Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on July 6, 2018

KUALA LUMPUR: Following news on the work suspension of the East Coast Rail Link (ECRL) project and the two projects under Suria Strategic Energy Resources Sdn Bhd (SSER), Council of Eminent Persons (CEP) member Tun Daim Zainuddin is said to be going to China ahead of Finance Minister Lim Guan Eng’s visit slated for later this month, according to a source familiar with the matter.

The source also noted the possibility of Daim relying on CEP member Tan Sri Robert Kuok Hock Nien’s connections in China to smoothen the path.

It is understood that the government will be sending a delegation to China later this month to renegotiate the contract costs of the ECRL and the two SSER projects.

Last month, it was reported that Prime Minister Tun Dr Mahathir Mohamad had said Guan Eng and Malaysian Anti-Corruption Commission officers will travel to China soon to discuss with relevant officials about the two gas pipeline projects under SSER. Before that, Dr Mahathir had also noted the need to renegotiate unequal terms of the controversial ECRL project.

However, it is understood that Guan Eng will not be leaving for China before the new parliamentary session begins on July 16.

Meanwhile, Reuters quoting sources reported yesterday that Dr Mahathir will be visiting Beijing in August.

However, a check with an officer of the Prime Minister’s Office revealed that no plan to visit Beijing had been confirmed at this time.

 

MoF’s suspension notice sent out on Tuesday

According to a statement yesterday, Guan Eng said the ministry of finance (MoF) had issued a notice to suspend services and operations of the ECRL project under Malaysia Rail Link Sdn Bhd (MRL) and the two projects under SSER, namely the Multi-Product Pipeline (MPP) and the Trans-Sabah Gas Pipeline (TSGP) projects, with immediate effect until further notice is issued by the MoF.

Both SSER and MRL are wholly-owned subsidiaries of the Minister of Finance Inc (MoF Inc).

Guan Eng noted that Dr Mahathir, after seeking advice from the Attorney-General’s Chambers, had instructed the MoF to issue a “suspension notice” through MoF Inc for all contracts related to the MPP, TSGP and ECRL on Tuesday.

“The decisions are solely directed towards the related contractors relating to the provisions mentioned in the agreements, and not at any particular country,” said Guan Eng.

Guan Eng reiterated that the MPP and TSGP projects, with a total construction cost of RM9.4 billion, were awarded to the China Petroleum Pipeline Bureau on Nov 1, 2016.

Additionally, SSER had paid RM8.3 billion or 88% of the project’s construction value of RM9.4 billion, although progressive work completion (that has not been audited) is only at 13%.

These SSER contracts worth RM9.4 billion have not taken into account costs related to land acquisition, two expert consultancy agreements, and a maintenance agreement comprising a total additional cost of RM1.7 billion, said Guan Eng.

Meanwhile, the ECRL project, financed by a loan from the Export-Import Bank of China (Exim Bank), is a rail line that stretches from Port Klang to Pengkalan Kubor, Kelantan.

The project — comprising Phase 1 between Gombak and Wakaf Baru and Phase 2 between Gombak and Port Klang — was approved by the cabinet in 2016 and 2017, and had China Communications Construction Co Ltd (CCCC) appointed as the main contractor, said Guan Eng.

The actual total cost of the ECRL project is expected to reach RM81 billion, which includes land acquisition cost and loan interest during the project’s construction, Guan Eng said in another statement on Tuesday.

Besides that, CCCC, in a statement two days ago, expressed its “regret that the suspension comes at this junction, as substantial work has been progressing well”.

Noting that the contract had been signed by CCCC and MRL via legal processes, the company said it is hopeful that MRL will honour and respect the contract signed and is hoping that both parties will be able to find a win-win solution through sincere negotiation with goodwill.

Aside from being expensive, Dr Mahathir had said the ECRL project had “strange” terms where money from the RM55 billion loan from Exim Bank was kept abroad and paid to CCCC in China, as opposed to drawing down the loan here and paying it to the construction group’s local subsidiary.

He had also said that payments for the rail project had been made “without regard for the progress of the construction”. It was reported that Malaysia had already paid RM19.7 billion — which included a 15% mobilisation fee — with under 15% of the project completed.

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