KUALA LUMPUR — Malaysian and Chinese officials are in talks for Prime Minister Tun Dr Mahathir Mohamad to visit Beijing soon, two sources with knowledge of the discussions told Reuters, after Kuala Lumpur suspended China-backed projects worth more than US$20 billion.
Dr Mahathir, who came to power in May following a stunning election defeat for then prime minister Datuk Seri Najib Razak, is reviewing major projects signed by the former government, saying many of them do not make financial sense for Malaysia.
His trip to Beijing has been provisionally agreed for mid-August, according to one source involved in planning it.
A Malaysian foreign ministry source said both sides had yet to finalise dates, but Dr Mahathir was “looking forward to visiting China”.
The sources spoke on condition of anonymity as they were not authorised to talk to the media on the subject.
A spokesman for Dr Mahathir did not comment.
China’s Foreign Ministry did not immediately respond to a faxed request for comment.
Najib courted billions of dollars of Chinese investment and was one of South-east Asia’s most enthusiastic supporters of President Xi Jinping’s signature Belt and Road Initiative.
Arrested this week on charges of corruption, Najib pleaded not guilty and was freed on bail yesterday.
Reuters today reported authorities were investigating whether his administration made use of Chinese funds for two pipeline projects to pay the dues of scandal-ridden state fund 1Malaysia Development Berhad (1MDB).
Dr Mahathir has been highly critical of the benefits of certain Chinese projects in Malaysia. Since taking office, he has vowed to renegotiate terms even as construction work continued.
But in a surprise move this week, the finance ministry, under Dr Mahathir’s orders, called a halt to work on three projects: The US$20-billion East Coast Railway Link (ECRL) and two pipeline projects worth US$2.3 billion.
The 688-km (428-mile) ECRL will connect the South China Sea off the east coast of peninsular Malaysia with the strategic shipping routes of the Straits of Malacca to the west.
The other two projects are a petroleum pipeline stretching 600km along the west coast of peninsular Malaysia and a 662km gas pipeline in Sabah, the Malaysian state on the island of Borneo.
Chinese state-owned firms are involved in all three projects.
“The decisions are solely directed towards the related contractors, relating to the provisions mentioned in the agreements, and not at any particular country,” the finance ministry said in a statement today.
‘Do not want to be indebted to China’
Calling the halt was part of a negotiation strategy ahead of high-level government talks, said two other sources familiar with the government’s thinking, since the Belt and Road status of the ECRL makes a successful outcome critical for the Chinese.
“It’s sending a message to the Chinese,” said one of the sources, a senior finance ministry official. “They don’t want a failure to taint their name.”
Malaysia’s Finance Minister Lim Guan Eng has said Najib’s government understated the true cost of the ECRL, which was 50 per cent higher, at US$20 billion, than the earlier estimate.
Organised before his election victory, Dr Mahathir’s first overseas visit as prime minister, to Japan last month, was nonetheless seen as a signal he would look beyond China for key foreign investment.
“We will be friendly with China, but we do not want to be indebted to China,” he said in Tokyo. — Reuters
Finance Ministry suspends ECRL and gas pipeline projects
THE Finance Ministry has suspended the East Coast Rail Link (ECRL), Multi-Product Pipeline (MPP) and Trans-Sabah Gas Pipeline (TSGP) due to laggard completion by contractors.
Finance Minister Lim Guan Eng said the move, made on Prime Minister Dr Mahathir Mohamad’s instruction, was not targeted at China.
The three projects were being built by Chinese state-owned companies.
Lim said Dr Mahathir, after seeking advice from Attorney-General Tommy Thomas, had instructed the Finance Ministry to issue a “suspension notice” for all contracts related to the projects on Tuesday.
“The services and operation ‘suspension notice’ takes effect immediately until further notice is issued by the Finance Ministry.
“The decisions are solely directed towards the related contractors relating to the provisions mentioned in the agreements, and not at any particular country,” Lim said in a statement today.
Malaysia Rail Link Sdn Bhd undertook the ECRL while Suria Strategic Energy Resources Sdn Bhd undertook the pipeline projects. Both companies are wholly-owned subsidiaries of MoF.
The MPP and TSGP, with a total construction cost of RM9.4 billion, were awarded to China Petroleum Pipeline Bureau on November 1, 2016.
SSER has paid RM8.3 billion or 88% of the project’s construction value even though the unaudited progressive work completion was only at 13%.
“These SSER contracts worth RM9.4 billion have not taken into account cost related to land acquisition, two expert consultancy agreements, and a maintenance agreement comprising a total additional cost of RM1.7 billion,” Lim said.
The ECRL project is a rail line that stretches from Port Klang to Pengkalan Kubor, Kelantan. Both projects were approved by the Cabinet in 2016 and 2017, in which China Communications Construction Company was appointed as the main contractor.
“The actual total cost for the ECRL project is expected to reach RM81 billion, which includes land acquisition cost and loan interest during the project construction.” – THE MALAYSIAN INSIGHT
REUTERS / THE MALAYSIAN INSIGHT
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