‘DON’T BE TOO EUPHORIC DR M, SOON CHINA WILL BE DEMANDING COMPENSATION’: SINGAPORE FEELS THE ‘HSR’ HEAT AS MAHATHIR GETS BEIJING’S NOD TO CANCEL NAJIB’S ‘LOPSIDED’ DEALS

THE prickly issue of compensation to Chinese companies for their scrapped projects in Malaysia could threaten the newly revived bilateral relations between Putrajaya and Beijing, said the Straits Times.

Prime Minister Dr Mahathir Mohamad announced earlier this week that the government will cancel the East Coast Rail Link (ECRL) and two multi-product oil pipeline networks that the previous Barisan Nasional coalition had signed with state-owned Chinese entities.

These companies will soon be demanding compensation for the almost RM90 billion worth of deferred infrastructure projects, said the report.

“Negotiations have already begun but these will be protracted because China is not going to be lenient with Malaysia when it comes to honouring the default clauses for the projects,” a director of a Malaysian engineering consultancy involved in the ECRL project was quoted as saying.

He added that future foreign direct investments from China are likely to be adversely affected by the decision to shelve the infrastructure projects.

Malaysia is also expected to face serious challenges when it begins negotiations on the settlement terms of the multibillion-dollar loans taken from the Export-Import Bank of China (Exim Bank) to fund the ECRL.

During Dr Mahathir’s recently concluded visit to China, the 93-year-old leader reiterated that Putrajaya was not “blaming” China for the exorbitant cost of the scrapped infrastructure projects but could not afford to see them through due to its current fiscal position.

He told reporters that Malaysia continues to value Chinese investments, adding that Beijing was understanding of Putrajaya’s situation.

However, Malaysian government officials expect bilateral relations to be further tested in the coming months over plans by Putrajaya to review other deals with China.

The Pakatan Harapan government intends to review the 2015 sale of power assets held by scandal-plagued state fund 1Malaysia Development Berhad (1MDB) to China General Nuclear Power Corp for more than RM10 billion.

The sale gave the Chinese company control over a major portion of Malaysia’s economically strategic power generation sector.

“It will be difficult to overturn the sale of the IPP (independent power producer) project, but the fact that a foreign country owns a large chunk of our generation business is not a healthy situation,” a senior government official told the Straits Times.

PH said RM19.7 billion had already been paid by the Najib administration to China Communications Construction Co for completing about 15% of the 688km ECRL, which would stretch from Kelantan to Port Klang on the west coast.

Various estimates had shown that ECRL could be built for less than RM40 billion, but its cost had ballooned to between RM60 billion and RM70 billion.

Meanwhile, the two scrapped pipeline projects are worth RM9.4 billion.

It was reported that, as at end March this year — about 12 months after the three-year projects started — RM8.3 billion or 87.7% of the total contract value had already been paid to China Petroleum Pipeline Bureau, although only 13% of the projects had been completed.

– https://www.themalaysianinsight.com