Chinese engineering firm told to suspend US$20 billion East Coast Railway Link in Malaysia

Owner puts project on ice, raising uncertainty about future of key part of China-funded infrastructure development plan

PUBLISHED : Wednesday, 04 July, 2018, 9:40pm
UPDATED : Thursday, 05 July, 2018, 3:50pm

The project owner of Malaysia’s US$20 billion East Coast Railway Link has told its main Chinese contractor to suspend work, both companies said on Wednesday, raising uncertainty about the future of part of China’s “Belt and Road Initiative”.

The 688km (430-mile) rail link is designed to connect the South China Sea off the east coast of peninsular Malaysia with strategic shipping routes to the west, and is a major part of China’s trade and infrastructure development plan that stretches across Asia and beyond.

The suspension comes as Kuala Lumpur is seeking to renegotiate the terms of the deal with Beijing.

Since a surprise election victory in May, Malaysia’s new government has pledged to cut the national debt, stamp out corruption and review major projects agreed by the scandal-plagued previous administration led by Najib Razak. Najib was formally charged on Wednesday with corruption linked to a multibillion dollar financial scandal that contributed to his election defeat.

Financial news outlet The Edge first reported the halt in the rail link project, referring to a letter sent from Malaysia Rail Link Sdn Bhd (MRL) to China Communications Construction Company (CCCC) that cited grounds of “national interest” among other reasons.

A spokesman for MRL confirmed the instruction but declined to comment further.

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CCCC said in a statement that it regretted the suspension and was “upset and concerned” over the livelihood of its more than 2,250 local staff members and other indirect hires.

“We respect and comply with Malaysian laws. Under the situation we have no choice but to adhere to the suspension instruction,” it said.

It said also that it hoped the suspension would be lifted as soon as possible.

Malaysian Finance Minister Lim Guan Eng said he planned to visit China soon to renegotiate the terms of the deal.

In a statement on Tuesday, he said that the East Coast Railway Link was feasible only if its cost could be significantly reduced.

Completing Malaysia’s biggest rail project as previously planned would cost US$20 billion, or nearly 50 per cent more than estimates made under the last government, he said.

“We expect that the East Coast Railway Link project will only become financially and economically feasible if there is a drastic price reduction of the project by the CCCC,” Lim said in the statement.

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CCCC is one of the world’s largest engineering and construction companies by contract value, but has found its biggest project in Malaysia embroiled in controversy ever since it agreed to build the East Coast Railway Link.

Last month, the controversy took a fresh turn when contracts uncovered by the new government, which says it is 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 new government has also halted a rail project with Singapore.