Malaysia finally scraps $3 billion China-backed pipeline plans

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SINGAPORE (Sept 10): Malaysia has finally scrapped three China-backed pipeline projects after halting work on them following the shock elections in May that saw an opposition alliance assuming power for the first time in the country.

A finance ministry spokeswoman confirmed that the country has canceled three China-backed pipeline projects.

The Financial Times earlier cited Malaysian Finance Minister Lim Guan Eng saying he had sent a letter to “relevant parties” in Beijing to terminate the planned projects. The plans comprise of two oil and gas pipelines that cost more than $1 billion each as well as a $795 million pipeline that would link the state of Malacca to a refinery and petrochemical plant in the state of Johor, the paper reported.

Lim didn’t disclose the cancellation fees Malaysia would incur for canceling the pipeline projects but said that the lawyers were handling the matter, the report said.

Since taking office, Malaysian Prime Minister Mahathir Mohamad has been reviewing infrastructure projects undertaken by the former administration. The cost-cutting efforts are aimed at tackling the country’s liabilities which have surged above RM1 trillion due to state guarantees on borrowing by state investment firm 1MDB, which is at the center of a multibillion-dollar scandal.

Lim also told the Financial Times that another China-backed project -- the East Coast Rail Link -- was under review. That project is being built by China Communications Construction Co.

In a visit to Beijing last month, Mahathir warned against new ‘colonialism’ and called for free trade that was also "fair".

Last week, Malaysia and Singapore agreed to postpone a multibillion-dollar high-speed rail project between the two countries until the end of May 2020.