Malaysia Says Still Negotiating With China on $20B Rail Project

By Reuters 31 January 2019

KUALA LUMPUR — Malaysia is in talks with China over a $20-billion rail project, the finance minister said on Wednesday, just days after another cabinet minister said Kuala Lumpur had decided to cancel the contract.

After winning power last May, Malaysia’s prime minister vowed to renegotiate or cancel what he calls “unfair” Chinese projects authorized by his predecessor, Najib Razak, voted out after nearly a decade in power amid a massive financial scandal.

On Wednesday, Finance Minister Lim Guan Eng said the cabinet had decided to seek further negotiations on the East Coast Rail Link project, the centerpiece of China’s infrastructure push in the Southeast Asian nation.

Malaysia’s cabinet decided “in view of the sensitivity of the contract discussions, that we should allow the discussions,” Lim told reporters, adding that the governments would hold talks.

He did not elaborate on the topic of the discussions.

On Tuesday, Prime Minister Mahathir Mohamad asked for China’s understanding over Malaysia’s plan to cancel the project, saying Kuala Lumpur could not afford it.

The contract may cost the country more than 100 billion ringgit ($24.33 billion), Mahathir said, adding that Malaysia would still have to pay a cancellation fee.

Last week, Malaysian Economic Affairs Minister Mohamed Azmin Ali said the cabinet had decided to cancel the deal with China Communications Construction Co Ltd, one of the biggest signed in China’s Belt and Road initiative.

Azmin said at the time the government was still determining how much to pay CCCC as a cancellation fee. Government officials have previously said the project cost had been inflated.