Gov’t Said to Have Axed Chinese ECLR Contractor

January 24, 2019


A source revealed that the Federal Government has scrapped on Tuesday (Jan 22) the original agreement with China Communications Construction Company (CCCC) for the construction of the East Coast Railway Link (ECRL), reported The Straits Times.

Consequently, Putrajaya is said to be on the lookout for a new main contractor that can slash the mega project’s estimated overall cost from RM81 billion to about RM40 billion, which is lower than the project’s initial estimated cost of RM55 billion when it was launched in November 2016.

Notably, work on the railway project spanning 688 kilometres has been halted since July 2018 including the 12-passenger station sites, as the new Federal Government led by Pakatan Harapan scrutinized all major infrastructure projects inked by previous Barisan Nasional Administration.

Since construction works have been suspended, the authorities had negotiated with CCCC, with talks led by government adviser Daim Zainuddin.

Apart from cutting the maximum cost to RM40 billion, the federal government asked CCCC to incorporate more Malaysian products and services in the mega project so that more citizens and local businesses will benefit from the development. However, the Chinese company was not able to fulfil these requirements.

As a result, Putrajaya is said to have ended negotiations with CCCC and terminated the contract. But the Chinese contractor did not respond when asked about this.

On Tuesday, Tun Daim told the media that the ECRL project is still on and negotiations are ongoing. But he declined to reveal which parties are involved in the current talks, and whether it includes CCCC.

Originally, the Chinese firm obtained the main contract for ECRL, involving procurement, engineering, construction and commissioning. The rail project was financed via a soft loan obtained by the government from the Export and Import Bank of China (Exim). However, the loan will only fund 85 percent of the project cost, while the rest was supposed to be raised through the issuance of domestic bonds.

Moreover, the railway project is among several large-scale infrastructure projects funded by China inked by the previous federal government that were reviewed by the new administration, so that it can reduce the Putrajaya’s debts that have ballooned to more than RM1 trillion.

The authorities also axed two China-backed oil pipeline projects costing about RM9.4 billion, after it was discovered that the contractor has received nearly 90 percent of the payment, but only 13 percent of projects have been completed on average.

In July, Prime Minister Tun Dr Mahathir Mohamad told The Edge that the contract for ECRL is “strange”. “The contractor must be from China and the lending is from China. And the money is not supposed to come here but (kept overseas) to pay the contractor in China.”

Touted as a catalytic project connecting Peninsular Malaysia’s east and west coasts, the ECRL aims to link Kuantan Port with Port Klang, enabling cargo to bypass Singapore.


Image source: Straits Times


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