China’s belt and road builder finds itself embroiled in a scandal in Malaysian coastal railway link

China Communications Construction Company, one of the world’s largest engineering and construction companies by contract value, has found its biggest project in Malaysia embroiled in controversy ever since it agreed to build the 620-kilometer rail link spanning the east coast of the Southeast Asian country.

Last week, the controversy took a fresh turn when contracts uncovered by a newly elected government committed to unearthing financial malfeasance shed light on some of the terms and conditions on one of the country’s costliest public works projects.

The project, known as the East Coast Rail Link (ECRL), can actually be built for less than 40 billion ringgit, inclusive of a 10 per cent profit for the contractor, the weekly newspaper reported, citing a document.

The total cost was inflated by 50 per cent to give room for the contractor to buy 19.12 billion ringgit of assets and liabilities from the indebted 1MDB, while another 1.26 billion ringgit would go toward buying two local construction companies. Those companies - Putrajaya Perdana and Loh & Loh Corp - were taken over in 2010 by PetroSaudi International, an entity at the centre of a scandal to siphon US$700 million from 1MDB, masterminded by Malaysian financier Low Taek Jho, also known as Jho Low.

Export and Import Bank of China (Exim China), a Chinese policy lender, would fund the rail link to the amount of 55 billion ringgit, or more than 90 per cent of the project’s total cost.