THE cost of the East Coast Rail Line may have been hiked to pay off debts from 1Malaysia Development Bhd, said former Council of Eminent Persons member Jomo Kwame Sundaram.

China’s Exim Bank was to finance 85% of the 688km railway track, with the Malaysian government paying the remaining 15% of the funding requirement, amounting to about RM8.25 billion.

Prime Minister Dr Mahathir Mohamad said in June that the previous government “had borrowed RM55 billion from China” with China Communications and Construction Co hired as the main contractor.  

Speaking at a book launch in Universiti Malaya today, Jomo said that although the railway track to benefit freight transport in the east coast of the peninsula was a “noble” concept, the project was never financially feasible from the outset.

“The fact of the matter was that the job, the whole project, even at its original cost, which was RM28 billion, would never have paid for itself.

“In fact, the final cost was RM81 billion. And if you add the interest, et cetera, it would be over RM100 billion,” he said at the book launch of Till Debt Do Us Part by Universiti Malaya business and accounting professor Mohd Nazari Ismail.

“That was the kind of debt that was being incurred. Now, you might ask: why did the price almost triple from the original RM28 billion?”

“Well, you know the answer to that. Maybe our graduate from the Wharton School of Finance… or his master,” Jomo said, referring to Penang-born businessman Low Taek Jho, who is a Wharton business graduate, and former prime minister Najib Razak.  

“The fact of the matter was that the debt incurred was probably to help pay off the earlier scam – I’m sorry, 1MDB – because something went wrong with 1MDB.

“There was a need to pay that debt off, and of course, to finance GE14. I suspect that was part of it.”

Malaysia and China are negotiating the RM55 billion price tag for the ECRL project, with Prime Minister Dr Mahathir Mohamad saying in a recent interview with The Malaysian Insight that parties are offering to do it for as low as RM10 billion.

Dr Mahathir visited China last month to discuss certain deals, such as the ECRL and two pipeline projects, that were agreed to during Najib’s administration.

Najib said on Tuesday that Beijing was angry as the ECRL project was a key component to China’s Belt and Road Initiative which Chinese president Xi Jinping wanted as his legacy.

“We are all focusing on the Monets, and the pink diamond, and so on and so forth, but I think there are fundamental issues about the financing of the Malaysian political system, which need to be addressed,” Jomo said.

Jomo said 1MDB, which investigators believed US$4.5 billion (RM18.6 billion) has been misappropriated from, probably spun uncontrollably away from the original intent of its key figures.

“The scheme went seriously, seriously wrong. Frankly, I don’t think the people concerned made all the money. I think they were taken for a ride.”

Jomo also commented on news reports that investment bankers from Goldman Sachs structured 1MDB debt issues to secure outsized profits, making off with US$600 million of taxpayers’ money.

“These are scandalous by any standards. People think Malaysians are stupid. Stupid, to agree to such terms and conditions. But of course, it was not just stupidity. It was greed.” – September 14, 2018.