ECRL: Remapping the nation's growth engine

Malaysian Reserve

6 hours ago

It would reshape Malaysia's logistics corridors, attract new investment and rebalance regional development
by HIDAYATH HISHAM & SUFEA SALEHUDDIN
THE East Coast Rail Link (ECRL) is shaping up to be more than just a railway.
Beyond connecting the east coast to Selangor, the project is being positioned as a force of national growth — one that could reshape Malaysia's logistics corridors, attract new investments and rebalance regional development.
As of June, the 665km alignment has reached 82.45% completion, according to Transport Minister Anthony Loke.
Yet, experts say the railway's true success will hinge on more than construction milestones.
(graphic: TMR)
Coordinated Strategy, High-impact Zones
Investor activity along the ECRL corridor is gaining tangible momentum, backed by confirmed projects and rising interest, particularly in Pahang and across the East Coast Economic Region (ECER), according to the Malaysian Investment Development Authority (MIDA).
'This growing momentum is the result of deliberate strategy, strong inter-agency collaboration at both federal and state levels, and tangible infrastructural progress,' MIDA said in a written statement to The Malaysian Reserve (TMR).
MIDA said the project remains on track to reach 90% completion by year-end, with full operations expected in 2027. The progress has catalysed logistics expansion, industrial development and rising land values.
It has established a dedicated task force with the ECER Development Council (ECERDC) and China Communications Construction Co Ltd (CCCC) to promote and facilitate Economic Accelerator Projects (EAPs) along the corridor.
These include transit-oriented developments (TODs), industrial parks and logistics hubs in key areas.
Nearly RM20 billion has been invested in Kuantan and the Malaysia-China Kuantan Industrial Park (MCKIP), focusing mainly in high-value manufacturing, processing and logistics.
The Malaysia-China Kuantan International Logistics Park (MCKILP) is expected to bring in up to RM17.61 billion in foreign direct investment (FDI) and create 20,000 jobs in industries like light and medium manufacturing, warehousing, housing, petrochemicals, steel, palm oil processing, e-commerce and marine engineering.
Most investment is focused in high-tech manufacturing, logistics and transport, tourism, hospitality and commercial services.
MIDA said it supports these sectors through investor facilitation, feasibility guidance and close engagement with local and state authorities.
'While initial investments have focused on developed areas like MCKIP, the broader ECRL corridor is envisioned to enable balanced development, expanding opportunities to less-developed areas in Terengganu, Kelantan and central Pahang.'
Sector Priorities, Catalytic Zones
MIDA is focusing on key industries like logistics, green technology, and agro-based sectors near transit-oriented developments (TODs). The ECRL aims to boost east-west trade and speed up industrial growth. Economic Accelerator Projects (EAPs) are open to all investors and concentrate development within a 15km radius or 30-minute drive of ECRL stations.
The main focus areas are Kuantan Port City for logistics and manufacturing and central Pahang towns such as Temerloh and Bentong for industrial parks and TODs.
Other sites include Kuala Terengganu, Cherating, Kota Sultan Ahmad Shah (Kota- SAS) and Bandar Permaisuri, all under a broader Integrated Land Use Master Plan (ILUMP).
'A new international airport will be developed in the Cherating area. The Cherating Station, currently passenger-only, is planned by the Pahang state to add cargo facilities to support the growing aerospace industry nearby,' MIDA said.
KotaSAS, meanwhile, is being developed as a new township and administrative capital for the state government. It currently serves passengers only.
Incentives, Promotion and Long-term Positioning
MIDA globally promotes key zones like Kuantan Port City under the Belt and Road Initiative (BRI) and offers full support to investors, including site scouting, licensing, land access, incentives and utilities.
It coordinates closely with agencies like the Town and Country Planning Department (PLANMalaysia) and state governments to ensure infrastructure and talent readiness.
Under the BRI, MIDA promotes the ECRL as a key advantage for investors, linking Port Klang and Kuantan Port to enhance trade by avoiding congested sea routes.
Incentive Framework Boosts Enabling Environment
The agency said the ECRL is a major incentive, offering strong connections between Malaysia's east and west coasts. It is also collaborating with government agencies to develop competitive incentive packages for EAPs.
The government plans to launch a New Investment Incentive Framework in the third quarter of 2025 (3Q25), aimed at encouraging high-value activities and reducing economic differences between regions.
'ECRL aims to boost economic growth, create jobs and support balanced regional development, but its success relies on fair benefit distribution and effective integration with local economies.'
ECRL achieves another milestone with the record-breaking breakthrough of the 16.4km Genting Tunnel. Loke (centre) says the completed tunnel is expected to be the longest railway tunnel in South-East Asia
Railway History Hints at ECRL's Future Impact
Monash University Malaysia senior economics lecturer and Honours/Postgraduate Diploma director Dr Audrey Siah pointed to early railway stations like Taiping in Perak, helped form industrial clusters and boosted nearby towns such as Matang.
Citing her co-authored study Colonial Origins of Agglomeration, she said the ECRL could create similar economic ripple effects as past railway developments.
'It is essential to address this potential backwash effect, where areas with stations attract economic resources such as labour, capital and trade, at the expense of areas without stations,' she told TMR.
Smaller towns like Kuala Lipis, Jerantut, Kuala Krai and Gua Musang could be developed into feeder points for ECRL-linked logistics.
For example, the timber and wood products manufacturing and the agro-based food processing industries in Mentakab, Pahang, could flourish due to its access to cities and ports on the West Coast.
Siah said improved connectivity will reduce logistics costs, boost investor confidence and make the East Coast more attractive for sectors such as agriculture, manufacturing and export logistics.
While ECRL's strategic link between Kuantan Port and Port Klang may appeal to Chinese investors, deeper BRI integration must not sideline local firms.
