A QUESTION OF BUSINESS | While Mass Rapid Transit Corporation (MRT Corp) CEO Shahril Mokhtar’s attempts to get the lowest possible price for MRT3, estimated to cost RM40 to RM50 billion, is laudable, some key questions involved go beyond his brief and need answers from his boss Prime Minister Najib Abdul Razak, who is also the finance minister. MRT Corp is wholly-owned by the Minister of Finance Incorporated.

This is a terribly convoluted project - it most likely involves massive amounts of foreign financing, interest rates to be set and whether they are floating or not, a minimum moratorium of eight years and a minimum repayment period of 30 years.

Last week, we explained why the tender terms favour China contractors. The focus here will be on the risks that MRT3, as tendered, poses to the country in general.

First, there are few bona fide organisations which are able to provide a 90 percent loan for a minimum period of 30 years. Even if they could, the nation faces horrendous risks in terms of movement of exchange rates and interest rates.

As an example, in 1980, one US dollar was worth 2.4 ringgit - now it’s about 4.2. That’s a depreciation of some 40 percent! If the ringgit depreciates against the currency in which the loan is taken, then the repercussions can be serious....