The 648km East Coast Rail Link (ECRL), which originally cost RM65.5bil, was the biggest mega project proposed by the previous government headed by Datuk Seri Najib Razak to China’s state-owned enterprises to bail out 1MDB.
As testified by Datuk Amhari Efendi Nazaruddin, former special officer to Najib who is a key witness in the ongoing 1MDB trial, four other schemes were also planned, all designed to fill the crater of debt created by the pillaging of 1MDB.
Amhari testified that Najib sent him to China on a “secret mission” in 2016 to convince authorities in Beijing to help pay 1MDB’s debts. In return, China’s state-owned companies were to be awarded massive infrastructure projects.
He mentioned the Bangkok-Kuala Lumpur high-speed rail link, a petroleum pipeline from Port Klang to Kuala Kedah, the Trans-Sabah Gas Pipeline (TSGP), the Multi-Product Pipeline (MPP) and the development of Labuan into an offshore banking and tourism hub.
The 600km MPP, costing RM5.35bil, was to connect Melaka and Port Dickson to Jitra, Kedah, while the 662km TSGP was to link the Kimanis Gas Terminal to Sandakan and Tawau at the cost of RM4.06bil.
Both projects were awarded to China Petroleum Pipeline Bureau (CPPB) on Nov 1, 2016.
Shockingly, RM8.3bil, or 88% of the total value of the projects, was drawn down and paid to CPPB when only 13% of the projects was completed.
The RM8.3bil was paid in cash and borrowings guaranteed by Najib’s administration through a 20-year loan from the Export-Import Bank of China.
The Malaysian government is negotiating with China to resolve the knotty issues linked to the cancelled MPP and TSGP contracts.
In the case of the ECRL, it was reported that almost RM20bil (including an advance payment of RM10bil) had already been paid to China Communications Construction Company Ltd (CCCC) before Pakatan Harapan came to power after last year’s general election.
The new government found itself in a predicament.
It had to choose between paying the contract termination cost of RM21.78bil without getting anything in return or renegotiate for a better deal. It opted for the latter.
On April 12, Malaysia Rail Link Sdn Bhd (MRL) and CCCC signed a supplementary agreement to resume the project at the reduced cost of RM44bil, or a reduction of 32.8% of the original cost.
Under the new deal, which covers two phases of the engineering, procurement, construction and commissioning of the ECRL, the cost per km of the track was cut from RM95.5mil to RM68.7mil.
The new alignment will pass through five states and Putrajaya instead of the four under the previous agreement and will have 20 stations, including Kota Baru, Kuala Terengganu, Kuantan, Kuala Klawang, Nilai and Port Klang.
An important part of the new contract is the participation of CCCC in the operation and maintenance of the ECRL through a joint venture company with MRL.
In addition to technical support, it will also share operational risks when the project is completed in December 2026.
The project is currently at the stage of finalisation of the alignment, and tenders are expected to be called for local subcontractors to undertake 40% of the civil works.
However, despite the changes and cost savings under the supplementary pact, criticism against the ECRL has continued.
The constant contention is that it would end up as white elephant, not economically viable even based on the reduced RM44bil price tag.
Based on today’s exchange rate, it might take up to 80 years to repay the loan, a huge burden for future generations of Malaysians.
Amhari’s revelations in court have rekindled the stringent calls for the ERCL to be cancelled or re-negotiated and among those in the forefront pushing for this are PKR president Datuk Seri Anwar Ibrahim and prominent economist Dr Jomo Kwame Sundaram.
Anwar said the terms and conditions of the agreement needed to be reviewed and the price reduced in the light of the disclosures in court.
Warning that the current government must not be seen as complicit in continuing to cover up what the previous government did with public funds, Jomo said the disclosure of the circumstances under which the ECRL initiated was important.
Finance Minister Lim Guan Eng agreed with Jomo but said the government had to bear in mind China’s position as Malaysia’s biggest trading nation, noting that the protracted discussions were held before the project was re-negotiated, without having to go to court for settlement on compensation.
With China being an economic and political superpower, the pros and cons must be weighed carefully.
The question to ask is whether short term gains would be worth the long-term pain?
Jomo, who was a member of the Council of Eminent Persons that advised the government on economic and financial matters, said Malaysia should approach the Chinese government to relook the issue of the project’s integrity and viability.
He has suggested that the ECRL could be cancelled without upsetting China, adding that there were many individuals in the country who were capable of leading the talks with Beijing.
But why go far? As the calls for review and cancellation are coming from one of the country’s most prominent economists and the “Prime Minister in waiting”, should they be given key roles in the discussions for the cancellation or re-negotiation of the ECRL?
There is no doubt that these men who have vast experience in economic and international relations will continue to feature prominently in the country’s political and economic landscape in the coming years.
So why not let them undertake this most important mission?
Media consultant M. Veera Pandiyan likes this quote by Confucius: By three methods we may learn wisdom: By reflection, which is noblest; by imitation, which is easiest; and by experience, which is the bitterest. The views expressed here are entirely the columnist’s own.
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