The Malaysian Insight

MALAYSIA may find it tough to act as clinically on the RM66 billion East Coast Rail LINK (ECRL) as it did on the high-speed rail (HSR) link to Singapore

Government sources said it is trickier to pull out of the Kelantan to Port Klang rail link project because the agreement for phase 1 costing some RM46 billion has been signed and the loan from China’s Exim Bank has been drawn down.

Scrapping the deal will result in the loan being defaulted and this will trigger a clause that requires the loan plus interest to be paid within three months of the default, said a source familiar with the contract that was inked by the Najib government and China Communications Construction Company Ltd.

And even if the Mahathir administration goes to court to challenge the legality of the contract, litigation could take years and adversely impact bilateral ties – something both Kuala Lumpur and Beijing are keen to avoid.

In addition to phase 1 of the ECRL project, agreements have also been signed for:

1. An extension line to Port Klang costing some RM9 billion.

2. An extension to Pengkalan Kubur costing RM1.3 billion.

3. An upgrade of the track system to double-tracking costing RM10.5 billion.

Since coming into office, Prime Minister Dr Mahathir Mohamad has made it clear that tackling the country’s RM1 trillion debt is his priority. A key strategy to cut the country’s debt is to scrap big ticket items.

Dr Mahathir and Daim Zainuddin of the Council of Eminent Persons have made no secret of the government’s desire to halt the ECRL project, or at least re-negotiate the terms of the agreement.

On its part, Beijing has also made the right noises about wanting to preserve strong bilateral ties with Malaysia. 

China’s ambassador Bai Tian has met Dr Mahathir and the council of elders. 

Malaysia understands that the ECRL is one of China’s key projects under its grandiose One Belt, One Road scheme and it senses a willingness in Beijing to reach some compromise on the cost of the rail link.

It is understood that for a start, the number of stations on the ECRL can be reduced. Many of the stations were included due to political considerations.

Another cost-cutting option is to realign some of the routes.

If the cost-cutting measures that China has put on the table are implemented, it could drive down the cost of the ECRL by RM5 billion to RM10 billion. – May 31, 2018.