Malaysia revives China-backed rail link after cost cut

Updated April 13, 2019

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KUALA LUMPUR: Mala­ysia’s government said on Friday it has decided to resume a China-backed rail link project, after the Chinese contractor agreed to cut the construction cost by one-third.

The deal follows months of vacillating over the East Coast Rail Link, which connects Malaysia’s west coast to eastern rural states and is a key part of China’s Belt and Road infrastructure initiative.

It should also help bolster ties between China and Malaysia that were strained when Prime Minister Mahathir Mohamad suspended the project after his election last May.

The prime minister’s office said in a statement that the construction cost of the first two phases of the project will be cut to 44 billion ringgit ($10.7 billion), down from the original cost of 65.5 billion ringgit ($15.9 billion).

It welcomed the signing of a supplementary agreement between Malaysia Rail Link Sendirian Berhad and state-owned China Commu­nications Construction Com­pany Ltd. to revive the project.

“This reduction will surely benefit Malaysia and lighten the burden on the country’s financial position,” the statement said.

In Beijing, Malaysian chief negotiator Daim Zainuddin told Malaysian media that the rail link will be 40 kilometres (24.8 miles) shorter at 648 kilometres (402.6 miles) but will remain a double-track line.

Daim was quoted by the New Straits Times newspaper as saying the cost savings was a “big achievement.” The lower cost also means the government can save in terms of interest on a lower loan, he said.

He said the agreement will bolster bilateral relations and encourage more Chinese companies to invest in Malaysia.

A Chinese Foreign Ministry spokesman, Lu Kang, hailed the agreement.

“We are happy to see that the two sides have reached a settlement through friendly negotiation. I also hope that the two sides can resume the project construction as soon as possible,” he told reporters.

Mahathir’s government has axed or reviewed large-scale infrastructure projects to rein in surging national debt that it blames mostly on corruption in the previous government.

Published in Dawn, April 13th, 2019