Dr M: We also got partial refund from earlier advance payment


PUTRAJAYA: Malaysia made significant success in renegotiating the East Coast Rail Link (ECRL) project with China, where apart from bringing down the construction cost, the government has also managed to get partial refund from the advance payment made by the previous administration.

Prime Minister Tun Dr Mahathir Mohamad said China Communi­cations Construction Company Ltd (CCCC) had agreed to refund part of the RM3.1bil advance payment paid for Phase 2, double tracking and the northern extension under the original contract.

The CCCC will refund RM500mil within a week from April 12, the date it signed a supplementary agreement with Malaysia Rail Link Sdn Bhd to pave the way for the resumption of the project.

“A further RM500mil (will be refunded) within a month from April 12, for a total of RM1bil.

“The balance will be settled within three months after deductions for verified claims due to abortive works, suspension and cancellation of the northern extension,” he told the media at a special press conference yesterday.

The Prime Minister, however, did not indicate the total amount to be refunded to the government.

The renegotiation also resulted in the cost of the project now to be at RM44bil, a significant reduction from the original cost of RM66bil.

Dr Mahathir explained that with the project now costing at RM44bil, the loan amount from China-EXIM Bank would be substantially reduced.

While the amount was still being negotiated, the government expect this to lessen its financial burden in terms of principal repayment amount, total interest costs and other fees, he added.

Under the original ECRL agreement, the total project cost was RM66.7bil and the loan amount from China-EXIM Bank at 85% would have amounted to RM56.7bil.

“Under the previous government, the current amount signed for with China-EXIM Bank is RM39.1bil for Phase 1 alone. The balance of the RM17.6bil for Phase 2 and the northern extension, luckily, were yet to be signed,” he said of the previous deal.

The government has also managed to increase local participation in the project where the percentage has now been increased to 40% of civil works from the 30% in the original deal in an effort to boost the local infrastructure sector, said Dr Mahathir.

Operation and maintenance of the ECRL will be through a joint venture company to be set up by CCCC and MRL with equal share.

This arrangement will ease the financial burden on Malaysia, which previously was to bear the entire cost of the operation and maintenance, said the Prime Minister, adding that this would improve the long-term viability of the project while leveraging on CCCC’s expertise in the two areas.

“We are confident that CCCC’s involvement will attract and spur investment along the rail link corridor, especially from China,” he said.

Pointing out that the Pakatan Harapan government is not against the ECRL project, the Prime Minister said its objection was always about the high cost of the original agreement signed by the Barisan Nasional administration.

“The government’s main objection to the original ECRL project was premised on the way and speed at which the original contract was negotiated and signed in 2016. It was an unjustified, hefty lump sum price which lacked clarity in terms of technical specifications, price and, by extension, economic justification,” he said.

Dr Mahathir said the government was faced with the choice to either renegotiate or pay termination costs of about RM21.78bil, with nothing to show for it.

“As such, we chose to go back to the negotiation table and call for a more equitable deal, whereby the needs of the Malaysian people would be prioritised,” he said.

Related stories:

Putrajaya to be rail hub

New ECRL alignment will protect Klang Gates Quartz Ridge

China welcome, but priority to local firms for mega projects

Work on ECRL expected to resume next month

New ECRL deal may become a case study for others

Local contractors want full packages under ECRL

ECRL , Dr Mahathir , CCCC , Refund