KUALA LUMPUR: Malaysia's construction sector could see a fresh pipeline of contracts from expanding rail plans in Sabah and Sarawak, potentially boosting contractor workloads and sustaining activity.
Execution will be critical in turning proposals into awarded jobs.
Industry players said the pipeline could offset slower momentum in some segments by unlocking long-duration infrastructure work, particularly in civil engineering, tunnelling, station development and related industrial facilities.
Samuel Tan, founder and chief executive officer of Olive Tree Property Consultants said: "Large-scale rail projects typically provide multi-year visibility for contractors, from earthworks through to systems integration.
"That kind of pipeline is what helps sustain utilisation levels across the construction sector, and this could put more jobs in the market."
He said the timing and structuring of project rollouts would be crucial in determining how much of the announced pipeline converts into actual awarded contracts.
"Even when projects are announced, the real boost to contractors depends on procurement sequencing, funding clarity and execution readiness.
"These factors determine how quickly the industry feels the impact," he told "Business Times".
The construction sector continued its steady expansion in the first quarter of this year, recording 8.5 per cent year-on-year growth to RM46.5 billion, driven by growth in special trade activities and non-residential building sub-sectors, according to the Department of Statistics.
While the sector maintained its growth trajectory, the pace moderated from 16.6 per cent in the first quarter of 2025, reflecting a stabilising construction cycle after a sharp post-pandemic recovery.
Tan said rail investments could generate strong multiplier effects for the construction industry but cautioned that benefits may be uneven if projects are delayed or demand assumptions prove overly optimistic.
"The upside for builders is clear in theory. Infrastructure-heavy states like Sabah and Sarawak can drive long-term contract flows.
"But if demand assumptions are weak, projects may be stretched out, reducing near-term construction intensity," he said.
Sarawak Ready For Trans-Borneo Railway Project
Sarawak aims to play a leading role in the proposed Trans-Borneo Railway, with the state government signalling readiness to support the long-planned project to strengthen logistics, lower transport costs and deepen economic integration across Borneo.
State Premier Tan Sri Abang Johari Openg said last week the state has developed a preliminary rail alignment and is prepared to work closely with the federal government to refine the route.
The project is expected to begin with Sabah and Sarawak before expanding into Kalimantan through government-to-government cooperation.
In March, Transport Minister Anthony Loke said in a Facebook post that the final feasibility study report is expected to be completed by mid-2026 following additional stakeholder engagement in Sabah and Sarawak.
The minister also said that while the railway could take decades to fully materialise, long-term planning must begin now given the scale and complexity of the project.
If realised, the Trans-Borneo Railway would become one of the region's most ambitious transport infrastructure projects, linking Sarawak, Sabah, Brunei and Indonesia's Kalimantan region.
The project could reshape trade and freight movement across Borneo, improving connectivity within the Brunei Darussalam-Indonesia-Malaysia-Philippines East Asean Growth Area (BIMP-EAGA) while enhancing the movement of goods between ports, industrial zones and inland economic centres.
Sabah Bets on Rail to Drive Long-Term Growth
Sabah is placing rail infrastructure at the centre of its long-term economic strategy as it seeks to improve logistics, support industrial expansion and attract higher-value investments.
Under the 13th Malaysia Plan (13MP) from 2026 to 2030, the state has identified 39 rail and rail-related projects, including several initiatives and 24 new ones slated for launch throughout this year, marking one of Sabah's largest transport overhauls in decades.
Among the recent proposals drawing industry attention is a feasibility study for a rail corridor linking Putatan, the Kota Kinabalu Industrial Park (KKIP) and Sepanggar Port, a project expected to improve freight connectivity along Sabah's west coast and address persistent logistics bottlenecks.
The proposal comes as Sabah seeks a larger role in manufacturing, logistics and regional trade amid rising investor interest in East Malaysia and cross-border economic corridors.
In April, Sabah Governor Tun Musa Aman said the rail initiative forms part of the state government's broader infrastructure strategy to improve connectivity and stimulate economic expansion in Sabah.
