NEGOTIATIONS over the East Coast Rail Link (ECRL) are continuing, a visiting Chinese foreign official said today, amid confusion in Putrajaya over the status of the RM81 billion project.

China’s Foreign Affairs Vice-Minister Kong Xuanyou told Channel NewsAsia that negotiations are being carried out and have yet to reach a conclusion, noting the outcome will not affect ties between the two countries.

He had lunch with Wisma Putra officials today in Putrajaya.

Meanwhile, Prime Minister Dr Mahathir Mohamad said Finance Minister Lim Guan Eng will issue a statement on the matter soon. 

“Has Guan Eng given a statement ? If he hasn’t, let’s just wait for him,” he said today.

“We will wait. We have to be patient. Sometimes, people make mistakes. We have to understand that this is a new government. The number of mistakes we (have made) is not (a lot) but people notice them very much because this is a new government.”  

The status of the project signed by the former Barisan Nasional government has been up in the air since it lost the May 9 polls. Dr Mahathir had ordered a review of the project, adding that it could be done on a smaller scale.

Economic Affairs Minister Azmin Ali said last week the cabinet had cancelled the project due to the high interest rate of RM500 million a year on the loan but Lim differed, saying there had been new instructions from Dr Mahathir.

Industry sources said Malaysia’s cancellation of the ECRL project could be an economic catastrophe as compensation would come up to RM20 billion.

Dr Mahathir’s suggestion to rescale the project would circumvent the compensation clause in the contract, the industry sources said, noting the ECRL could be built in phases, like the North-South Highway in the late 1980s and early 1990s. 

The project timeline agreed to is seven years but the industry sources said the project could be completed over 20 years, which is the duration of the loan repayments.

It is understood that China’s Export-Import Bank could call a default overnight on all loans extended to Malaysia if the rail deal is terminated. Among such loans is one for a pipeline project.

Analysts said a loans recall would affect Malaysia’s credit ratings. Fitch last graded Malaysia A- and Moody’s, A3.

The ECRL is the largest as well as the most strategic project under Chinese President Xi Jinping’s Belt and Road Initiative. – January 28, 2019.

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