Prime Minister Mahathir Mohamad said Monday a Chinese company building a rail link across peninsula Malaysia will jointly help to manage, operate and maintain the network that will help reduce the country’s financial burden.
The East Coast Rail Link was suspended after Mahathir’s alliance swept into power last May, a decision that strained Malaysia’s relations with China, its largest trading partner.
The project was revived last week after the contractor, state-owned China Communications Construction Company Ltd., agreed to cut the cost by one-third to 44 billion ringgit (USD 10.7 billion). The rail link connecting Malaysia’s west coast to eastern rural states is a key part of China’s Belt and Road infrastructure initiative. Mahathir said Monday the government chose to renegotiate the deal rather than pay compensation of 21.78 billion ringgit (USD 5.3 billion).
Under the new deal, Mahathir said CCCC will form a joint venture with Malaysia Rail Link to operate and maintain the network. The project is now slated for completion by the end of 2026. Malaysia’s chief negotiator Daim Zainuddin was quoted as saying previously that the lower costs would mean the government would be paying less in interest on the loans.
The project is largely financed by China and the main contract was awarded in 2016 to CCCC by former Prime Minister Najib Razak. The government has said it is investigating whether any money in the rail project had been channeled by Najib’s government to repay debts at the 1MDB state investment fund. A massive financial scandal at 1MDB led to the election loss of Najib’s coalition last May and Najib is currently on trial for multiple corruption charges linked to 1MDB.