AUGUST 22 — From an engineer’s point of view, it was a failure because Mahathir had to announce the cancellation of three major projects namely: East Coast Rail Link (ECRL) and two gas pipeline projects.
It is obvious to anyone with simple common sense that the three contracts are completely lopsided, heavily tilted in favour of the Chinese. It was a win-lose situation where Malaysia is the heavy loser. Never in my 40 years of practice as a professional civil engineer in the construction industry that I come across a contract whereby the payment is time-based rather than work progress-based. As a result, in ECRL, the progress of work done is only 15 per cent but the payment is already 36 per cent. In other words, the work done is only worth RM8.28 billion but the contractor has already been paid RM19.68 billion. In the case of the gas pipelines contract, the scenario is worst. The work done is only 13 per cent but 88 per cent of the contract sum has been paid.
With this kind of time-based contract, even a RM2 company can do the work. One only need to used political connection to get the project and total sub it to a competent contractor at a lower contract sum. The difference in contract sums would be the clean profit made by the RM2 company.
To make the matters worse, there is no termination clause in the contract. Any unilateral termination will result in heavy penalty which seems to have a punitive element.
Reading between the lines, I presume that our PM went to China with the hope of renegotiating the contracts to make them fairer. Apparently, the Chinese party is not open to renegotiate.
As a result, it was a lose-lose situation between China and Malaysia.
ECRL is important to China because of its strategic geo political advantage. ECRL provides China with alternative trade and naval route. As it is now, the Straits of Malacca and Singapore form a critical strategic trade and naval route for China. China also needs the three projects because of the excess capacity due to slowing down of its own economy.
On the other hand, by cancelling the three projects, Malaysia loses heavily because of the cost abortive work and the resultant financial compensation for unilateral termination of contract. We also lose the inherent benefit of the projects, job creation plus the economic multiplier effect. In view of the size of the projects, the contribution to economic growth and spin off is significant.
Nevertheless, I am glad that our PM stood firm and is not a pushover despite talking to a giant.
However, all is not lost. There are successes in other fronts. My view is just from the perspective of an engineer involved in a small part of nation building for the infra structural development of our beloved nation, Malaysia.
* Nehemiah Lee is a professional civil engineer who loves Malaysia. He is also avid political observer.
** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
