Malaysia revived China railway to avoid USD$5B penalty

KUALA LUMPUR (AFP) – Malaysia would have faced a USD5-billion penalty if a China-backed rail project was axed entirely, the Malaysian Prime Minister said yesterday, after a deal was reached to revive the controversial scheme.

Last week Malaysia and China agreed to push ahead with the railway at a 30-per cent lower cost, lifting a suspension slapped on the project when a corruption-plagued regime lost power last year.

It was among several Beijing-financed deals in the Southeast Asian country put on hold after the change of government, amid concerns they lacked transparency and were aimed at funnelling cash to the administration of ex-leader Najib Razak.

The 640-kilometre east coast rail link will run from northern Malaysia, near the Thai border, to a port outside Kuala Lumpur, and is seen as a key project in China’s Belt and Road infrastructure drive.

Announcing further details yesterday, Prime Minister Tun Dr Mahathir Mohamad said that the government “was faced with the choice to either renegotiate or pay termination costs of about RM21.78 billion with nothing to show for it.

“As such, we chose to go back to the negotiating table and call for a more equitable deal, whereby the needs of the Malaysian people would be prioritised.”

He also announced the main Chinese company in the scheme, China Communications Construction Company, had agreed to help with operation and maintenance of the line, which would ease the financial burden on Malaysia.

Under the new agreement announced last week, the project cost has been reduced to RM44 billion.

Malaysia will still need to take a loan from a Chinese state-owned bank to fund the line but it will be less than under the original deal.

Rail Link Sdn Bhd’s Public Relations Officer Ani Azureen Zainuddin points out the route of the East Coast Rail Link (ECRL) project after a press conference by Malaysian Prime Minister Tun Dr Mahathir Mohamad on the project at Perdana Putra Building yesterday. – BERNAMA