Malaysia's Finance Minister Lim Guan Eng says gag order in place while East Coast Rail Link is still being negotiated

The 688km railway line was suspended last July by the PH coalition after it took over the government amid criticism over the project's high cost. PHOTO: ST FILE

PETALING JAYA (THE STAR/ASIA NEWS NETWORK) - The Malaysian Cabinet has issued a gag order while negotiations with the Chinese contractor of the multi-billion-dollar East Coast Rail Link project are ongoing, Finance Minister Lim Guan Eng said on Wednesday (Jan 30).

Mr Lim said Cabinet had a meeting on Wednesday to discuss the matter, after which a decision was made that only Prime Minister Mahathir Mohamad would speak on the matter.

"This is a G2G (government-to-government) discussion, and it should be held away from the public glare," he told a press conference at the Finance Ministry. "The official statement will be released when it is ready. And no other ministers are allowed to make any statements on the matter, but the Prime Minister," he said.

The Straits Times reported last week that the government had cancelled the original contract with the state-owned China Communications Construction Company (CCCC). The Malaysian government is said to be seeking to halve the estimated project cost to RM40 billion.

There had been conflicting statements over the past few days on the status of the controversial RM81 billion project (S$27 billion), which was meant to link the east and west coasts of Peninsular Malaysia and was approved by the previous Barisan Nasional (BN) administration in October 2016.

The 688km railway line, however, was suspended last July by the Pakatan Harapan coalition after it took over the government, amid criticism over the project's high cost.

Some 15 per cent of the project, to span across four states, was completed by that point.

Last Saturday, Economic Affairs Minister Azmin Ali was quoted as saying that the Cabinet had decided to cancel the project. But Mr Lim said hours later that he was "shocked" by the announcement.

On Tuesday, Tun Mahathir said that the government had not made a decision yet on the project and that negotiations were ongoing.

While he did not confirm the project's cancellation, Dr Mahathir said that the compensation for cancelling the ECRL project would be significantly lower than the debt the government would have to pay for the next 30 years if it was continued.

Meanwhile, industry sources told The Star the Chinese company is said to be still holding out for an amicable solution amid uncertainty surrounding the project's future.

The sources said news of the project's supposed termination had shocked CCCC, as it had acceded to a lot of the demands made by the new PH government. This, they said, included even sharing the operational costs of the project post-construction.

In the re-negotiations, the CCCC had also agreed to allow 40 per cent to 50 per cent local participation, from 30 per cent previously, sources said.

In what was perhaps the biggest feat, the sources said the Chinese company had also agreed to share the operational and financing risks once the project is completed, sources said.

This is opposed to the CCCC's initial role only as a contractor, which would see it building the rail line and then handing it over to asset owner Malaysia Rail Link.

According to sources, given that the CCCC had conceded so much in the re-negotiations, it is not taking talk of the possible termination lightly. Some of them believe the Malaysian government is now weighing how to do this diplomatically.

However, they said that in its mitigating letter, the CCCC was still open to resolving the issue amicably.

Join ST's Telegram channel and get the latest breaking news delivered to you.