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Business deals

Malaysia high-speed rail cancellation a blow to Japan's 'shinkansen' exports

JR East consortium had high aspirations for the $15bn project

Japanese rail companies were hoping to export shinkansen bullet trains to Malaysia.

TOKYO -- Malaysia's decision to scrap a planned high-speed rail link from Kuala Lumpur to Singapore has blindsided Japanese contractors looking to cash in on the $14.8 billion project.

Malaysia's newly elected Prime Minister Mahathir Mohamad said Monday he would cancel the undertaking approved by his predecessor, Najib Razak. The project was supposed to be completed by 2026 and make the 350km train trip in 90 minutes.  

Bidders from Japan, China and Western nations were looking to land contracts that were to be awarded by the end of this year. A Japanese consortium including East Japan Railway and Sumitomo Corp. was hoping to export Japan's acclaimed shinkansen technology.

"The consortium has not been able to make official contact with Malaysian authorities, so the true intentions are not known," said a source close to the Japanese partnership.

Shinkansen technology is employed in Taiwan, and it will feature in the 500km high-speed line to open in India in 2023. But Japan's high-speed rail industry is competing with CRRC, the world's largest manufacturer of rolling stock leveraging low costs in a crowded market. The Asia-Pacific rail market averaged 58.9 billion euros ($67.9 billion) between 2019 and 2021, according to Japan's Ministry of Economy, Trade and Industry.

Moreover, high-speed rail projects often face challenges and have failed in the past in other countries, said a person close to a rolling stock manufacturer. Projects in Mexico, Venezuela and Brazil come to mind.

"Because of the prevailing risks, I would proceed cautiously," said the source close to the Japanese consortium.

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