Malaysia scuttles major China rail project

Malaysia scuttles major China rail project

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The Malaysian government has decided to scrap the US$20-billion rail project being constructed and funded by China, explaining it is too costly.

The decision to cancel the project came after failed attempts to lower the construction cost, Malaysia’s Economic Minister Mohamed Azmin Ali said on January 26.

Azmin said Malaysia will cancel its East Coast Rail Link (ECRL) project with contractor China Communications Construction Co. (CCCC) due to the high annual interest rate, reported VNA.

According to the minister, in a meeting on January 24, the Malaysian cabinet decided to terminate the project because if it is continued, the country would have to pay around MYR500 million (over $120 million) each year in interest.

The finance ministry will determine how much to pay CCCC for the project cancellation fee, he said.

Early last week, the Malaysian government had laid down a maximum cost of MYR40 billion (nearly $10 billion) instead of $20 billion for the project and asked for more local products and services to be included in the works.

However, CCCC turned down these proposals, resulting in an end to the negotiations.

In 2017, CCCC won the right to construct the 688-kilometer rail project connecting Malaysia’s underdeveloped East Coast area to Kuala Lumpur and Thailand. About 85% of the cost of this project was covered by Export-Import Bank of China.

Following the official launch of the project in August 2017, engineering, procurement, construction, and commissioning works were suspended in July 2018.

The rail project, linking Port Klang in Selangor with Pengkalan Kubor in Kelantan, was to have been developed in two phases. The infrastructure project would have carried both passengers and freight from the West Coast of Peninsular Malaysia to its East Coast and vice versa.

Azmin said Malaysia still welcomes all forms of investment from China but will take into account Malaysia’s financial capabilities first. He said the Malaysian government has yet to decide on the new developer for the ECRL project, but will continue to evaluate new investment applications.

When the project was awarded to CCCC in 2016 by the previous government of Malaysia, observers hailed it as one of the cornerstones of Chinese President Xi Jinping’s “Belt and Road Initiative.”

Photo: N509FZ

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