THE RM55 billion East Coast Rail Line (ECRL) has a “strange” arrangement, where the loan for Malaysia to build the link is kept abroad, Prime Minister Dr Mahathir Mohamad told The Edge.

He said this led to suspicions that some of the money was used to repay 1Malaysia Development Bhd debts and buy certain companies.

The Pakatan Harapan chairman said money from the loan, taken by Malaysia from the Export-Import Bank of China, is kept abroad and paid to state-owned construction company China Communications Construction Co Ltd (CCCC) in China.

He said another unusual practice is that payments to CCCC are based on a predetermined timetable, and not on the basis of work done.

“That (ECRL) contract is strange. The contractor must be from China, and the lending is from China. And, the money is not supposed to come here, but (kept abroad) to pay the contractor in China,” he said in an interview with the business weekly two weeks after taking office.

The Edge said this is “not the normal way”. Under usual practice, the loan would have been drawn down in Malaysia and paid to the foreign company’s local subsidiary, since the project is in Malaysia.

When asked by The Edge about talk that the ECRL loan had been used to retire 1MDB’s debts and acquire companies, Dr Mahathir said: “Yes, there is suspicion.”

He said the PH government will review and renegotiate the terms of the project.

Citing sources and a document it sighted, The Edge reported that the ECRL could have been built for under RM40 billion, but the price was inflated to RM60 billion. The additional sum was allegedly used to help pay some of 1MDB’s debt obligations and for the purchase of two companies linked to financier Low Taek Jho, an associate of former prime minister Najib Razak and who is at the centre of the massive 1MDB scandal.

Dr Mahathir also said by the time Malaysia had paid off the debt for the ECRL, it would cost the country RM92 billion with interest. – May 26, 2018.