PETALING JAYA, May 31 — Malaysia’s construction industry will only grow an average of 4.3 per cent until 2022 without the KL-Singapore High Speed Railway (HSR) and the East Coast Rail Link (ECRL) projects, according to BMI Research.

The Fitch Group unit added that axing the two projects, which it said have a total investment value of US$40 billion (RM158.8 billion), will also hurt property and industrial development along the routes of both railways.

“Not only did the project itself — estimated to cost more than US$28 billion (RM111.16 billion) represent a significant component of Malaysia’s transport infrastructure growth, stations along the railway would have also served as anchors for new commercial, residential and industrial developments Malaysia and Singapore.

“This will also exacerbate the already-negative impact Mahathir’s surprise victory in this month’s elections has had on foreign investment,” it said in its latest report released today.

Prime Minister Tun Dr Mahathir Mohamad had announced the cancellation of the KL-Singapore HSR earlier this week in an austerity drive aimed to curb government spending.

He also announced the government will review the ECRL that was to connect the rural east and developed west coasts of the peninsula, which China sees as part of its greater Belt and Road initiative.

BMI noted that the US$12 billion ECRL project will be disrupted in the coming weeks due to the high cost and reliance on Chinese financing.

However, BMI said the construction sector is quite resilient and will be able to bounce back due to the Pakatan Harapan government’s priority on public infrastructure as per its election manifesto, even if the scale of projects would be smaller and focused on transport and utility projects that address quality-of-life and cost-of-living issues.

“Rural road, power and broadband projects may not be of the same value or prestige as high-speed railways, but they remain essential to bolstering economic growth and will be a source of project opportunities for companies that may have missed out on larger projects,” it said.