upgrading its metre gauge line for top speed of 80 km/h. In Cambodia, the railway is to be upgraded with second hand railway tracks and sleepers to an even lower speed. Vietnam needs to spend about US$ 4 billion to bring its railway to international metre gauge standards. At the moment, the trains travel at between 20-60km/h in these two countries.

Now we have been told that the best price gets the job. But this has not been government policy for the past 20 years. The former Malaysian transport minister said that the consultants chosen to provide the technical and economic assessment for the so-called Trans-Asia Railway were the best available. Yet the study undertaken by the consultants could not decide how much the Trans Asia Railway would cost, and based on news reports determined costs of between RM1.6 million to US$1.6 billion.

All this while, the double tracking costs for the North South line has been escalating. For the original Rawang-Kuala Lumpur-Seremban line, the cost was RM1.4 billion. The Rawang-Ipoh project costs RM2.88 billion with numerous variations. And in Parliament recently, the deputy transport minister has declared that the cost is RM26million per km. The Malaysian experts have not done any rail upgrades for the other countries while China Railway is now doing the upgrades for the Thai State Railway under a US$16 billion counter trade deal. Under G to G arrangements, it is doing the standard gauge connecting Laos to Kunming China and metre gauge for Cambodia. Vietnam is sharing this work between China, India and its European partners.

In April 1996, Malaysia declared it would build the Trans Asia Railway - the country tour railway which will slowly makes its way at 160 km/h up to the border and then reduce speed to 60-80 m/h in Thailand and further reduce speed through second hand rails in Cambodia to about 20-40 km/hr.

In Vietnam the French rail study determines US$4 billion is needed to bring the railway up to normal operations speeds of 60-80km/h. Malaysian consultants took four years to cost the project and they said it would cost anything from RM250 million to US$1.6 billion to complete the Trans Asia from Malaysia to Kunming as reported by the New Straits Times!

Blithely unaware

Malaysia seems to be blithely unaware of the rail developments by the majors in the region. In December 1995 the Asia Times reported in New York that a Chinese-led multinational Consortium which included Malaysian rail infrastructure specialists was involved in the development of Pan Pacific Trans-Continental and the Euro-Asian rapid freight railways which intended to also connect India, Europe and Singapore to China.

In 1997, the NST reported Malaysian infrastructure specialists were appointed by the Chinese-led multinational rapid rail global freight consortium to prepare the development and implementation plans for the proposed standard gauge rapid freight railway from Singapore to China via the east coast line.

The double tracking of the North South railway to be built with private funding in 1994 by independent multinational contractors was also not replied to by the government. The government preferred to hand the privatisation of the KTM to Renong-Marak Unggal which left the KTM in further debt after the Malaysian taxpayers had absorbed all the previous debt of KTM.

In all the above examples, the projects were to be funded and developed by highly experienced transport system operators. Yet under the questionable contracts given out by the government, these have been very expensive to the tax payers who will continue to pay exorbitant rates for others' finance failure.

The euphoria at Gamuda-MMC will be short lived when China in alliance with our neighbours form a rapid rail freight network operating on standard gauge railway effectively cutting out freight passes through to Malaysia. When the rest of the global trading nations are falling over themselves to have a market share in the two giants India and China, we are certainly showing the world how we can be different.

In the long term, the interest of KTM and Malaysia's economic strength have been ignored. But such delusions of grandeur forged in this "golden age of mediocrity" will not be good for Malaysia's future.

KUA KIA SOONG is director of the human rights group Suara Rakyat Malaysia (Suaram) and a former opposition politician.