In less than two months, the government of newly elected Malaysian Prime Minister Mahathir Mohamad has suspended four multi-billion dollar infrastructure projects in Malaysia to be funded and constructed by China citing exorbitant project costs imposed by the Chinese and other irregularities.
The latest victim of Mahathir's pro-Malaysia, the anti-China policy is the 620 kilometer-long East Coast Railway Link (ECRL), a multibillion-dollar rail line that would have linked Malaysia's east coast to Kuala Lumpur and Thailand. ECRL was also intended as a trade route connecting China with markets beyond Asia.
Malaysia Rail Link Sdn Bhd (MRL) said it had instructed state-owned China Communications Construction Ltd (CCCC) on July 4 to suspend all works under the Engineering, Procurement, Construction and Commissioning contract (EPCC) of ECRL effective immediately on grounds of national interest, among other reasons.
A letter to CCCC from MRL CEO Datuk Sri Darwis Abd Razak said the suspension "shall take effect immediately and will be in force until further instruction from us." In addition, CCCC "shall not remove any equipment, materials or any part of the works from the site, without our prior written consent."
The project was heavily criticized by Mahathir and others for terms totally unfavorable to Malaysia. Among this is the stipulation CCCC will receive a 15 percent upfront payment of the total project cost of $10 billion as a "mobilization fee.
Mahathir's government contends ECRL will only become financially viable if there is a drastic reduction of the project cost by CCCC. The suspension of the ECRL project came a day after Minister of Finance Lim Guan Eng said the total bill for the project is actually $20 billion, far higher than original estimates.
CCCC said it regrets the suspension and urged Mahathir's government to "honor and respect" the contract signed with the administration of former PM Najib Razak. Razak, however, was arrested Tuesday by anti-graft investigators for the multibillion-dollar looting of state investment fund, 1MDB. CCCC said it doesn't know how long the suspension will last, and that the suspension will mean additional costs, losses, and damages.
"We hope that both sides will be able to find a win-win solution through sincere negotiation with good will. We also hope that the suspension will be lifted as soon as possible," said CCC in a statement.
Political analysts said scrapping ECRL is a strong signal that Mahathir is making good on his election promise to curb China's growing influence in Malaysian politics and business. The demise of ECRL comes a month after Mahathir scrapped another Chinese-backed project: the 350 kilometer-long, the high-speed railway between Kuala Lumpur and Singapore. The project would have cost some $17 billion and was targeted for completion by 2026.
Also this week, Malaysia suspended two Chinese-backed pipeline projects that each costs $1 billion.
The anti-China Mahathir has promised to slash excessive spending and review all Chinese projects and "unequal treaties." These actions are part of Mahathir's pledge to diminish Chinese influence in Malaysia.
