New East Coast Rail Link deal eases 'debt trap' concerns for Malaysia, says Mahathir

Under the new deal, local participation in civil works of the key land bridge in Beijing's Belt and Road initiative has also been increased from 30 to 40 per cent.

PUTRAJAYA - China has not just reduced the fee for the East Coast Rail Link (ECRL) to RM44 billion (S$14.4 billion), but also agreed to a 50-50 joint venture to operate the 640km line across Peninsular Malaysia, reducing Kuala Lumpur's financial risks.

Prime Minister Mahathir Mohamad revealed this on Monday in a press conference, where he called the reduction from an original RM66 billion deal signed by the ousted Najib Razak administration "a solution to our concern" about the so-called Chinese debt trap.

"It is a considerable saving for us. The interest payment will be far less," he said, in a reference to the government's claim that taxpayers would have had to shell out RM81 billion in total for the double-tracked rail.

Under the new deal, local participation in civil works of the key land bridge in Beijing's Belt and Road initiative has also been increased from 30 to 40 per cent. An official Malaysian source told The Straits Times that the joint venture to operate the line will see both firms sharing any losses, but "the profit will be 80-20 to us".

According to a statement issued by Tun Dr Mahathir, the original RM56.7 billion loan obtained from China's Exim Bank would be reduced "and we envisage that this will result in lessening... the principal repayment amount, total interest costs and other fees".

Dr Mahathir, however, refused to confirm if the initial fee agreed by the Barisan Nasional (BN) government that was defeated in last year's general election, was inflated to include a bailout of the troubled 1MDB controlled by Najib.

"We suspect that was what happened because the price was so high and we can reduce by RM22 billion. This was a lump sum given to a company from China through a direct award," he said.

The premier revealed that Malaysia could not afford to terminate the agreement, as a compensation of RM21.78 billion would have to be paid to Beijing. The new pricing instead sees the cost per kilometre dropping to RM68.7 million from the earlier RM95.5 million.

Dr Mahathir also said that while there was no direct link between the ECRL and other bilateral issues, "we are taking advantage of signing the agreement to work out the purchase of palm oil by China. That will happen".

Last Friday, China Communications Construction Company (CCCC) inked a supplementary agreement with Malaysia Rail Link (MRL) - the ECRL project owner - which paves the way for the resumption of the line that joins up the ports of Klang in the west to Kuantan in the east, before heading north along the east coast towards Kota Baru, the capital of Kelantan. According to MRL, suspended works could resume as early as next month, with completion expected by the end of 2026.

The new alignment will be shortened from the 688km planned earlier and have eight fewer stops, although a source revealed that an additional station has been proposed for Shah Alam, the capital of Selangor.

The path now avoids the previous plan to cut through the Klang Gates Quartz Ridge in Gombak, Selangor, the world's longest pure quartz dyke which the government is proposing as a Unesco heritage site.

Instead, it will now travel south via Negri Sembilan, reducing tunnelling and adding integration to existing rail networks such as the MRT, the Express Rail Link to the Kuala Lumpur International Airport, and also the Malayan Railways intercity service.

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