Chart of the Day: Why is Singapore increasing its investments in Malaysia?

The high-speed rail link is on its way.

Economic necessity is definitely pushing Singapore to tighten economic integration with Malaysia, where there is abundant land and a larger population.

According to a report by BaML, Singapore can overcome its geographical and manpower constraints once it further integrates with Malaysia.

On the other hand, Malaysia also needs more foreign investment, as the oil & gas price
collapse is hurting growth and fiscal revenue.

Analysts at BaML believe that for Prime Minister Najib politically, the high-speed train will offer a way to rescue and lift 1MDB asset values. This opportunity comes at a time when both Japan and China – armed with ready infrastructure funds - are showing keen interests in the project.

Here’s more from BaML:

With the ASEAN Economic Community (AEC) set to start end-2015, the fast train will complement ambitious train projects connecting Thailand and the Greater Mekong region.

News on the High-Speed Train (HSR) has been lacking, but the upcoming leaders meeting in May will hopefully offer some signs of progress.

Realization of the KL-Singapore High-Speed Train will be an important milestone for economic integration. In Sept 2010, Prime Minister Najib announced the Kuala Lumpur-Singapore High-Speed Rail project, which could cut the travel time between the two cities to just 90 minutes. In Feb 2013, PM Lee and PM Najib officially agreed to build a high-speed rail link by 2020, although delays are likely.

A committee was tasked with looking at the feasibility and modalities of the project. The RM40bn (US$11bn) infrastructure investment will offer a significant economic boost, at a time when exports are faltering and investment is slowing.