PETALING JAYA: At least RM15bil will be shaved off from the East Coast Rail Link (ECRL) project from its projected cost of RM55bil for the railway track stretching from Port Klang to Pengkalan Kubor in Kelantan.
Sources said the Council of Eminent Persons (CEP) have heard presentations from top officials of Malaysia Rail Link Sdn Bhd (MRL), the project owner of the ECRL, and some of the consultants involved to ascertain the cost of completing the project and study the various options to terminate the job.
It is learnt that the council was told that an estimated RM20bil more would be needed to complete the project. So far, RM19.7bil has been drawn down and paid to the contractor, China Communications Construction Company (CCCC).
It is learnt that the council was told that there were clauses for termination of the project such as if it is against national interest.
However, the contractors have to be compensated for work done and the government has to repay loans advanced by China Export and Import Bank (Exim Bank).
“If the government were to terminate the project, the cost incurred would be more than RM20bil and may include a lengthy legal battle with state-owned companies from China,” said a source familiar with the matter.
Of the RM19.7bil drawn down is included a “mobilisation fee” or upfront payment of 15% based on the entire project and its additional features.
The “mobilisation fee” came up to RM10bil because the agreement signed by the government was based on the entire cost of the project of RM55bil and an additional RM11bil for fortification work.
“The previous government signed for an entire project amount of RM66bil, which are phases one and two of the project and fortification works. So, a 15% fee comes up to RM10bil,” said a source.
A 15% mobilisation fee is three times above the norm, as the normal mobilisation fee is only 5%.
CCCC has done work for an estimated RM9bil and has submitted claims for another RM10bil that has not been approved yet.
“If Malaysia were to cancel the contract, it could have to deal with claims from CCCC. Also, the government would have to pay Exim Bank for the amount that has been drawn down so far,” said a source.
It is learnt that the CEP, after considering all aspects of the project, is likely to recommend to the government for phase one of the project to be completed at a reduced scale.
Phase one is from Gombak to Kota Baru via Kuantan. It is likely to remain as a single track with a double track formation, meaning additional space in case there is a need for a double track in future.
Phase two, which involves the connection from Gombak to Port Klang and Kota Baru to the border of Malaysia-Thailand, will not continue, said sources.
It is learnt that the consultants were confident the project can be completed with an additional RM20bil with some re-engineering and cutting down on the unnecessary features.
Officials close to CCCC said they were also anxious on the status of the project that has come under intense scrutiny following revelation that RM20bil has been drawn down on it, which is about 36% of the total cost for phases one and two.
Work done is less than 15%.
There have been reports of the money paid to CCCC being diverted to companies or people linked to the scandal-riddled 1Malaysia Development Bhd (1MDB).
It has been reported that CCCC is to acquire companies such as Putrajaya Perdana Bhd and Loh & Loh – two companies owned by Jho Low – from the profits of the ECRL project.
Jho Low is the prime figure behind the 1MDB scandal, a fund headed by former Prime Minister Datuk Seri Najib Tun Razak that accumulated debts of RM35bil in a short span of less than five years and a large amount of money being diverted overseas in questionable transactions.
1MDB is subject of international and domestic investigations from the United States to Switzerland and Singapore.
MRL has denied that any of its agreements with CCCC or Exim Bank involves payments to other parties. It has stated that all agreements are strictly between CCCC and Exim Bank.
It is learnt that the Malaysian government is now likely to mandate MRL to press on the contractor to complete the job based on the amount paid so far.