BEIJING (Aug 21): East Coast Rail Link (ECRL) and the two pipeline projects will be cancelled for now due to the current government’s fiscal position. The Chinese government understands the rationale for the move, prime minister Tun Dr Mahathir Mohamad told the Malaysian media after he concluding his five-day official visit to China.
Malaysia will have to pay compensation for the cancellation. The compensation for the ECRL project “could be quite substantial”, Dr Mahathir said. The final sum will be negotiated soon.
The prime minister’s latest remark on the three projects of which China’s state-owned enterprises are involved, will end speculation that his official visit might raise hope that the new government would revive the projects that have been served stop work notice.
Also, it may ease concern that the project cancellation might anger the Chinese government, since building infrastructure across Asia to improve connectivity is part of its Belt and Road initiative.
“The projects will not go now, because we don’t need them at the moment. Our priority is reducing our debts, if we are not careful, we could be bankrupt,” Dr Mahathir said — a point that he has made since he being appointed as prime minister for the second time three months ago.
“The Chinese government, they see our point of view. I met three leaders here. No one of them says no. They understand why we don’t need (the projects),” he added.
Dr Mahathir met China’s president Xi Jinping, premier Li Keqiang and chairman of the Standing Committee of the National People’s Congress of China, Li Zhanshu yesterday (Aug 20).
“We must find an exit from the projects at lowest cost possible. We will have to pay compensation. This is our own people’s stupidity; we can’t blame the Chinese for that,” said Dr Mahathir when asked about compensation for cancelling the projects.
“This is stupidity of the negotiation before. There must be exit clauses in all agreements and the exit clauses must be fair for both parties.
“He (Datuk Sri Najib Razak) is the one…I never see a contract (like this before), that money (is) paid before the work (gets) done….What kind of stupidity of this, (you need) to pay on time, without any conditions that work must be done,” Dr Mahathir commented.
The money that has been drawn down from the loans extended to the three projects, is not in proportion to the work in progress. “So, we need (to) find out why the money (was) paid and no work done. All negotiation will be done by our people,” Dr Mahathir said.
“We will recover the money from Najib,” he added, when asked how the government would pay back the sum that has been drawn down.
The three projects, namely ECRL, multi-product pipeline in Malacca and Trans-Sabah Gas pipeline which were undertaken by the Barisan-Nasional government, have been under scrutiny after Pakatan Harapan gained controlled of Putrajaya.
The new government has put a stop work notice to the three projects, after they had discovered that the project costs have bloated to unjustified levels. Such high cost of infrastructure projects would further strain the country’s fiscal position.