Beijing-backed Malaysian megaprojects on agenda for Mahathir’s August China trip
Malaysian leader says he will discuss contracts and interest rates on loans for multibillion-dollar infrastructure schemes
Malaysian Prime Minister Mahathir Mohamad said on Friday that he was set to visit China next month to discuss “unfair” terms for several big projects signed by his scandal-tainted predecessor Najib Razak.
Mahathir, 92, a tough-talking political veteran, said he would also bring up the high interest rates levied on Chinese loans used to finance the projects.
Malaysia’s previous government under Najib cultivated warm ties with China and signed a string of deals for Beijing-funded projects.
But critics say many agreements lacked transparency, fuelling suspicions they were struck in exchange for help in paying off debts from a financial scandal that engulfed the state fund 1MDB which ultimately helped bring down Najib’s regime.
Mahathir has ordered a review of megaprojects signed by Najib during his nine-year term in a bid to cut the country’s national debt, estimated at US$250 billion, and other liabilities.
Malaysia on Thursday announced the suspension of three of its largest China-backed projects worth more than US$22 billion.
“I want to go to China as early as possible, but the president of China is not available in July so I will go in August,” Mahathir said in the administrative capital Putrajaya outside Kuala Lumpur.
“There are several issues to be brought up, among which is the unfairness of the terms of the contracts and also of the loans.”
The interest rate charged on the loans to Malaysia “is much higher than when governments borrow”, according to Mahathir.
“Normally governments borrow at 3 per cent and below, but this one is very high,” he said.
The East Coast Rail Link, one of the projects suspended, would connect Malaysia’s east coast to southern Thailand and the Malaysian capital Kuala Lumpur.
The US$20 billion project was contracted with China’s largest engineering firm, China Communications Construction Company, and mostly financed by a loan from the Export-Import Bank of China.
Malaysia’s finance ministry said on Thursday that 88 per cent of the project’s construction cost of 9.4 billion ringgit (US$2.32 billion) had been paid despite only 13 per cent of the work being completed.
The two other projects were gas pipelines contracted to the China Petroleum Pipeline Bureau.
In May, Mahathir postponed plans to build a high-speed rail link between Singapore and Malaysia, which had been agreed on several years ago, saying it was too costly.
Chinese, Japanese and European investors were among those who had expressed interest in bidding for the project.
Najib was charged with corruption on Wednesday for allegedly accepting millions of dollars in bribe money, in a stunning fall from grace just months after his shock election defeat.