East Coast Rail Link and pipeline projects with China to be deferred: Malaysian PM Mahathir

Malaysian PM Mahathir Mohamad said the East Coast Rail Link could not go on due to Malaysia's financial woes. PHOTO: BERNAMA

BEIJING - Two Chinese mega projects in Malaysia would be deferred, with Beijing's agreement, Prime Minister Mahathir Mohamad told a press briefing on Tuesday (Aug 21) at the end of a five-day visit to China.

He was referring to the US$20 billion (S$27 billion) East Coast Rail Line (ECRL) and two gas pipelines worth US$2.3 billion.

"It will be deferred until such time we can afford, and maybe we can reduce the cost also if we do it differently," Tun Dr Mahathir said.

"It's all about borrowing too much money which we can't afford, can't repay, and also we don't need those projects for Malaysia at this moment," he added.

Dr Mahathir, who returned as prime minister for the second time after the Pakatan Harapan coalition scored a historic win in a general election in May, has denounced what he called the profligate spending of the previous administration on big-ticket items such as the Chinese projects as well as a high-speed rail project with Singapore.

Dr Mahathir also wants to negotiate a deferment of the rail project with the Singapore Government. Transport Minister Khaw Boon Wan met Malaysia's Economic Affairs Minister Mohamed Azmin Ali this month on the issue and they agreed to continue discussions.

Dr Mahathir on Tuesday said he had explained to the Chinese his reasons for halting the projects and they understood and agreed.

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The Chinese Foreign Ministry at its regular press briefing, while not addressing the issue directly, said it was inevitable that there should be problems or different points of view in the bilateral cooperation.

"These issues should be resolved properly through friendly consultations and from the standpoint of the long-term development of friendship and bilateral relations between the two countries," said ministry spokesman Lu Kang.

He noted that China was now Malaysia's largest trading partner.

Dr Mahathir on Tuesday witnessed the signing of a memorandum of understanding between Malaysia's Sime Darby and China's Cofco on cooperation to develop downstream applications of palm oil.

Last Saturday, Chinese carmaker Geely signed a deal to expand Malaysian carmaker Proton's markets overseas, beginning with China.

South-east Asia expert Xu Liping of the Chinese Academy of Social Sciences said the broad direction of economic cooperation would not be hurt as China had many other projects in Malaysia and the foundation was strong.

But Mr Xu said compensation would have to be paid if projects were cancelled or deferred as losses were incurred, including dismissing workers. Alluding to this, Dr Mahathir on Tuesday said "we have to find a way to exit this (ECRL) project at (the) lowest cost possible".

The political impact of Malaysia's move would be minimal at the moment, said Associate Professor Li Mingjiang of the S. Rajaratnam School of International Studies.

Noting that China is facing challenges from major powers in the region such as the United States, Australia, India and Japan, he said Beijing needed friends and for regional states to at least stay neutral in this growing strategic rivalry.

Still, Mr Xu said, for the Chinese, this episode is a lesson that for such large investments, there is a need to pay attention to political risks.

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