Given the difficulty of coming out of the contract without incurring huge cost, the East Coast Rail Link (ECRL) project will likely resume but on a smaller scale, said Prime Minister Tun Dr Mahathir Mohamad.
With an original cost of RM30 billion, the project cost ballooned to RM66.78 billion. As such, it was the first project to be put on hold when Dr Mahathir took over in May last year.
Aside from the inflated cost, there were also the issue of lopsided contracts and questionable advance payments.
The project’s main contractor, China Communications Construction Company Ltd (CCCC), was allowed to draw down RM20 billion, RM15 billion of which was advance payment.
Under the contract, CCCC would also undertake 70 percent of the work, leaving just 30 percent to local contractors.
It has to be noted that CCCC was appointed as the main contractor in exchange of financing from the Chinese government.
Under ECRL version 2.0, local contractors should be given the chance to take the lead, reported The Star.
This comes as there are enough funding options for the project since the government is its paymaster.
There are also enough local companies that can do the job well or even better than those from China. And spending more in the local construction industry brings significant multiplier effect on the domestic economy.
Financing from China should also be reduced to limit CCCC role in the project.
This has been done before in the second Penang Bridge project, which started with an US$800 million loan offer from China’s Exim Bank during the Tun Abdullah Ahmad Badawi administration.
The loan was lowered to US$200 million when Najib took over. The reduced loan also slashed the scope of work of the Chinese contractor.
A smaller-scale ECRL would entail smaller funding, hence reduced participation from contractors for China.
Image source: The Star
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