Fitch unit sees Putrajaya, Beijing chasing win-win ECRL outcome

Fitch Solutions Macro Research issued a report today saying Prime Minister Tun Dr Mahathir Mohamad had to balance negotiating an affordable deal and wanting to maintain healthy bilateral ties with China. — Picture by Shafwan Zaidon
Fitch Solutions Macro Research issued a report today saying Prime Minister Tun Dr Mahathir Mohamad had to balance negotiating an affordable deal and wanting to maintain healthy bilateral ties with China. — Picture by Shafwan Zaidon

KUALA LUMPUR, Feb 20 — Malaysia and China are likely negotiating a mutually beneficial resolution to the East Coast Rail Link (ECRL), Fitch Solutions Macro Research predicted from the time it has taken to announce a decision.

The Fitch unit issued a report today saying Prime Minister Tun Dr Mahathir Mohamad had to balance negotiating an affordable deal and wanting to maintain healthy bilateral ties with China.

“This motivation is driven by Malaysia’s deepening economic cooperation with China, and the government will unlikely want to risk a strain in relations by cancelling the ECRL.

“Also, we believe the Malaysian government would want to avoid reputational damage which could arise from the cancellation of the ECRL,” said the report.

It noted that high costs needed to complete the ECRL, a flagship project under China’s Belt and Road Initiative (BRI), remained a major concern for Dr Mahathir.

It noted how China recently offered to reduced the original US$20 billion (RM81.3 billion) price tag.

“Such a move suggests that the Chinese are determined to proceed with the project and the delay of an official announcement by the Malaysian government, two weeks after China’s refreshed offer, suggests that the Malaysian government might be reviewing the project with renewed interest.”

Aside from diplomatic ties, it said Malaysia also needed to consider China’s role as a major trading partner.

The report also suggested that investors’ confidence, mainly in the infrastructure sector, and potential foreign investors would be deterred from cooperating with the government, should the ECRL be scrapped.