• Linking Borneo by high-speed rail. Brunei-based company Brunergy Utama announced the proposed first high-speed rail network in Borneo linking Kalimantan, Sarawak, Sabah, and Brunei. The said project known as TransBorneo Railway (TBR) would be implemented in two phases involving routes spanning 1,620 km and is estimated to cost USD70bn. Note that there has been no official endorsement by the Brunei Government for this project but it is aware of such aspirations for TBR.

• Further details. The TBR’s first phase will connect cities from the west to the east coast, beginning in Pontianak, West Kalimantan, and ending in Kota Kinabalu, Sabah, which is an economic focal area (Figure 1). Meanwhile, according to Brunergy Utama, the second phase would involve North and East Kalimantan, connecting the main route with Samarinda and to Indonesia’s new capital Nusantara. The project will have four terminals serving as the main hubs for mass transportation, along with 24 stations stretching throughout the island.

• Development of the TBR is not entirely new to Malaysia’s Federal Government as it announced in Oct 2023 that it will finance a ground survey to look into the feasibility of constructing the said project. At the time of writing, the Sarawak and Sabah Governments have yet to be officially informed on the proposal made by Brunergy Utama on TBR. The Economic Planning Unit is still in the midst of conducting feasible studies to create a railway network to link Sarawak with the other regions in Borneo.

• Plans for a Trans-Borneo Railway appear to be apt as planning for Kalimantan’s railway line started in 2019 for Banjarmasin-Tanjung (196km) and Banjarmasin-Palangkaraya (194km). Upcoming plans for Kalimantan’s railway network will expand the stretch to a total of 2,428km in various phases (Figure 2), covering destinations such as North Kalimantan and Pontianak. If Sarawak, Sabah, and Brunei remain idle, all three stand to lose a great opportunity to reap the benefits from better cross-border flows in light of Indonesia setting up its new capital in Kalimantan.

• We envisage that the rollout of the said project will not happen immediately as it requires the agreement of all three countries – Malaysia, Brunei, and Indonesia. Furthermore, the Malaysian Federal Government is occupied with other upcoming mega projects ie the Penang Light Rail Transit, Kuala Lumpur-Singapore High Speed Rail and the Mass Rapid Transit 3. However, we do not discount the possibility of an expedited rollout should funding be backed by the private sector. Nonetheless, we view a faster-than-expected rollout to be a catalyst not just for Sarawak-based contractors such as Ibraco (IBRA MK, NR) (involved in the Kuching Autonomous Rapid Transit (ART)) and KKB Engineering (KKB MK, BUY, TP: MYR2.02) (involved in steel fabrication of various infrastructures) but also for other Malaysian contractors – especially ones with rail credentials ie IJM Corp (IJM MK, BUY, TP: MYR2.76), which is also involved in the Kuching ART.

• Key risk: Longer-than-expected delays in contract rollouts.

Source: RHB Securities Research - 1 Apr 2024