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China offered to halve cost of Malaysia's $27b rail project: Report

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China offers to halve cost of $27b rail project authorised by previous PM Najib, but conflicting official remarks leave outcome in doubt

KUALA LUMPUR: China offered to nearly halve the cost of a US$20billion (S$27 billion) rail project to save the centrepiece of its infrastructure push in South-east Asia, two sources told Reuters yesterday, but contradictory remarks by Malaysian ministers leave the outcome uncertain.

The conflicting statements made over the past week on the status of the East Coast Railway Link (ECRL) underscore the political and diplomatic challenges facing the government of Prime Minister Mahathir Mohamad in renegotiating the contract.

"If it was just about the cost, China has offered a big reduction on the cost, as much as around half," one of the sources privy to the talks told Reuters.

Contractor China Communications Construction Co Ltd (CCCC) had offered to cut construction costs of RM 67 billion ($22 billion) for the 688-km project by as much as half, the sources said.

Expenses on interest and land acquisition help make up the rest of the total cost.

Despite the proposed discount, Mahathir's government decided to cancel the contract this month, said the sources, who asked not to be identified because of the sensitivity of the topic.

After coming to power in May, Dr Mahathir, a critic of China's investments in Malaysia, vowed to renegotiate or cancel what he calls "unfair" Chinese projects authorised by his predecessor Najib Razak, and suspended the ECRL in July.

However, on Wednesday, Finance Minister Lim Guan Eng said Malaysia was pursuing more talks with China, Reuters reported.

That news came days after another minister said the cabinet had decided to terminate the contract and a day after Dr Mahathir sought China's understanding over the planned cancellation.

Negotiations have continued since the July suspension, with Malaysia indicating that it was looking for cheaper proposals on what would have been China's biggest Belt and Road venture in South-east Asia.

The sources also said negotiations had been complicated by the involvement of too many Malaysian officials.

Apart from the finance ministry, CCCC and its domestic partner Malaysia Rail Line (MRL) have also had to present their proposals to Dr Mahathir's long-time adviser Daim Zainuddin, among other government officials.

"Each has their own agenda and looks at the project's a very peculiar situation," one of the sources said.

Mr Daim led the now-disbanded advisory council formed soon after Dr Mahathir came to power. His office declined to comment.

The Malaysian finance ministry directed queries to the prime minister's office, which did not immediately respond to questions.

MRL and CCCC declined to comment.

In Beijing, foreign ministry spokesman Geng Shuang said this week he had seen the reports of the cancellation but was unaware of the specifics.

In a separate development, Malaysia has remitted to Singapore $15 million as payment for the abortive costs the Republic incurred as a result of the Kuala Lumpur-Singapore High-Speed Rail (HSR) project being suspended, The Straits Times reported.

Singapore's Ministry of Transport (MOT) said in a statement yesterday that it has received confirmation from the Malaysian government, through diplomatic correspondence, that the reimbursement has been made.

The amount was agreed on in September 2018, when both countries inked a deal to suspend the HSR project for about two years, up to May 31, 2020.

The reimbursement was to be made by the end of this month.