Malaysia would have faced a US$5 billion penalty if a China-backed rail project was axed entirely, Malaysian Prime Minister Mahathir Mohamad said yesterday, after a deal was reached to revive the controversial scheme.
Malaysia and China on Friday agreed to push ahead with the railway at a 30 percent lower cost, lifting a suspension slapped on the project when a corruption-plagued regime lost power last year.
It was among several Beijing-financed deals in the Southeast Asian nation put on hold after the change of government, amid concerns they lacked transparency and were aimed at funneling cash to the administration of former Malaysian prime minister Najib Razak.
The 640km east coast rail link would run from northern Malaysia, near the Thai border, to a port outside Kuala Lumpur, and is seen as a key project in China’s Belt and Road Initiative.
Announcing further details yesterday, Mahathir said that the government “was faced with the choice to either renegotiate or pay termination costs of about 21.78 billion ringgit [US$5.3 billion], with nothing to show for it.”
“As such, we chose to go back to the negotiating table and call for a more equitable deal, whereby the needs of the Malaysian people would be prioritized,” he said.
He also announced that the main Chinese company in the scheme, China Communications Construction, had agreed to help with operation and maintenance of the line, which would ease the financial burden on Malaysia.
Under the new agreement announced on Friday, the project cost has been reduced to 44 billion ringgit.
Malaysia would still need to take a loan from a Chinese state-owned bank to fund the line, but it would be less than under the original deal.
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