Malaysia Suspends Three China-Backed Infrastructure Projects

Malaysia Suspends Three China-Backed Infrastructure Projects”

Officials from Malaysia and China are in talks for Prime Minister Mahathir Mohamad to visit Beijing soon, two sources told Reuters, after Kuala Lumpur suspended China-backed projects worth more than US$20 billion (S$27 billion).

Global Construction Review reported that China's infrastructure diplomacy in Malaysia took a hit today when its government declared that the East Coast Rail Link (ECRL), which is being funded and built by Chinese entities, can only be viable with a "drastic" price reduction by the Chinese contractor involved.

China Communications Construction Co Ltd said late on Thursday it halted all work at the request of the project owner Malaysia Rail Link SDN BHD.

A flagship scheme of China's Belt and Road Initiative, the 688km East Coast Rail Link (ECRL) had been meant to connect Malaysia's west coast to rural northeastern states with 23 stations, and was initiated under the previous government of Najib Razak, who was this week charged with corruption.

He says he will raise the issue of the unfair terms of the Chinese contracts and Chinese loan.

The ECRL project came under criticism in recent times following the change of the Malaysian government in May.

A Malaysian Foreign Ministry source said both sides had yet to finalise dates, but Dr Mahathir was "looking forward to visiting China".

"Normally governments borrow at 3.0 percent and below, but this one is very high", he said.

The suspension came just a day after Malaysia Finance Minister Lim Guan Eng called for a sharp price reduction to the 428-mile East Coast Rail Link, after discovering that the project's actual cost is $20 billion (81 billion ringgit), almost 50 percent higher than what was estimated by the previous government.

The rail link connects Malaysia's west coast to rural eastern states and is largely financed by China.

He said the Najib government had paid about $2 billion, or 88 percent of the total value of the projects, despite being less than 15 percent complete.

Concerned over the country's finances, one of Mahathir's first acts was to scrap the $27.6bn high-speed railway between Kuala Lumpur and Singapore, which had been in the advanced planning stage.

Mahathir has ordered a review of mega-projects signed by Najib during his nine-year term in a bid to cut the country's national debt, estimated at $250 billion, and other liabilities.

Mr. Najib had been defeated in the May 9 elections and was charged with corruption over the 1MDB (1Malaysia Development Berhad) fund on July 4, 2018.

Lim said a report on the pipeline scandal would be filed with the Malaysian Anti-Corruption Commission, adding that he would "seek the assistance of the China government to help trace the flow of funds in China, in order to investigate the possibility of money laundering".

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