Malaysia deepens austerity drive by cutting transit project cost

File photo showing the skyline of Kuala Lumpur, Malaysia, on May 8, 2018. PHOTO: ST FILE

KUALA LUMPUR (BLOOMBERG) - Malaysia intensified its efforts to rein in spending by reducing the cost of an almost US$14 billion (S$19.4 billion) mass rapid transit project, as Prime Minister Mahathir Mohamad reviews programmes he says his predecessor kicked off under unfair terms.

The Finance Ministry shaved 5.22 billion ringgit (S$1.74 billion) from the above-ground portion of the nation's MRT2 project, accepting a new construction tender by the MMC-Gamuda consortium, it said in an e-mailed statement on Sunday (Oct 7).

The government has not firmed up a deal for the underground portion, which will be offered in another tender, it said.

The South-east Asian nation has been grappling with debt and liabilities exceeding 1 trillion ringgit, and state revenue curbed by the removal of a sweeping consumption tax that was replaced with a more selective levy. Since Tun Mahathir swept into power in May, he has reviewed billion-dollar infrastructure projects, and cancelled or deferred many of them due to budget constraints.

The MRT2 is set to connect Putrajaya, where the government is based, to Sungai Buloh in the north of the nation's capital Kuala Lumpur.

The project was initially earmarked to cost about 28 billion ringgit, but the budget ballooned to 56.93 billion ringgit following a plan to extend a line to Bandar Malaysia, which the previous government sought to develop as a transportation hub.

The government holds "steadfastly to obtaining value for money" on all public expenditure, "especially when large borrowings are required", Finance Minister Lim Guan Eng said in the statement on Sunday.

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