Malaysia’s Mahathir: green light for China-backed East Coast Rail Link – if price is right

Malaysian Prime Minister Mahathir Mohamad said on Thursday he would give the green light to the China-backed East Coast Rail Link project he had previously wanted to dump – but only if the Chinese contractor agreed to a significant price reduction.
Doing so could be cheaper than cancelling the project, which would incur a hefty penalty, the prime minister told the South China Morning Post in his first interview with foreign media this year.
Soon after his election victory last May, Mahathir had said the 688km rail link – to have cost some 55 billion ringgit (US$13 billion) – needed to be cancelled because it was unnecessary and too expensive given the huge sovereign debt his predecessor Najib Razak had saddled the country with.
In the ensuing 10 months his government has given conflicting signals on the project. Earlier this year Mahathir walked back comments by his Economic Affairs Minister Azmin Ali who had told the media the cabinet had made a final decision to cancel the project.
Mahathir said that negotiations with the contractor, China Communications Construction Company (CCCC), were continuing with involvement from both governments.
Since Azmin’s comments, all officials except Mahathir have been barred from publicly commenting on the talks.
The top negotiator on the Malaysian side is Daim Zainuddin, Mahathir’s long-time confidante and a former finance minister.
Pressed by the Post about the nature of the negotiations, Mahathir – who is in Manila for talks with President Rodrigo Duterte – said it was “going to be very difficult” to come to a resolution soon.
“Naturally, the Chinese do not want to stop the project because it is a big project. I think it is good for their business,” Mahathir said.
“On the other hand, we don’t have the money. We don’t want to borrow so much money. So there is an ongoing negotiation. If it must go on, the price must be affordable to us.”
Pushed on whether he would accept the project if the cost were slashed by half – a price bandied about by his colleagues previously – or by two-thirds, he declined to say more.
When asked if he had a price point in mind, Mahathir said: “Yes, there is. But I cannot reveal it to you.”
Pressed on whether he would give the green light to the project were that price met, the 93-year-old demurred: “Well, because we know that you can’t terminate unilaterally a contract. You have to pay compensation.
“The compensation can be very big. Between having to pay compensation if you stop and carry on if the price is reduced, will be something that we will consider to see which one is best.”
Earlier this week he told local media the government had paid 200 million ringgit in interest payments relating to the project even though it had been put on hold since last July.
Mahathir told the Post that while “we would like to stop [the project] … but to stop means we have to pay compensation, big compensation”.
“So there is a need for us to weigh which one is the best way to go.”
The prime minister also reiterated why he took a dim view of the project, listing factors including the sparse populations of the areas the railway would serve, the concentration of businesses in the east rather than the west coast of peninsular Malaysia, and the fact that even the heavily used east coast railways were not profitable.
He said: “The ROI [return on investment] is nothing. It will take 40, 50 years for us to repay the loan. So we want to avoid incurring debts, borrowing too much from countries.”
Mahathir’s officials have previously said they believe Najib struck deals for the projects as a quid pro quo for Chinese state companies’ purchase of assets from the scandal-tainted 1MDB state fund when its losses were first made public in 2015.
Najib, who has pleaded not guilty to all the criminal charges brought against him in relation to the scandal, has challenged Mahathir to make public the terms of the ECRL contract with CCCC, which he characterises as favourable.
Apart from CCCC, other major players involved in the ECRL include the Chinese Export Import Bank, which was to finance 85 per cent of the project.
This article appeared in the South China Morning Post print edition as: Malaysian premier ready to cut rail deal with China

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