KUALA LUMPUR, Jan 30 — Malaysian Institute of Economic Research (MIER) executive director Prof Zakariah Abdul Rashid today said that it would be understandable if the federal government decides to cancel the East Coast Rail Link (ECRL) project and pay compensation instead.

He said it was currently unclear if the Malaysian government would proceed with the ECRL, but suggested that paying compensation for its cancellation would help ensure government finances remain viable.

“From my point of view, I think we have to look at the ECRL project, not only from the point of view of the ECRL, but also we have to look at the sustainability of public sector finances.

“That’s why I understand why the government said that the amount of compensation paid will be more manageable than if we were to bear the burden of debt for the next 30 years,” he said at a press conference on MIER’s economic outlook for 2019.

Advertisement

“They are talking about the financial sustainability of federal government finances, this means it will affect your fiscal deficit, your rating.

Zakariah said he would agree to the ECRL proceeding if the Malaysian government had the funds for it, noting its touted benefits of connecting the east coast of Peninsular Malaysia to the Klang Valley.

Later, when met, Zakariah explained that making government finances more viable includes making sure the country’s fiscal deficit is at a “manageable level”, and also making sure the country’s debts can be paid “comfortably”.

Advertisement

“The ECRL is one of the elements that contributes to debts. You don’t look at the ECRL alone, you have to look at the bigger picture of public sector accounts, but if you want to see the public sector account is healthy, then you have to sacrifice the ECRL,” he said.

He agreed it would be “worthwhile to safeguard our public sector accounts” to pay compensation instead of continuing the project, further outlining the potential risks for Malaysia if government finances do not remain sustainable.

“Because you see when the public sector account is not healthy, then our future generations will be affected.

“That means we can’t borrow money, we cannot spend, not only on the ECRL but on education, we can’t pay for our subsidies or health expenditure. It will affect everything,” he said.

“That’s why I said the bigger picture is public sector accounts, so we have to sacrifice the ECRL for the sake of bigger considerations.

“But of course, you cancel, you have to pay compensation, but what to do, that’s the mistake we have done,” he said, referring to the signing of the ECRL deal under former prime minister Datuk Seri Najib Razak’s administration.

Yesterday, Prime Minister Tun Dr Mahathir Mohamad said the compensation for ending the ECRL project would be significantly lower than the estimated cost of over RM100 billion if the project were to ahead.

“Huge compensation is not as huge as the amount of debt we will carry for the next 30 years.

“It is not that we do not want to honour our contracts, but we just cannot pay. These contracts will cost us more than RM100 billion,” he had said.

MORE TO COME