'If foreign firms dominate business operations and supply chains, Malaysia risks missing critical opportunities for SME participation and local capacity building.
'Another potential risk is an eventual influx of cheaper Chinese goods and services, which could undercut — and ultimately stunt — the growth of Malaysian SMEs in competing sectors,' Siah said.
Still, she believes the benefits outweigh the risks.
'To fully benefit from the ECRL, SMEs should position themselves near key stations or industrial hubs along the rail corridor to take advantage of improved connectivity and reduced transportation costs.
'These efforts, part of the ECRL-EAP, offer significant opportunities for SMEs to participate in and benefit from the broader economic transformation,' she added.
To benefit from ECRL, SMEs should set up near key stations or industrial hubs along the rail line, says Siah (Source: research.monash.edu)
Kuantan's Strategic Anchor
The Kuantan segment of the ECRL stands out as a strategic linchpin in Malaysia's east-west connectivity.
Universiti Malaya (UM) Department of Finance, Faculty of Business and Economics Assoc Prof Dr Mohd Edil Abd Sukor believes the corridor's development hinges on how well its infrastructure is integrated with freight logistics and industrial nodes — particularly Kuantan Port and MCKIP.
He said Kuantan Port City 1 and 2, and Cherating are strategically positioned to drive regional growth by enhancing mobility, boosting tourism and strengthening Kuantan's role as a key logistics hub linked to Kuantan Port and MCKIP.
While the ECRL's capital cost remains significant, Mohd Edil said the long-term returns can be realised if economic activity is stimulated around key freight corridors. Freight operations at Kuantan Port City 2, in particular, are projected to be a major revenue source.
'Over time, the multiplier effects on employment, local businesses and real estate are expected to support a positive return on investment,' he told TMR.
But for this to materialise, he said the infrastructure must be closely linked to surrounding industrial activity, with clear freight incentives, efficient customs procedures and strong intermodal planning.
Balancing Development, Managing Fiscal Risk
Beyond the East Coast, Mohd Edil sees the ECRL as an opportunity to address Malaysia's persistent east-west economic imbalance.
By connecting less-developed states to key urban markets, the rail line could attract capital into logistics, tourism and manufacturing in areas long neglected by mainstream investment flows.
Improved logistics connectivity lowers the cost of moving goods, widens access to urban markets and increases investor confidence.
For governments, this can translate into higher tax revenue, while firms benefit from reduced entry barriers.
Over time, Mohd Edil expects private investment to cluster around stations such as Kuantan Port City 2 — particularly in sectors with existing momentum such as heavy industry, warehousing and real estate.
However, he warns of key macroeconomic risks.
'One of the primary risks is its heavy reliance on foreign loans, particularly from a Chinese bank serving as the project's main financier. This exposes Malaysia to currency exchange risk, especially if the ringgit depreciates against the yuan or US dollar,' he said.
Even if the loan terms are favourable — such as longer maturities and relatively low interest rates — Malaysia remains vulnerable if revenue projections underperform or freight traffic fails to materialise at scale. In such a case, debt servicing could strain public finances.
Mohd Edil urged policymakers to manage currency and operational risks through efficiency, industrial integration and robust oversight to ensure that project benefits are delivered on the ground.
Mohd Edil sees the ECRL as an opportunity to address Malaysia's persistent east-west economic imbalance (Pic courtesy of Mohd Edil Abd Sukor)
Financial Inclusion, Regional Capital Market Spillovers
Beyond infrastructure and logistics, ECRL could unlock broader financial participation in rural areas.
'As commerce and mobility increase, financial institutions may be more inclined to expand their branch networks or digital outreach in these areas, especially in underserved towns, improving access to credit and savings facilities for local entrepreneurs, smallholders and informal businesses,' Mohd Edil added.
This shift could stimulate asset ownership, financial literacy and broader participation in Malaysia's formal economy, especially in areas like Jerantut, Kuala Lipis and interior Kelantan.
At the national level, ECRL also provides opportunities for capital markets.
As a BRI flagship, the project signals Malaysia's readiness to support large-scale infrastructure finance — including sukuk issuances, public-private partnerships and cross-border deals — making it a platform to attract international investors into BRI-linked projects.
With the right incentives, ECRL could trigger financial innovation, ranging from syndicated infrastructure bonds to new financing models via Labuan, Sabah.
Building Rail Talent Through Local Upskilling
ECRL's operation phase is expected to create about 1,800 jobs.
In May, Loke said ECRL Operation Sdn Bhd, a joint venture (JV) between Malaysia Rail Link Sdn Bhd and CCCC, will manage the workforce, with operations scheduled starting in January 2027.
He said at least 80% of the workers will be Malaysians in technical and operational roles.
To meet this demand, the government is expanding the Program Latihan Kemahiran Industri ECRL (PLKI-ECRL) to include operations and maintenance (O&M) training.
Launched in 2017, the programme is entering its next phase, targeting 3,200 local talents specifically for O&M roles.
This year, 210 Malaysians will undergo a one-year intensive programme in Liuzhou, China, with the first 102 trainees having departed in May.
Trainees will be prepared for roles including assistant station attendant, signalling technician, assistant train driver, overhead line technician, and emu maintenance technician.
Loke also guaranteed employment for all PLKI-ECRL upon completion of the programme.
'The effort to develop the capability and competence of our local youth is a priority, so that Malaysia will not have to depend on foreign expertise in the long term,' he said.
CCCC has contributed RM12 million to support the training programme, which forms part of its investment in developing a sustainable and localised rail workforce.
From freight logistics and financial inclusion to SME development and industrial spill-overs, the ECRL's impact will depend on how well it is integrated into the real economy — and whether the gains it promises reach surrounding communities.
This article first appeared in The Malaysian Reserve weekly print edition