PETALING JAYA: Malaysia's success in renegotiating the East Coast Rail Link (ECRL) project with China is significant as it saves Malaysia from the debt trap that Sri Lanka fell into, Forbes writes.
In an opinion piece, Economics Professor Panos Mourdoukoutas said the new deal is a big win for Prime Minister Tun Dr Mahathir Mohamad.
"In dealing with China, Malaysia has dared to do something Sri Lanka, Pakistan, and the Philippines didn’t - bring Beijing back to the negotiating table to cut the cost of the investment projects assigned to Chinese contractors," he said.
Mourdoukoutas said the ECRL served the interests of Beijing more than it served the interests of Kuala Lumpur.
He explained that China's growing infrastructure projects around the world are part of its bid to "write the next chapter of globalisation and advance Beijing’s geopolitical agenda".
However, many of China’s infrastructure projects aren’t economically viable, as they are built at inflated costs and leave countries involved heavily indebted to Beijing, he said.
Quoting Current History journal, Mourdoukoutas wrote that some of China’s infrastructure projects in Sri Lanka, namely the deep-sea Hambantota port project, the Colombo Port City complex and the Mattala Rajapaksa International Airport, were white elephants that forced Sri Lanka into a debt trap.
“The overpriced projects left Sri Lanka owing US$8bil (RM32bil), or around 10% of the island’s debt. That is close to what Sri Lanka owes Japan and India, but what rankles many is how Chinese loans have been used to fund questionable projects that generate little income,” he quoted Current History writers Neil DeVotta and Sumit Ganguly.
"The situation has fuelled accusations that China seeks to entice strategically located countries (others include Djibouti and the Maldives) into debt traps that it then leverages to seize control of key infrastructure.”
Mourdoukoutas said Dr Mahathir has been trying to avoid falling into the same trap that Sri Lanka did and he did so successfully in renegotiating the cost of the ECRL.
Malaysia has managed to bring down the construction cost of the ECRL by RM21.5bil, which is almost a third of the original cost.
The new price is set at RM44bil now, down 32.8% from the previous RM66bil.
With the new price tag, the construction cost for the project is now at RM68mil per km, against RM98mil per km originally.