Malaysia's Belt and Road railway project suspended

It wants to renegotiate terms, says costs higher than estimated

KUALA LUMPUR • The project owner of Malaysia's US$20 billion (S$27 billion) East Coast Rail Link has told its main Chinese contractor to suspend work, both companies said yesterday, raising uncertainty about the future of part of China's Belt and Road plan.

The 688km link would connect the South China Sea off the east coast of Peninsula Malaysia with shipping routes in the west and is a major part of China's infrastructure push across Asia and beyond.

The suspension comes as Malaysia seeks to renegotiate the terms of the deal with China.

Since a surprise election win in May, Malaysia's new government has pledged to cut the national debt, stamp out corruption and review major projects agreed by the scandal-plagued previous administration led by Najib Razak.

Financial news outlet The Edge first reported the halt in the project, referring to a letter sent from Malaysia Rail Link Sdn Bhd (MRL) to China Communications Construction Co (CCCC) that cited grounds of "national interest", among other reasons.

A spokesman for MRL confirmed the instruction.

CCCC said in a statement it regretted the suspension and was "upset and concerned" over the livelihood of its more than 2,250 local staff and other indirect hires.

CCCC said in a statement it regretted the suspension and was "upset and concerned" over the livelihood of its more than 2,250 local staff and other indirect hires.

"We respect and comply with Malaysian laws. Under the situation, we have no choice but to adhere to the suspension instruction," it said, adding that it hoped the suspension would be lifted as soon as possible.

Malaysian Finance Minister Lim Guan Eng has said he plans to visit China soon to renegotiate the terms of the deal.

He also said on Tuesday that the East Coast Rail Link would only become economically feasible if there was a drastic reduction in costs.

Completing Malaysia's biggest rail project as previously planned would cost US$20 billion, Mr Lim said, nearly 50 per cent higher than estimates under the previous government.

"We expect that the ECRL project will only become financially and economically feasible if there is a drastic price reduction of the project by the CCCC," Mr Lim said .

The new Malaysian government has also halted a rail project with Singapore.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 05, 2018, with the headline 'Malaysia's Belt and Road railway project suspended'. Print Edition | Subscribe