The feasibility study aligns with the Sabah Sustainable Transport Master Plan, envisioned as a long-term strategic framework for a safer, more efficient and environmentally sustainable public transport network.
At the centre of the proposal is a freight rail corridor, potentially with passenger services, connecting Putatan, KKIP and Sepanggar Port, the three economic nodes viewed as critical to Sabah's industrial and logistics ecosystem.
Transport specialists say the corridor could reshape freight movement if implemented effectively, lowering logistics costs, improving supply chain reliability and reducing congestion caused by heavy dependence on trucks.
Carefully Assess Demand Before New Rail Investments
Transport expert Dr Rosli Khan said Sabah should assess passenger and freight demand before committing to major rail infrastructure.
He said a well-designed rail link along the Kota Kinabalu and Sipitang corridor could efficiently move both workers and freight, reduce logistics costs, and support industrial clustering.
More importantly, it must prevent the fragmentation of development that Sabah has already experienced elsewhere, he told Business Times.
"The experience in Sarawak offers a cautionary lesson.
"The failure to properly connect key growth centres such as Bintulu and Miri by rail has led to duplication rather than complementarity.
"Instead of building an integrated economic ecosystem, infrastructure has been replicated; ports, airports, industrial parks, and urban centres are often serving overlapping functions.
"This is not just inefficient; it represents a significant misallocation of public resources. Sabah must avoid repeating this mistake.
"There are already discussions about building a new airport in Sipitang, but such a move should be carefully reconsidered.
"If an efficient, high-capacity rail system connects Sipitang to Kota Kinabalu, the need for a separate airport diminishes significantly.
"Rail can serve both passenger mobility and freight logistics at a fraction of the cost of duplicating aviation infrastructure, while also supporting more sustainable, transit-orientated development."
Rosli said infrastructure planning in Sabah has long suffered from a lack of coordination and prioritisation.
Basic amenities, reliable electricity, a clean water supply, and proper road networks remain inconsistent in many parts of the state.
He said these are not secondary concerns; they are a basic foundation for any meaningful economic expansion.
Rosli said without addressing these gaps, even the most ambitious transport projects risk operating in isolation, disconnected from the broader development needs of the state.
He said the issue is not simply about building more infrastructure but about building the "right" infrastructure in the right places at the right time.
"This requires a shift from politically driven, project-based planning to a more integrated, data-driven approach.
"Demand forecasting, land use planning, industrial policy, and transport strategy must all be aligned. Sabah stands at an important crossroads."
A rail system, if properly conceived, could be transformative; otherwise, it risks becoming yet another expensive symbol of misplaced priorities, he said.
"Railways are capital-intensive, long-gestation investments.
"If they are not aligned with real economic flows and future growth corridors, they risk becoming underutilised assets rather than catalysts for development."
Rosli said a planning mechanism must be put in place to study, analyse, plan and implement.
He said at present, there appears to be a mismatch between proposed rail alignments and Sabah's emerging industrial geography.
The state's primary industrial corridor is not between Kota Kinabalu and Sepaggar Bay.
Instead, future growth is increasingly concentrated along the Kota Kinabalu-Sipitang axis, particularly driven by oil and gas-related industries.
Rosli said Sipitang, anchored by the Sabah Oil and Gas Industrial Park, is being positioned as a major industrial hub, potentially playing a role similar to Bintulu in Sarawak.
This makes the case for infrastructure priority more clear: connectivity between Kota Kinabalu and Sipitang should be the backbone of any serious transport strategy, he said.
Sabah Rail Link Could Boost Connectivity, Industrial Growth
Wan Agyl Wan Hassan, founder and senior adviser at MY Mobility Vision, told "Business Times" that Sabah's proposed rail link has the potential to significantly improve economic connectivity, industrial competitiveness and logistics efficiency.
But the railway, he said, cannot function as a standalone project.
"If done properly, this rail link can make Sabah's economy more connected, more efficient, and more competitive."
However, success will not come from building the railway alone. It depends on whether the entire ecosystem around it is planned and delivered to work together, he said.
Wan Agyl said projects of this scale require long gestation periods.
