Malaysia set to scrap showcase infrastructure projects

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The new Malaysian government under Prime Minister Mahathir Mohamad is looking for ways to get out of obligations to pay for multi-billion dollar infrastructure projects initiated during the term of former prime minister Najib Razak.

The projects include the $17-billion Kuala Lumpur-Singapore high-speed rail project and the $14-billion East Coast Rail Link, which would serve as part of China’s One Belt, One Road initiative, as well as other large developments which have been inherited from Najib, including the Pan Borneo Highway, Bandar Malaysia and Tun Razak Exchange.

The aim is to reduce government debt by a total of around $50 billion from currently $251 billion, or about 80 per cent of GDP. Part of the new government’s austerity measures is also a cut of ten per cent on all ministers’ salaries, although this is widely seen to be a symbolic measure. “Non-essential” agencies such as the Land Public Transport Commission, National Professors Council and Special Affairs Department will be disbanded,

In an interview with The Edge published on May 26, Mahathir raised the possibility of both large rail projects being dropped, although this would involve substantial penalties for breaking contract agreements.

“We are renegotiating the terms,” Mahathir said, adding that “the terms are very damaging to our economy.”

For example, the East Coast Rail Link scheduled for completion in 2024 would cost in fact more than $23 billion by the time it is paid off due to the long repayment phase and accruing interest. The project is being built by China Communications Construction Co Ltd, and is being mainly financed by a loan from China Exim Bank.

“Najib knew very well that this railway is not something we could afford. It is not going to serve any purpose, it is not going to give us any returns,” Mahathir said in the interview.

However, experts and politicians have said that scrapping the Kuala Lumpur-Singapore high-speed rail would be a “waste” since it was an essential infrastructure project for the benefit of both countries as it would strengthen their roles as regional business hubs.

MyHSR Corporation, the state firm tasked with implementing the high-speed railway on the Malaysian side, estimated that Malaysia could lose more than $53 billion in gross national income from spillover effects until 2035 if the project was dropped.

UPDATE: Mahathir on May 28 definitely confirmed that the high-speed railway to Singapore will not be built and the penalty will be 500 million, whereby he had yet to verify whether the amount  would be in ringgit or Singapore dollars “or any other currency.”

 

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Reading Time: 2 minutes

The new Malaysian government under Prime Minister Mahathir Mohamad is looking for ways to get out of obligations to pay for multi-billion dollar infrastructure projects initiated during the term of former prime minister Najib Razak.

Reading Time: 2 minutes

The new Malaysian government under Prime Minister Mahathir Mohamad is looking for ways to get out of obligations to pay for multi-billion dollar infrastructure projects initiated during the term of former prime minister Najib Razak.

The projects include the $17-billion Kuala Lumpur-Singapore high-speed rail project and the $14-billion East Coast Rail Link, which would serve as part of China’s One Belt, One Road initiative, as well as other large developments which have been inherited from Najib, including the Pan Borneo Highway, Bandar Malaysia and Tun Razak Exchange.

The aim is to reduce government debt by a total of around $50 billion from currently $251 billion, or about 80 per cent of GDP. Part of the new government’s austerity measures is also a cut of ten per cent on all ministers’ salaries, although this is widely seen to be a symbolic measure. “Non-essential” agencies such as the Land Public Transport Commission, National Professors Council and Special Affairs Department will be disbanded,

In an interview with The Edge published on May 26, Mahathir raised the possibility of both large rail projects being dropped, although this would involve substantial penalties for breaking contract agreements.

“We are renegotiating the terms,” Mahathir said, adding that “the terms are very damaging to our economy.”

For example, the East Coast Rail Link scheduled for completion in 2024 would cost in fact more than $23 billion by the time it is paid off due to the long repayment phase and accruing interest. The project is being built by China Communications Construction Co Ltd, and is being mainly financed by a loan from China Exim Bank.

“Najib knew very well that this railway is not something we could afford. It is not going to serve any purpose, it is not going to give us any returns,” Mahathir said in the interview.

However, experts and politicians have said that scrapping the Kuala Lumpur-Singapore high-speed rail would be a “waste” since it was an essential infrastructure project for the benefit of both countries as it would strengthen their roles as regional business hubs.

MyHSR Corporation, the state firm tasked with implementing the high-speed railway on the Malaysian side, estimated that Malaysia could lose more than $53 billion in gross national income from spillover effects until 2035 if the project was dropped.

UPDATE: Mahathir on May 28 definitely confirmed that the high-speed railway to Singapore will not be built and the penalty will be 500 million, whereby he had yet to verify whether the amount  would be in ringgit or Singapore dollars “or any other currency.”

 

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