Malaysia, China agree to resume rail project after slashing cost

Reuters

Posted at Apr 12 2019 04:11 PM

Malaysia's Prime Minister Mahathir Mohamad reacts during an interview with Reuters in Langkawi, Malaysia March 28, 2019. Feline Lim, Reuters

KUALA LUMPUR -- Malaysia and China agreed on Friday to resume construction of a multi-billion dollar rail project, shaving nearly a third of the cost, after months of negotiations that strained ties between the two trade partners.

Prime Minister Mahathir Mohamad, who came to power after a stunning election victory in May, has vowed to renegotiate or cancel what he calls "unfair" Chinese projects authorized by his predecessor, Najib Razak.

The two sides have agreed to cut the cost of the 688-kilometer (430-mile) rail project to 44 billion ringgit ($10.7 billion) from the original 65.5 billion ($16 billion), Mahathir's office said in a statement.

"This reduction will surely benefit Malaysia and lighten the burden on the country's financial position," it said, adding that more details would be revealed on Monday.

In January, Reuters reported, citing sources, that contractor China Communications Construction Co Ltd (CCCC) had offered to nearly halve the cost to save the project, known as the East Coast Rail Line (ECRL).

In March, Malaysia's representative in the talks, Daim Zainuddin, said they could include commercial elements that would benefit the southeast Asian nation, but he did not elaborate.

Launched in 2017, the project to link Malaysia's east coast on the South China Sea with the busy waterway of the Malacca Strait on the west, has seen costs balloon amid a lack of transparency, threatening to saddle the country with uncomfortably large debt.