The Malaysian government on Friday said that it has decided to resume a China-backed rail link project, after the Chinese contractor agreed to cut the construction cost by one-third.
The deal followed months of vacillating over the East Coast Rail Link, which is to connect Malaysia’s west coast to eastern rural states and is a key part of China’s Belt and Road Initiative.
It should also help bolster ties between China and Malaysia that were strained when Malaysian Prime Minister Mahathir Mohamad suspended the project after his election in May last year.
Photo: AP
The construction cost of the first two phases of the project would be cut to 44 billion ringgit (US$10.7 billion) from the original cost of 65.5 billion ringgit, the Malaysian prime minister’s office said in a statement.
It welcomed the signing of a supplementary agreement between Malaysia Rail Link Sendirian Bhd and state-owned China Communications Construction Co (中國交通建設) to revive the project.
“This reduction will surely benefit Malaysia and lighten the burden on the country’s financial position,” the statement said.
In Beijing, Malaysian chief negotiator Daim Zainuddin told Malaysian media that the rail link would be 40km shorter at 648km, but would remain a double-track line.
Daim was quoted by the New Straits Times newspaper as saying that the cost savings was a “big achievement.”
The lower cost also means that the government could save in terms of interest on a lower loan, he said.
The agreement is to bolster bilateral relations and encourage more Chinese companies to invest in Malaysia, he added.
Chinese Ministry of Foreign Affairs spokesman Lu Kang (陸慷) hailed the agreement.
“We are happy to see that the two sides have reached a settlement through friendly negotiation. I also hope that the two sides can resume the project construction as soon as possible,” he told reporters.
Mahathir’s government has axed or reviewed large-scale infrastructure projects to rein in surging national debt that it blames mostly on corruption in the previous government.
The government last year suspended work on the rail link pending renegotiations.
Mahathir initially suggested that the project would be called off, because the high cost could burden the nation with debt for decades, but he later said that negotiations were ongoing and the government had not made a final decision.
Mahathir’s administration has said that the final cost could balloon to more than 100 billion ringgit, but bids to terminate the project could pose a challenge to the government, which would have to pay compensation and risk angering China.
Apart from the rail link, the government last year also canceled two China-backed pipelines costing 9.3 billion ringgit after discovering that 90 percent of the project’s costs had been paid, but only 13 percent of work had been completed.
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