Economist: Loan or investment, just focus on how ECRL helps

PETALING JAYA: Economist Hoo Ke Ping says it is pointless to argue over whether China-backed projects, such as the East Coast Rail Link (ECRL), are loans or investments.

Speaking to FMT, Hoo said the more pertinent question was how these projects would contribute to the future of the country.

“Whether it is a loan or investment, there are grey areas that are quite complicated to explain. What is more important are the implications of these projects on the future of the country – such as connectivity, logistics and growth.

“Back in Daim and Mahathir’s time, they never developed the East Coast because they wanted to focus on selling cars,” he said referring to Daim Zainuddin who was finance minister when former prime minister Dr Mahathir Mohamad had launched Proton, the national car maker.

“Today, Najib (Prime Minister Najib Razak) wants to open up the East Coast, what is wrong with that?” Hoo asked, referring to the ECRL.

He was responding to Daim’s comments to the media on whether the government had to repay the cost of the ECRL project, which will reportedly be funded through a loan from the Export-Import Bank of China. He suggested it was actually a loan and not an investment as claimed by Putrajaya.

The ECRL, stretching over 688km from Gombak in Selangor to Tumpat in Kelantan, has been officially estimated to cost RM55 billion.

PKR commerce and investment bureau chief Wong Chen, however, has a different view saying that the project was very likely a loan, and not an investment.

“A loan will be more problematic, having a pre-condition that a main contractor from China is pre-selected without an open tender. This means that China is providing a loan to Malaysia to then hire another China company as main contractor.

“The China main contractor will make profits that will be repatriated back to China and we are left to service and repay the loan.

“If the project is overpriced and economically dubious then it is not even a sustainable loan,” he said, referring to the cost of the project which some analysts had reportedly said could surge up to RM70 billion.

The Kelana Jaya MP added that in order to claim a project as an investment, the China main contractor needed to have at least a substantial 30% equity stake in the project.

“The China main contractor will also need to be a guarantor to the loan,” he said.

The ECRL will be built by China Communications Construction Company Ltd (CCCC) with Malaysia Rail Link Sdn Bhd (MRL) as the project owner. -FMT