Malaysia restarts ECRL project after cost cut

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KUALA LUMPUR (July 25): Malaysia restarted the China-linked East Coast Rail Link project on Thursday after downsizing building costs by a third to lighten the government’s debt burden.

The rail project, led by China Communications Construction Co and Malaysia Rail Link Sdn Bhd, was canceled a year ago by Prime Minister Tun Dr Mahathir Mohamad’s new government after he balked at the RM65.5 billion (US$16 billion) cost. He revived talks later and in April struck a deal with China to cut it down to RM44 billion.

Malaysia hopes “the ECRL will bring economic benefits to the country, not just in construction, but that it would also connect all the railway tracks to the ports,” Transport Minister Anthony Loke said at the project relaunch in the east coast state of Terengganu on Thursday. “Hence the shipping and logistics industry would certainly enjoy more encouraging industry growth.”

The rail project is one of several infrastructure projects that Dr Mahathir has sought to revive to help stoke economic growth, after a wave of spending cuts and a corruption crackdown last year following his election victory. For China, the resumption may be a boon for its Belt and Road Initiative, which has seen Asian governments from Myanmar to Maldives reassessing Chinese investments amid concern over sovereignty and large borrowings.

The 640-kilometer rail will connect Peninsular Malaysia’s eastern coast, whose economy lags the wealthier western coast, to states near the capital of Kuala Lumpur when completed in 2026. The amended deal increases local contractors participation while realigning certain routes.

Malaysia will sign a supplementary agreement soon with Export-Import Bank of China that will see the interest cost of its loan reduced for the East Coast Rail Link project, said Loke. The Exim Bank loan is to finance 85% of the RM44 billion project, he said.

The project’s cost had ballooned as construction went underway, with the finance ministry estimating that the price tag could reach as much as RM81 billion. Dr Mahathir said the original cost was inflated and would have been lower if the deal — inked during his predecessor Datuk Seri Najib Razak’s time as part of China’s Belt and Road Initiative — was offered through an open tender.

See also:
ECRL is 10.18% complete after alignment change — MRL
MRL to submit ECRL environment, social, heritage impact assessment reports in 1Q20