Putrajaya has decided with finality to scrap the contract with China Communications Construction Company (CCCC) for the construction of the East Coast Rail Link (ECRL) during a Cabinet meeting on Thursday (24 Jan).
This was revealed by Economic Affairs Minister Datuk Seri Mohamed Azmin Ali after officiating the Silat Cekak Hanafi Annual General Meeting 2019 and Outstanding Awards in Kuala Lumpur on Saturday (26 Jan)
He explained that Putrajaya came to the decision given the ECRL’s high cost, which the federal government can’t afford currently.
“If the contract is not terminated, the government will have to bear the interest rate of about RM500 million a year. Therefore, the agreement needs to be terminated without affecting relations with China.”
Notably, CCCC was awarded with the contract involving procurement, engineering, construction and commissioning for the ECRL. 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.
However, 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 to reduce the federal government’s debt of over RM1 trillion.
Despite the cancellation of the contract with CCCC, Azmin said Malaysia is still accepting investment from China, but the government will decide on whether to proceed based on the country’s financial status.
Regarding the compensation to CCCC, Mohamed Azmin said the amount will be comprehensively reviewed by the Finance Ministry to make sure it would not heavily burden the country’s finances.
He also revealed that Putrajaya has not yet decided on the ECRL’s new main contractor.
Previously, a source told Singapore’s Straits Times that Putrajaya has axed the contract with CCCC, after it failed to slash the project’s cost from RM81 billion to RM40 billion, as well as incorporate more Malaysian products and services into the mega project.
Image source: The Sun Daily
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