Dithering over ECRL decision due to fear of Beijing pushback, says report

By MT Webmaster On Jan 29, 2019

(TMI) – FEAR of retaliation from Beijing could be one of the reasons for the lack of a coherent response from the Malaysian government to the question of whether it would proceed with the RM81 billion East Coast Rail Link The Straits Times reports.

Cancellation of the project contracted to the state-owned China Communications Construction Company could provoke “tough” actions from Beijing, such as suspending its contract to purchase palm oil from Malaysia – a move that will hurt producers like Felda, which is already financially strapped.

“More punishing for Malaysia would be if the Chinese were to make a full-blown declaration of a default on the project that was awarded by the previous government in October 2016 to state-owned CCCC with financing from the Export-Import Bank of China,” the report said.

Citing senior government officials and industry executives familiar with the ECRL contract, it said CCCC and Exim Bank could demand compensation and penalties amounting to as much as RM19.53 billion ringgit, failure to settle which could lead to complications for other similar loans taken by the Malaysian government.

The last few days have seen conflicting announcements from the Malaysian government on the status of the ECRL project. A visiting Chinese official, meanwhile, said negotiations are ongoing.

Following the confusion that arose over differing statements from the ministers, Prime Minister Dr Mahathir Mohamad today said the final word will come from Finance Minister Lim Guan Eng “soon”.

The status of the project signed off by the Barisan Nasional government has been up in the air since Prime Minister Najib Razak lost the May 9 polls. Dr Mahathir ordered a review of the project, adding that it could be done on a smaller scale. but did not discount the possibility of its being scrapped altogether.

Industry sources said rescaling the project would circumvent the compensation clause in the contract, which otherwise would cost the government RM20 billion to cancel.