KUALA LUMPUR (THE STAR/ASIA NEWS NETWORK) - The Malaysian government's review of the East Coast Rail Link (ECRL) is not confined to construction costs only, but also to the viability of maintaining the rail network, said Finance Minister Lim Guan Eng.
"It must be noted that even if the rail project is completed, the operational cost will be very high to cover the project cost," he said.
"Don't even talk about capital expenditure, as we can't even cover the operational cost, which is estimated to be RM600 million (S$202 million) to RM1 billion annually," Mr Lim said when replying to a supplementary question by Mr Thomas Su Keong Siong in Parliament on Wednesday (Aug 15).
Mr Lim said operational cost is another crucial factor why the government decided to review the ECRL project.
"This is a huge issue, and it is clear why a review is needed to avoid the government being straddled with a huge debt. It is a mega project that will result in a mega debt," he added.
Mr Lim informed lawmakers that negotiations between the government and Chinese project contractor, China Communications Construction, are still ongoing.
Although there had been some headway in negotiations, following Prime Minister Mahathir Mohamad's special representative Daim Zainuddin's recent visit to China, Mr Lim noted that no common point had been reached between the parties.
"The viability and feasibility of the project remains the biggest question," he stressed.
Earlier, when answering a question by Datuk Seri Ismail Abd Muttalib, Mr Lim assured that the government would adhere to the provisions under the Land Acquisition Act for land that had been acquired for the ECRL.
On the fate of project staff who were retrenched, Mr Lim said the government would assist only locals affected following the suspension of the project.
He said the government decision to suspend the project and issue an immediate stop-work order on July 3 followed the advice from the Attorney-General.
He said this was done to avoid the government having to make progressive payments to the Chinese contractors.
Mr Lim told the House that the actual cost of completing the project is RM80.92 billion and not RM55 billion as announced by the previous government.
So far, the government, through project owners Malaysia Rail, had paid RM19.68 billion to China Communications Construction as progressive payment for completing 15 per cent of the project, said Mr Lim.
The 688km ECRL project was launched on Aug 9, 2017, and was scheduled for completion in 2024.
Under the project, Malaysia raised RM55 billion from China, with 85 per cent of the loans provided by the Export-Import Bank of China and 15 per cent by Islamic bonds.
The first phase of the project was to connect Gombak and Tumpat in Kelantan, while the second phase links Gombak and Port Klang.
It is estimated that some 1,000 employees out of 2,250 had been laid off after the project was suspended in early July.