Mahathir axes Chinese rail project

The Malaysian East Coast Rail project, launched by former prime minister Najib Razak in September, has been suspended along with two other China-backed projects worth billions.

Finance Minister Lim Guan Eng said he had ordered the suspension of two pipeline deals and the 688km train link worth a combined US$22.35 billion.

Lim said Najib’s government understated the true cost of the rail line, which was 50-per-cent higher, at US$20 billion, than an earlier estimate.

The train line would have connected the South China Sea off the east coast of Peninsular Malaysia with the busy shipping routes of the Strait of Malacca to the west.

The pipeline contracts had been awarded to China Petroleum Pipeline Bureau, while the China Communications Construction Company was the main contractor for the East Coast Rail Link.

Lim said the 92-year-old prime minister, Mahathir Mohamad, ordered the suspensions to cut US$250 billion in national debt and other liabilities.

Ethnically Chinese Lim said no particular country was being targeted, possibly to ease concerns that China was being singled out.

The deals were among several contracts with Chinese firms signed by Najib, who had close ties with Beijing. His opponents said many agreements lacked transparency, fuelling suspicions they were signed in exchange for help paying off debts from the 1MDB financial scandal.

Najib was arrested this week on charges of corruption and pleaded not guilty and was freed on bail on Wednesday.

Mahathir has pledged to review Chinese deals, raising doubts about Malaysia’s status as one of Beijing’s key allies in its Belt and Road infrastructure push.

He is reportedly planning a trip to Beijing in mid-August.

Although organised before his May election victory, Mahathir’s first overseas visit since returning as prime minister, to Japan in June, was seen as a sign he would look beyond China for foreign investment.

“We will be friendly with China, but we do not want to be indebted to China,” Mahathir said while in Tokyo.

In May, Mahathir postponed plans to build a high-speed rail link between Singapore and Kuala Lumpur, which was agreed several years ago. He said it was too expensive.

Song Seng Wun of CIMB Private Banking said Najib-era investors would be holding back.

“Anyone with any activities related to the previous administration itself will be lying low,” Wun told the media.

“They wouldn’t be starting any new projects because they might not be sure that their existing project or contracts might come under review,” Wun added



China wants Asean to be linked by its high-speed trains. Picture credit: Wikimedia