The Malaysian Insight

LOCAL Chinese businessmen are on tenterhooks, as Daim Zainuddin and Lim Guan Eng head to China soon to renegotiate some of mega-projects signed by Malaysia and China.

They hope that that RM55 billion East Coast Rail Line (ECRL) and the two gas pipeline projects will go ahead as scheduled but with more local involvement.

The gas pipeline projects – a multi-product petroleum pipeline running from Malacca and Negri Sembilan to Kedah, and a gas pipeline from Kimanis to Sandakan and Tawau, in Sabah – were handled by Suria Strategic Energy Resources (SSER) but are mired in controversy over payments and work carried out so far.

The projects were awarded to China Petroleum Pipeline Bureau (CPPB) in November 2016. 

The 600km multi-product petroleum pipeline (MPP) connecting Malacca and Port Dickson in Negri Sembilan to Jitra, Kedah, costs about RM5.35 billion while the 662km trans-Sabah gas pipeline from the Kimanis Gas Terminal to Sandakan and Tawau (TSGP) costs about RM4.06 billion.

Reports indicated that Daim, who is the Council of Eminent Persons chairman, is leaving for China today while Lim will leave after that to renegotiate the oil pipeline and ECRL projects.

Prime Minister Dr Mahathir Mohamad is expected to go to China after Daim and Lim for his first official visit to the country in August. Observers, however, said he will be there to finalise the new terms for the projects.

Putrajaya has said the three projects were too costly and is now looking at renegotiating their terms to reduce costs instead of cancelling them outright, creating a win-win situation for both countries.

Malaysian-China Chamber of Commerce (MCCC) secretary-general Siah Teong Chein told The Malaysian Insight that the ECRL involves many aspects and unlike the KL-Singapore high speed rail, work has already begun and there is no way it could be cancelled.

“At the end of the day, I hope that the ECRL can continue. Of course, the difference between the projected cost and the actual cost was too big and it definitely needs to be reviewed.”

Siah said a possible way to reduce construction costs was to use more Chinese capital to fund the project but without giving up Malaysia’s operating rights to ECRL.

He, however, said this is unlikely as it involved too many structural and management issues.

“The most likely way to reduce cost is to simplify the development and to change the operation model, such as changing it to the ‘build-operate-transfer’ (BOT) model.”

Siah said, under the BOT model, the government can allow Chinese businesses to operate the ECRL for a period of time, after which operations will be handed back to the Malaysian government, similar to local highway concession agreements.

“So the cost will be borne with Chinese capital, but there are still details and aspects of this project that need further discussion.”

Other ways to reduce cost would be for the project developer to use more local contractors and local materials, he said.

On what might be the changes to the ECRL, Siah said, it is still too early to say.

“Although MCCC has met with the Council of Eminent Persons to talk about the ECRL, it was still in its early stages. They said they have their own experts research the matter. To my knowledge, they have not decided on anything yet.

“We believe that due to the good relations between Malaysia and China, both countries will do its best to resolve this matter as it also involves China’s ‘One Belt One Road’ initiative for long-term development. I believe this matter will test the wisdom of both countries’ leadership.”

Siah also said the ECRL is just one of many projects that Malaysia and China are collaborating on, with many other development plans already in progress.

Meanwhile, the Federation of Chinese Associations Malaysia (Huazhong) president Pheng Yin Huah also told The Malaysian Insight that it is good that Malaysian leaders took the initiative to head to China first.

“I think Daim’s trip to China is to pave the way for Dr Mahathir’s official trip in August, as after the May 9 elections, Chinese investments and the ECRL project are being questioned. The initiative of Malaysian leaders to go to China first is a good thing, and I believe that the people of both countries are expecting good news from this trip.”

Asked if a win-win situation is possible, Pheng said Dr Mahathir had already stressed that the government welcomes Chinese investments under the One Belt One Road initiative and had also recognised the need for Malaysia to enter China’s vast market.

Coupled with the two countries’ good bilateral relations, he said, a win-win situation is attainable. – July 11, 2018.