From feasibility assessment to commercial operations, he estimates a timeline of eight to 12 years, depending on funding structures, regulatory approvals and execution quality.
He identified three major challenges that will likely determine whether the project progresses from concept to reality.
"The first is Sabah's terrain and construction complexity. Sabah's geography makes infrastructure projects more challenging.
"The west coast has limited space between the sea and mountainous areas, which makes building a rail line more complicated and costly.
"There are also risks such as landslides and environmental sensitivities that need careful planning."
The second and arguably more critical challenge is demand.
Wan Agyl rail systems require consistent freight and passenger volumes to remain economically viable. For freight operations, that means sufficient cargo moving regularly between industrial hubs and ports.
For passenger services, it requires commuters choosing rail over private vehicles.
"Right now, most people still rely on private vehicles, and freight is heavily dependent on trucks. This creates a practical challenge.
"The rail system is needed to attract more users and industries, but at the same time, there needs to be enough demand today to justify building it.
"If this is not handled carefully, there is a risk that the system could be underused, which would make it expensive to sustain."
To improve viability, Wan Agyl said the project would require strong participation from industrial players, seamless integration with port operations and efficient feeder systems, including buses and local transport links.
The third challenge is financing. Wan Agyl said rail infrastructure requires significant investment, often in the billions, and this will likely involve a combination of government funding and private sector participation.
However, funding alone is not enough. Rail systems only work when everything is connected properly, including trains, stations, ports and supporting transport services, he said.
He added that for investors, infrastructure sends an important signal about long-term economic commitment.
"For companies in manufacturing and logistics, this matters because they are making decisions that can last 20 to 30 years.
'They need to know that goods can move smoothly not just today, but well into the future.
For KKIP, this could be a turning point. The industrial park attracts considerable investment and employment but remains constrained by transport efficiency.
Wan Agyl said a dedicated rail connection could make the industrial zone substantially more attractive to manufacturers, logistics operators and investors seeking lower operational risk.
He added that rail lines also tend to create new growth areas along their route.
Beyond logistics, rail infrastructure often reshapes surrounding development patterns.
Commercial activity typically clusters around stations and logistics nodes, often catalysing new industrial parks, warehousing hubs and residential growth, he said.
"This is how infrastructure shapes development. It does not just support growth; it helps decide where growth happens."
Wan Agyl said Sabah may also stand to benefit from broader regional dynamics.
Sepanggar Port sits within the Brunei Darussalam-Indonesia-Malaysia-Philippines East Asean Growth Area (BIMP-EAGA), where stronger inland-port connectivity could enhance Sabah's role in regional trade and strengthen its attractiveness to foreign investors.
Still, he cautioned against expecting rail alone to become a silver bullet for investment.
"It is important to be realistic. Rail alone will not attract investment. It needs to be supported by proper industrial planning, reliable utilities, and a strong workforce.
'When all these elements come together, investment becomes more sustainable and more meaningful."
Meanwhile, he said the proposed rail corridor linking Putatan, KKIP and Sepanggar Port is not just about moving goods faster but also connecting three important parts of Sabah's economy.
"Sepanggar Port is where goods enter and leave the state.
"Kota Kinabalu Industrial Park is where many of those goods are produced or processed. Putatan and the surrounding areas are where people live and travel from.
"Today, these areas are mainly connected by roads, and those roads are already under pressure.
"Around 90 per cent of goods in Sabah are moved by trucks, which makes logistics costly, adds congestion, and puts strain on infrastructure."
He added that a rail link changes this in a very practical way.
"It can lower the cost of moving goods because trains carry much more cargo in a single trip.
"It can reduce congestion by taking heavy trucks off key roads, especially around port areas. It can also improve reliability, giving businesses more confidence that goods will arrive on time."
But the biggest impact is often overlooked, and that is the impact on people, he said.
Wan Agyl said if designed properly, the rail line can make it easier for workers to travel between residential areas like Putatan and job centres like KKIP.
"That means shorter and more predictable commutes and better access to employment.
"For businesses, it means a larger and more dependable workforce.
"So the impact is not just economic on paper. It is something people can feel in life through less traffic, better access to jobs and a more efficient system."
