China officials to visit Malaysia to revive scrapped rail project

Kyodo News

Posted at Feb 21 2019 11:23 PM

Malaysian Prime Minister Mahathir Mohamad is not keen on continuing a $20-billion railway project backed by Beijing, saying it's too costly.

KUALA LUMPUR - A team of Chinese officials will visit Malaysia this month to salvage a controversial $20 billion, Beijing-backed railway project that Malaysia at one point wanted to terminate due to its high cost, an adviser to the prime minister said in the Thursday edition of a local newspaper.

The 688-kilometer long East Coast Rail Link was one of the showpiece infrastructure projects under China's Belt and Road Initiative. Both sides hope for a resolution as Prime Minister Mahathir Mohamad is scheduled to head to Beijing in April for the Belt and Road Summit.

Construction of the rail link was launched in 2017 under the previous National Front coalition government before it was suspended when the Mahathir-led alliance overthrew the National Front coalition in last May's election.

Mahathir had said his government, as part of efforts to pare down the country's high debts, did not want to be burdened by the project, which he claimed was overpriced while also questioning some of the terms of the contracts.

But the government is caught between tackling its financial woes and risking its once-cozy ties with China, a major trading partner that has invested considerable sums in various other projects in this Southeast Asia country.

The ECRL is not the only Chinese-backed project that is being scrutinized by the Mahathir's government. Others under the financial microscope include a $2 billion gas pipeline project in Sabah in East Malaysia.

Adviser Daim Zainuddin, 81, a former finance minister and an influential aide of Mahathir, was tasked with negotiating with China on Malaysia's behalf. He had made few trips to Beijing before.

"We are still negotiating," Daim told the Chinese-language Nanyang Siang Pau. "They (the Chinese officials) are coming here this month. They invited me but I could not go so I invited them to come...They are the people in charge of the One-Belt-One-Road initiative."

In recent months, the Malaysian government has sent conflicting signals as to the status of the project, with ministers contradicting each other as to whether the rail link has been terminated or is still alive.

Asked by Nanyang Siang Pau whether he believed the negotiation can be settled by this month, Daim replied, "Hopefully. It's not that easy. It's very complicated. The less said the better. It's sensitive."

Earlier Thursday, Malaysia Finance Minister Lim Guan Eng told reporters the government is negotiating to bring the cost down "to an affordable level." He also described the ongoing talks as "positive."

The ECRL, originally was slated for completion in 2024, would have connected ports facing the South China Sea on the east coast of peninsular Malaysia to ports on the Straits of Malacca on the west coast over a distance of 688 kilometers.

Some 85 percent of the financing was being provided through a 20-year loan at 3.5 percent interest from the Export-Import Bank of China.