AFTER one year in federal power, Pakatan Harapan has saved RM45.84 billion through renegotiated projects.

The figure is tabulated based on published reports on the projects renegotiated as part of its electoral promise to review mega-projects approved under Najib Razak’s Barisan Nasional administration.

This figure is on top of the RM805 million the PH cabinet saved on renegotiating government supply contracts with overinflated price tags.

The review and renegotiations are based on a simple premise, Finance Minister Lim Guan Eng said previously: to save money to pay off massive debts incurred by Najib’s scandal-tainted administration.

However, Lim told reporters in a recent interview on PH’s first anniversary that savings from certain renegotiated projects have had to be used to bail out other state-owned institutions which suffered massive losses and debts due to mismanagement and dubious investments by those who ran them.

For example, savings from the Light Rail Transit 3 (LRT3) and Mass Rapid Transit 2 (MRT 2) projects have had to be used to save Felda and Tabung Haji, at RM6.3 billion and RM17.8 billion, respectively.

The biggest projects under review were the East Coast Rail Link (ECRL), Kuala Lumpur-Singapore High-Speed Rail (KLHSR), Bandar Malaysia, MRT 2 and LRT3.

Out of these, PH managed to save RM22 billion from renegotiating the ECRL, LRT 3 (RM15.02 billion) and MRT 2 (RM8.82 billion).

Former finance minister Daim Zainuddin, who negotiated the ECRL on behalf of Malaysia with the Chinese government, said there could potentially be more cost savings once the final details of the project are ironed out.

Meanwhile, the KLHSR project has been shelved for two years while the private-sector-driven Bandar Malaysia project has been revived with the original developers, China Railway Engineering Corporation (CREC) and Iskandar Waterfront Holdings Sdn Bhd (IWH).

Below are brief recaps of these projects:

MRT 2 and LRT 3

PH initially wanted to shelve MRT 2 priced at RM40 billion. It had also wanted to terminate the contract awarded to a MMC-Gamuda joint venture.

After renegotiating the project’s terms, MMC-Gamuda was given a turnkey contract to complete the above-ground portion of the project.

Lim said the cost rationalisation exercise of MRT 2 saved the government RM8.82 billion.

In the LRT 3’s case, its cost had ballooned to RM31.65 billion but a review brought the cost down to RM16.63 billion.

ECRL

While investors were relieved over the green light for MRT 2 and LRT 3, many were still sceptical of the ECRL as ministers had expressed contradicting views on the venture.

Economic Affairs Minister Mohamed Azmin Ali said in January the project was cancelled as the government could not afford the RM500 million annual interest on the loan for the rail line.

A few hours later, Lim expressed shock over his colleague’s statement.

Daim was then despatched to China to renegotiate the deal which had been undertaken by Malaysia Rail Link Sdn Bhd and China Communications Construction Company Ltd (CCCC).

On April 15, Prime Minister Dr Mahathir Mohamad said the project has been revived and that Malaysia has successfully renegotiated the deal, slashing RM22 billion from the original RM66 billion price tag.

Bandar Malaysia and KLHSR

Bandar Malaysia was supposed to be an ambitious mixed-development venture on land that was the old Sg Besi airport. It was also supposed to house the Kuala Lumpur terminus for the KLHSR.

It was given to a consortium between China Railway Engineering Corporation (CREC), which held 60% of the project, and Iskandar Waterfront Holdings Sdn Bhd (IWH), which held 40%. Johor owns about 40% of IWH.

It first ran into trouble in 2017 when the consortium failed to meet payment obligations. IWH-CREC has maintained that it had honoured all 12 payment obligations.

Four days after ECRL was revived, Dr Mahathir said Bandar Malaysia was also back on track with IWH-CREC reinstated as the developer.

He said initially there was a confusion within the cabinet as some thought that the project was awarded to a Chinese company.

Putrajaya decided to reinstate IWH-CREC after realising that the consortium is actually a joint venture between a Malaysian company controlled by tycoon Lim Kang Hoo and a Chinese company.

Although Bandar Malaysia will go on, the fate of the KLHSR is still uncertain as Dr Mahathir said negotiations have been suspended for two years due the government’s current financial constraints.

Nevertheless, the success of renegotiating these mega-contracts and the cost savings made is but the first milestone in the year-old government’s moves to consolidate an administration beset with problems and debt that it inherited. – May 9, 2019.