Malaysia's East Coast Rail Line will proceed only if $27.4b cost is cut drastically: Minister

Finance Minister Lim Guan Eng had earlier said it would not make sense to cancel the project as the government had already spent RM20 billion on it.
Finance Minister Lim Guan Eng had earlier said it would not make sense to cancel the project as the government had already spent RM20 billion on it.PHOTO: REUTERS

KUALA LUMPUR - Malaysia will not proceed with the East Coast Rail Line (ECRL) project with China unless its RM81 billion (S$27.4 billion) price tag can be substantially reduced.

"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," said Finance Minister Lim Guan Eng in a statement on Tuesday (July 3), referring to the project's main contractor, China Communication Construction Company.

He said the ministry will be holding discussions to cut costs with contracting parties.

According to Mr Lim, while nearly RM20 billion has already been spent to build the railway spanning Peninsular Malaysia's east and west coasts, about half of this amount can be recouped if the project is cancelled, by redeeming an advance payment bond.

"In the event of a worst-case scenario, the federal government can recover RM10.02 billion of the RM19.68 billion paid," he said.

Mr Lim had earlier said it would not make sense to cancel the project as the government had already spent RM20 billion on it.

The ECRL, a project inked in 2016 by the former Najib Razak administration, is meant to link the country's main Port Klang in Selangor to the border town of Pengkalan Kubor in Kelantan. The so-called land bridge was touted as a game-changer, altering regional trade routes which currently ply between the busy Strait of Malacca and the South China Sea via Singapore.

 
 
 
 

The railway, originally estimated to cost RM55 billion, is one of several mega projects being reviewed by the new Pakatan Harapan government as it grapples with more than RM1 trillion in national debt.

Mr Lim said on Tuesday that the total cost of the ECRL is actually RM81 billion, after taking into account land acquisition, interest, fees and other operational costs. Construction costs alone form the bulk of the total sum, at RM66.78 billion.

The railway is also not expected to cover its operating costs, though the extent of operating deficit cannot be determined for now, he said.

He also noted that the Selangor government had not been consulted on the project, which could jeopardise the state government's application to have the Klang Gates Quartz Ridge, the longest of its kind in the world, as a Unesco World Heritage Site.