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Mahamad Rodzi Abdul Ghani




Mahamad Rodzi Abdul Ghani


Business Times



Rail project: Door still open for Ircon
Friday, November 07 2003 - THE door may still be open for Indian RailwayConstruction Co to take part in the RM14.45 billion double-trackingproject that has been awarded to the Malaysia Mining Corp Bhd (MMC)-GamudaBhd joint venture.

Ircon officials came away from a meeting with Ministry of Transportofficials yesterday feeling that the company may yet get a major slice ofthe project, which was promised to the Indian company via a letter ofintent (LOI) but was then awarded to the Malaysian consortium.

Ircon and the ministry had a cordial discussion on recent developmentsconcerning the award of the project to MMC-Gamuda in Putrajaya yesterday.

Ircon wants better terms than what was offered by the MMC-Gamuda group toundertake sub-contracting works. As a sub-contractor, it also wants toreport directly to the Malaysian Government instead of MMC-Gamuda.

The Transport Ministry was the project’s custodian when it was mooted as agovernment-to-government (G-G) initiative two years ago.

According to sources familiar with the meeting, the ministry officialsurged all parties with interest in the project to work out a solution sothat the 616km electrified railway could be built without delay.

Three Ircon senior managers met the Transport Ministry secretary-generalDatuk Zaharah Shaari and other officials during the closed-door meeting.

There was an atmosphere of proactive brainstorming ...The ministry hastaken the lead once again by advising all parties to work towards awin-win situation.

Emphasis was placed on putting the project on track without much delay andsearching for the right formula on pricing.

No deadline has been given but we expect the dotted lines to be inked verysoon, the source told Business Times in Kuala Lumpur.

Ircon and its Chinese counterpart China Railway Engineering Corp (CREC)were originally earmarked to undertake the double-tracking project, deemedMalaysia’s biggest infrastructure project in current times, on a G-Gplatform.

Both companies had received LOI from the Government to build two separateportions of the rail track in mid-2002 until the submission of a counterbid by the MMC-Gamuda group five months ago.

The project was subsequently awarded to the MMC-Gamuda joint venture inwhich both companies were appointed as joint main contractors for the329km Ipoh-Padang Besar (northern grid) and 288km Seremban-Johor Baru(southern grid) stretches.

MMC-Gamuda was said to have offered Ircon RM3.36 billion to undertake 70per cent of the civil works for the northern grid and CREC RM2.3 billionfor 70 per cent of the southern grid.

Both firms which were offered rights of first refusal, however, failed toindicate their acceptance when the offer closed on the noon of October 30.

Commenting on the pricing, the source said the RM3.36 billion price tagoffered by the MMC-Gamuda joint venture to Ircon has to be adjusted upwardto reflect fairplay.

At the current offer price, Ircon’s cost to carry out the project is RM14million per km compared with RM26 million per km offered to DRB-HICOM Bhdand Emrail Sdn Bhd for the 179km central grid from Rawang to Ipoh.

At best, the contract provision should be amended to treat Ircon as anominated sub-contractor which takes instructions from the Governmentdirectly, the source said.

The source also expressed doubt that CREC, which has been rather quiet onthe matter, is still keen on the double-tracking project.

For now, it seems to be a two-way partnership between MMC-Gamuda jointventure and Ircon, as China seems contented with two project offerings inlieu of losing the double-tracking job on the southern grid, he added.

China may be asked to take part in the RM13 billion Pahang-Johor watertransfer project which is centred on the construction of water treatmentplants, supply of treated water and the transfer of raw water from Pahangto Johor.

It may also be offered a role in constructing the rail stretch linkingJohor and Kelantan.

If the jobs are offered to China, they are likely to be based on the sameformula like the rail contract, whereby China will be paid in palm oil forwork done.

India and Malaysia signed a memorandum of understanding for thedouble-tracking and electrification of the Ipoh-Padang Besar stretch inMay 2001 in the presence of visiting Indian Prime Minister Atal BihariVajpayee and his Malaysian counterpart, Tun Dr Mahathir Mohamad.

On Wednesday, Prime Minister Datuk Seri Abdullah Ahmad Badawi saidMalaysia is not obliged to make new offers to the Indian and Chineseparties who had earlier been earmarked to undertake the double-trackingjob.

We are only obliged to offer to those that offer the best cost, he told anews conference in Putrajaya after chairing his maiden Cabinet meeting.

The project, deemed to be part of the 5,500km trans-Asia link betweenSingapore and Kunming in southern China, was earlier proposed as acounter-trade arrangement between Malaysia and India and China to swap anestimated 8 million tonnes of palm oil in exchange for rail works over afive-year period.