Malaysia to ‘take advantage’ of ECRL deal to sell China more palm oil: Mahathir Mohamad

The Malaysian prime minister suggests there was a quid pro quo for agreeing to resume work on the controversial Beijing-backed rail project

Not only did the cost drop by more than US$5 billion – he says China will buy more palm oil from Malaysia, though the issue ‘isn’t directly related’

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Malaysian Prime Minister Mahathir Mohamad. Photo: Reuters

Published: 12:42pm, 15 Apr 2019Updated: 11:28pm, 15 Apr 2019

Malaysia’s Prime Minister Mahathir Mohamad on Monday said China was likely to buy more palm oil from his country in exchange for his government’s decision to resume work on a Beijing-backed rail project following renegotiations that shaved off nearly a third of the cost.

Mahathir said in a press conference that the price reduction of 21.5 billion ringgit (US$5.2 billion) – dropping the project’s cost from more than 65 billion ringgit to 44 billion ringgit – announced on Friday was partly made possible because the Chinese contractor, China Communication Construction Company (CCCC), had agreed to bear some of the risks involved in maintaining and operating the line when it comes into operation in 2026.

Under the original East Coast Rail Link (ECRL) deal signed by Mahathir’s predecessor, Najib Razak, Malaysia bore those risks alone. The prime minister, 93, said negotiations were now underway to reduce the 56.7 billion ringgit loan Malaysia had borrowed under the original deal from the Export-Import Bank of China.

The prime minister also revealed that the CCCC had began refunding 3.1 billion ringgit in advance payments it had received for the second phase of the project.

An oil palm plantation in Johor, Malaysia. Photo: Reuters

The percentage of local participation in civil works for the project will be raised to 40 per cent from 30 per cent previously, he said.