Malaysia cancels Beijing-backed pipelines, East Coast Rail Link

BEIJING — Malaysia has cancelled several multi-billion dollar projects awarded to Chinese firms, including an ambitious railway project at the heart of Beijing's Belt and Road infrastructure push in the South-east Asian country, Prime Minister Mahathir Mohamad said at the end of a five-day trip to China. 

Dr Mahathir told the Malaysian media in Beijing on Tuesday (Aug 21) that Chinese President Xi Jinping and other leaders "agreed" with Malaysia's stand.

“I explained to them why we cannot have the ERCL,” he said, referring to the East Coast Rail Link, a 688-km rail link that will connect the South China Sea off the east coast of peninsular Malaysia with the strategic shipping routes of the Straits of Malacca to the west.

“It’s all about borrowing too much money which we cannot afford, we cannot repay and also because we don’t need those projects for Malaysia at this moment,” he added.

“Later on when we need it we will restart, but at the moment the priority is for us to reduce our debt. That debt, if we are not careful, we can become bankrupt. That is the goal of Najib (former prime minister Najib Razak).”

Pressed on whether it is accurate to say that the ECRL has been cancelled, he replied: “For the moment yes. It will be deferred until such time when we can afford and maybe we can reduce the cost if we do it differently.”

He added that the negotiation of compensation and other issues will be handled by government officials.

The RM81 billion (S$27.16 billion)-project, awarded to China Communications Construction Company, was suspended weeks after Dr Mahathir defeated Najib in the May 9 election.

Dr Mahathir has also halted work on two projects worth more than US$2.3 billion (S$3.15 billion) awarded to the China Petroleum Pipeline Bureau that have been linked to graft at Malaysian state fund 1MDB.

In June, Malaysia's Finance Ministry said it has discovered dubious payments made in the two pipeline projects, with nearly 90 per cent of the contracts being paid out but less than 15 per cent of the work being completed.

Asked about the status of two pipeline projects on Tuesday, Dr Mahathir said: “Same (as ECRL). We do not find the need for those, they cost too much money and we cannot afford it. So we have to either cancel it or defer it to a later date.”

He said he did not discuss in details with the Chinese leaders about the projects but only raised Malaysia’s financing constraints, given that it has a debt of over RM1 trillion.

“They see our point of view. I explained to all the three leaders why we have to do this. And not one of them said no. They understand our problem, they understand why we have to reduce our debts,” said Dr Mahathir.

“I do not think China wants to see Malaysia bankrupt,” he added.

He gave the assurance that Sino-Malaysia ties are not affected by the cancellations, and said Beijing has in fact invited him for another visit in April next year.

“They did not say ‘why are you doing all these? We want to throw you out of China.’ Nothing. They even gave me 12 motorcycles to escort me.”

During his 30-minute interview, Dr Mahathir repeatedly criticised the Najib administration as “stupid” for entering into contracts and deals that his administration is now trying to untangle.

For instance, the ECRL and pipeline projects had no exit clauses so Malaysia has to pay out "huge sums" in compensation.

"If we have to pay, we have to pay," Dr Mahathir said.

"This is the stupidity of negotiations before. There must be exit clauses in all agreements and the exit clauses must be fair for both parties. But if we cancel now, we have to pay huge sums of money," he added.

“Such stupidity has never been seen in the history of Malaysia. But this is our own people's stupidity. You cannot blame the Chinese for that.”

He said that the government has not worked out the compensation for the ECRL and pipeline projects but they “will be substantial”.

“We will recover the money from Najib,” he quipped.

Since coming back into power, Dr Mahathir has said that his government will review, scrap or postpone major projects that his predecessor had taken on, including the High-Speed Rail (HSR) project linking Kuala Lumpur and Singapore.

The HSR project, first proposed by Malaysia in 2013, is a 350km line that would have slashed rail travel time between Singapore and Kuala Lumpur to 90 minutes.

Malaysia's Economic Affairs Minister Azmin Ali and Singapore’s Transport Minister Khaw Boon Wan met earlier this month to discuss the issue and are trying to find a "constructive way forward", said Prime Minister Lee Hsien Loong in his National Day Rally on Sunday.

Mr Lee added that Singapore had entered into the project "in good faith" after careful negotiations as it will benefit both countries and the agreement is legally binding, setting out terms that each party has to fulfil as well as the ramifications if either one wants to change or terminate the agreements.

On Tuesday, Dr Mahathir reiterated that the HSR project “is not necessary”.

He claimed that it was “planned for a distance of 220 km” but the high-speed train he just took in China travelled at 300km/h, which means one can travel from Kuala Lumpur to Singapore in less than an hour.

“So what is the savings in time? There’s no savings in time,” he said.

“For a High Speed Rail, you need a long distance, then you save time. If you have to travel for three hours, where before it was eight hours, then there is a savings of time of five hours," he added.

"But to travel from Singapore to Kuala Lumpur and save 15 minutes, we have to pay a lot of money, it will be very stupid.”  AGENCIES

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