Malaysia's Mahathir to visit China over lopsided projects

Howard TerryJul 07, 2018

East Coast Rail Link will connect the South China Sea in the east coast of Peninsula Malaysia with strategic shipping routes in the west and is a major part of China's infrastructure push across Asia and beyond.

Najib's close relationship with China, which has been pouring billions of dollars into Malaysian infrastructure and real estate, has now come under the spotlight.

Yesterday, Finance Minister Lim Guan Eng had announced that the ECRL cost is actually RM81 billion and in order for the project to proceed, costs must be reduced first.

The government also says it will halt pipeline projects.

Najib is under investigation for alleged theft and money-laundering at the 1MDB state investment fund, and has been barred from leaving the country.

Song Seng Wun, a regional economist with CIMB Private Banking, said the latest suspensions could prompt some investors to hold back.

According to the Financial Times, Malaysia Rail Link, the government company supervising the East Coast Rail Link, sent letters to CCCC and CPPB on Wednesday, informing them of the project's suspension due to excessive costs. It has urged Mahathir's government to "honor and respect" the contract signed by Najib's administration.

CCCC said no duration was given for the suspension and that it could spark additional costs, locsses, and damages.

"We hope to reduce costs a lot, because of a lot of wrong things [are] being done", he said at a news conference in June, referring to the East Coast Rail Link and the billions Malaysia would have to borrow from China to finish it.

Prime Minister Mahathir Mohamad, who took office May 10 after his Pakatan Harapan coalition scored an election upset over Najib's Barisan Nasional coalition, has been an outspoken critic of Malaysia undertaking projects that require borrowing from China.

"The terms are very damaging to our economy", he said at the time. "Under the situation we have no choice but to adhere to the suspension instruction", it said.

"We expect that the ECRL project will only become financially and economically feasible if there is a drastic price reduction of the project by the CCCC", Lim said in a statement. In May, Mahathir postponed plans to build a high-speed rail link between Singapore and Malaysia, which had been agreed on several years ago, saying it was too costly.

In addition to the ECRL, the finance ministry yesterday confirmed that two pipeline projects awarded in 2016 to China Petroleum Pipeline Bureau, together worth $2.3bn (9.4 billion ringgits), had also been suspended, The Edge Markets reports.

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