KUALA LUMPUR, March 7 — Prime Minister Tun Dr Mahathir Mohamad has maintained that the construction of the China-backed East Coast Rail Link (ECRL) on the scale it was initially proposed did not make good economic sense.
In an interview with the South China Morning Post, he gave a rundown of factors, including the sparse population in areas served by the railway, the small concentration of business and the fact that the current east coast railways were not profitable even when they were heavily used.
“The ROI (return on investment) is nothing. It will take 40, 50 years for us to repay the loan. So we want to avoid incurring debts, borrowing too much from countries,” he said when met on the sidelines of his visit to Manila.
The prime minister said negotiations with ECRL contractor, China Communications Construction Company, were ongoing and that Malaysia hoped to significantly reduce the project cost from the current RM55 billion.
He was tight-lipped when asked if he had a price point in mind, but conceded that Malaysia was trying to avoid having to compensate the contractor by cancelling the 688km project inked under the previous Barisan Nasional administration.
“Well, because we know that you can’t terminate unilaterally a contract. You have to pay compensation. The compensation can be very big. Between having to pay compensation if you stop and carry on if the price is reduced, will be something that we will consider to see which one is best,” he told the Hong Kong daily.
Dr Mahathir also admitted that it was “going to be very difficult” to come to a resolution soon on the ECRL.
“Naturally, the Chinese do not want to stop the project because it is a big project. I think it is good for their business. On the other hand, we don’t have the money. We don’t want to borrow so much money. So there is an ongoing negotiation. If it must go on, the price must be affordable to us,” he said.
Dr Mahathir is set to attend China’s second official summit on the Belt and Road Initiative in April where the ECRL could be brought up.
On February 19, it was reported that discussions between the prime minister’s advisor Tun Daim Zainuddin and China to reduce the size and cost of the ECRL project had reached the ‘last mile’.
Bloomberg quoted Foreign Minister Datuk Saifuddin Abdullah as saying Malaysia had made progress in talks with China on the rail project that the Pakatan Harapan government previously sought to cancel.
“China understands our constraint and they’re willing to scale down the size of the project and the cost. The discussion is probably in the last mile,” he had said.
Putrajaya sparked confusion last month when Economic Affairs Minister Datuk Seri Mohamed Azmin Ali and Finance Minister Lim Guan Eng made contradictory remarks about the status of the ECRL project on whether or not it had been cancelled.
