Chinese firm building Malaysian rail link ‘not too worried’ about review

China Communications Construction boss compares situation to a project in Sri Lanka that was renegotiated when new government took over in 2015

PUBLISHED : Friday, 29 June, 2018, 8:02am
UPDATED : Friday, 29 June, 2018, 8:02am

The Chinese state-owned firm building Malaysia’s East Coast Rail Link says it is confident the controversial project will get the new administration’s backing, after Prime Minister Mahathir Mohamad called for it to be reviewed.

Liu Qitao, president of China Communications Construction Group, compared concerns about the rail link raised by the Pakatan Harapan administration in Malaysia to what happened to the Colombo Port City project after a new government took office there in 2015.

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“The new administration [in Sri Lanka] questioned the project when they first came to power ... but after negotiating, they realised the project was good for the economy and livelihoods in Sri Lanka,” Liu told the Belt and Road Summit in Hong Kong on Thursday.

“The project in Malaysia is very similar to the [port city] case in Sri Lanka ... it is good for economic growth and people’s livelihoods and I believe the new government will consider this ... we are not too worried,” he said.

Mahathir has said projects like the rail link need to be renegotiated because they are too expensive and too reliant on Chinese financing. The 92-year-old leader is expected to travel to Beijing soon, where he will negotiate with Chinese leaders to cut the cost of the project, which now stands at 55 billion ringgit (US$13.65 billion).

Malaysia’s new finance minister Lim Guan Eng earlier revealed that a 20 billion ringgit payment had already been made for the 620km rail link that will connect the rural east coast to the seaport of Klang in the wealthy western state of Selangor.

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Speaking on the sidelines of the summit, Liu said if there was any renegotiation of the project, it would be between the governments. But he said China Communications Construction was open to negotiation with its partners on the contract details.

“Based on commercial principles, we can talk ... for example, if the railway is longer, then the price can be higher. If it is shorter, then it is cheaper,” Liu said.

The rail link is a key project under Chinese President Xi Jinping’s “Belt and Road Initiative”, an ambitious infrastructure push that is coming under increasing criticism for raising the debt risk of countries involved, the lack of local workers, and over the ultimate sovereignty of the projects.

Work began on the line last year after the Chinese company was awarded the contract. The Export-Import Bank of China will provide 85 per cent of the financing through a 20-year soft loan.

The Chinese company is also involved in other belt and road projects including a railway linking the cities of Mombasa and Nairobi in Kenya.

But Liu rejected criticism that most jobs went to Chinese workers, saying there were more local staff than Chinese working on all of its overseas projects.

He said in Kenya, Chinese companies were planning to revive local economies by building industrial parks along the railway line.

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Chinese workers accounted for 89 per cent of contractors on China-funded transport infrastructure projects in 34 Asian and European countries last year, according to a study by the Centre for Strategic and International Studies, a Washington-based think tank.

Sri Lanka’s coalition government in 2015 gave the green light for work to restart on the US$15 billion Colombo Port City real estate development after months of negotiation and changes to the contract.

The US$1.4 billion first phase of the special financial zone is being built by a subsidiary of China Communications and Construction, which is also bearing the cost of reclaiming 269 hectares of land for the project.