A multibillion-dollar China-backed rail project in Malaysia has been scrapped, government officials said yesterday, adding that the cost of building it was too high.
Malaysia has over the past few months suspended several major projects signed under the country’s previous scandal-plagued regime in a bid to cut the country’s massive 1 trillion ringgit (US$242.46 billion) debt.
Malaysian Minister of Economic Affairs Mohamed Azmin Ali said that Malaysia made the decision two days ago on the 81 billion ringgit east coast rail link (ECRL), which would have connected the eastern and western coasts of the peninsula.
“The cost of the ECRL development is too big, so we have no financial ability at this time,” he told reporters.
He said that if the project was not terminated, Malaysia would have to make 500 million ringgit annual interest payments.
The previous government under former Malaysian prime minister Najib Razak had warm ties with China and signed up to a string of Beijing-funded projects.
However, critics said that many of the deals lacked transparency, fueling speculation that they were made in exchange for help in paying off debts from a massive financial scandal involving state fund 1Malaysia Development Bhd (1MDB).
The scandal was a major factor in Najib’s shock electoral defeat in May last year, which saw his former boss Mahathir Mohamad return to power.
Mahathir then ordered a review of megaprojects signed by Najib during his nine-year term in office, saying that he would discuss “unfair” terms supposedly set in these deals and high interest rates levied on Chinese loans used to finance the projects.
Azmin did not say how much compensation Malaysia would have to pay for cancelling the project.
The costs would be determined by the Malaysian Ministry of Finance, he said.
Najib and his cronies were accused of plundering billions of US dollars from 1MDB, with the former leader charged with corruption over the scandal.
He is to stand trial over the charges next month, but has denied any wrongdoing.
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