Malaysia revived China-backed railway to avoid $5 billion penalty: PM

Published April 15, 2019
Malaysian Prime Minister Mahathir Mohamad speaks during a press conference in Putrajaya, Malaysia on Monday. — AP
Malaysian Prime Minister Mahathir Mohamad speaks during a press conference in Putrajaya, Malaysia on Monday. — AP

Malaysia would have faced a $5-billion penalty if a China-backed rail project was axed, the prime minister said on Monday, 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 in Malaysia last year.

It was among several Beijing-financed infrastructure initiatives put on hold after the change of government, as new leaders sought to reduce a mammoth national debt and amid concerns of corrupt dealings under the administration of ex-leader Najib Razak.

Malaysia and China's agreement to restart the project at a reduced cost of 44 billion ringgit ($10.7 billion) — inked in Beijing on Friday — could help improve ties which had been strained since Najib, a close Beijing ally, was ejected from power.

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 on Monday, Prime Minister Mahathir Mohamad said that the government “was faced with the choice to either renegotiate or pay termination costs of about 21.78 billion ringgit ($5.3 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 that the main Chinese company in the scheme, China Communications Construction Company, would form a joint venture with a Malaysian firm to help operate and maintain the line, which would ease the burden on Malaysia.

The Chinese firm had agreed to refund one billion ringgit from a 3.1 billion ringgit advance payment previously paid by Malaysia towards the project, he said. The route of the line has been altered so it would pass through five states, instead of four, to allow more parts of the country to benefit from the railway, Mahathir said.

The completion date had been pushed back to 2026, from 2024 under the original agreement. 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.

Mahathir, 93, returned for a second stint as premier in May last year after he led a reformist alliance to a surprise victory at the polls, toppling Najib's coalition which had been in power for over six decades.

Najib has since been slapped with dozens of charges over his alleged role in looting state fund 1MDB, and went on trial over the scandal this month.

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Military option
Updated 21 Nov, 2024

Military option

While restoring peace is essential, addressing Balochistan’s socioeconomic deprivation is equally important.
HIV/AIDS disaster
21 Nov, 2024

HIV/AIDS disaster

A TORTUROUS sense of déjà vu is attached to the latest health fiasco at Multan’s Nishtar Hospital. The largest...
Dubious pardon
21 Nov, 2024

Dubious pardon

IT is disturbing how a crime as grave as custodial death has culminated in an out-of-court ‘settlement’. The...
Islamabad protest
Updated 20 Nov, 2024

Islamabad protest

As Nov 24 draws nearer, both the PTI and the Islamabad administration must remain wary and keep within the limits of reason and the law.
PIA uncertainty
20 Nov, 2024

PIA uncertainty

THE failed attempt to privatise the national flag carrier late last month has led to a fierce debate around the...
T20 disappointment
20 Nov, 2024

T20 disappointment

AFTER experiencing the historic high of the One-day International series triumph against Australia, Pakistan came...