Wed, Jul 04, 2018 - Page 6 News List

Malaysia seeks sharp cuts in China-backed rail link


The Malaysian government yesterday said that a major China-backed rail link project can only be viable with a “drastic” price reduction by the Chinese contractor as the actual cost of the venture is 81 billion ringgit (US$20 billion).

The 688km East Coast Rail Link (ECRL) is a key part of China’s Belt and Road Initiative. It would connect Malaysia’s west coast to rural eastern states.

It is largely financed by China and the main contract was awarded in 2016 to the China Communication Construction Co (CCCC) by former Malaysian prime minister Najib Razak, who was defeated in May 9 elections.

Malaysian Minister of Finance Lim Guan Eng said that the project’s final cost, which is nearly 50 percent higher than that estimated by the previous government, includes land acquisition, interest, fees and other operational costs.

The 81 billion ringgit does not include operating costs, he said.

“We expect that the ECRL project will only become financially and economically feasible if there is a drastic price reduction of the project by the CCCC. Discussions on cost will be held with the contracting parties and others involved in the project,” Lim said in a statement.

The government has given CCCC 10 billion ringgit in advance payment and 9.67 billion ringgit as a progress payment.

The advance payment can be recovered in a “worst -case scenario” if the project is withdrawn, he added.

Malaysia’s new government has axed a high-speed rail line to Singapore because it is too costly and is reviewing other large infrastructure projects financed by China.

The cost-cutting came after officials revealed the national debt has surged sharply, partly due to corruption under Najib’s rule.

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