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  HOME | Business & Economy (Click here for more)

Malaysia Cancels China Sponsored Railway Link Project

KUALA LUMPUR – The government of Malaysia announced on Saturday its decision to cancel a $20-billion railway link project that was being built and financed by China.

Official news agency Bernama reported that the decision to scrap the East Coast Rail Link construction plan was taken after attempts by the government to bring down the high project cost failed.

The railway link was being built by China Communications Construction Company as part of Beijing’s Belt and Road Initiative and some 85 percent of the project cost was to be financed by the Export-Import Bank of China.

Minister of Economic Affairs Azmin Ali said a review of the costs involved showed that the project exceeded the government’s financial capabilities.

“If the project is not terminated, the government will have to bear the interest rate of about RM500 million a year,” said Ali.

“Therefore, the project needs to be terminated without affecting relations with China,” he said.

The Ministry of Finance will now decide on an appropriate compensation for the cancellation to the Chinese company that will not burden the country economically.

Bernama also quoted Ali as saying that the government had still not decided on the new developer for the railway link project but would continue studying new investment applications.

“We always evaluate all new applications for investment in Malaysia, not only ECRL, because we want to maintain foreign direct investment (FDI) inflows,” he said.

The 688-kilometer (428 miles) ECRL, a standard gauge railway link, was planned to connect Port Klang on the Straits of Malacca to Pengkalan Kubor in northeast Peninsular Malaysia which borders Thailand.

It is designed to carry both passengers and cargo to and from west coast of Peninsular Malaysia to its east coast.

The project was awarded to the Chinese company in 2016 by the government of former prime minister Najib Razak, who faces several lawsuits on corruption charges, and has been under review since he lost the elections in May last year to his former mentor, Mahathir Mohamad, serving as the current Malaysian Prime Minister.

Mahathir has been critical of some China-backed infrastructure investment deals, saying his country could not afford them and has been calling them unfair.

 

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