Malaysia: KL to announce ECRL decision this week after mixed messages

January 29, 2019
Posted by: admin
Category: Daily News

The status of the controversial East Coast Rail Link (ECRL) project has grown more ambiguous arising from conflicting announcements by Lim and Economic Affairs Minister Mohamed Azmin Ali on ECRL.
Former prime minister Najib Razak posted on Facebook on 28 Jan 19, the allegedly official letter dated 18 Jan 19 from the Finance Ministry cancelling the project and urged the Pakatan Harapan government to come clean on the matter.
Following that, Prime Minister Dr Mahathir Mohamad has denied the veracity of a letter stating the government’s confirmation that the ECRL project is cancelled and urged the public to be patient and wait for an announcement by Finance Minister Lim Guan Eng.
Meanwhile, 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.
Malaysia’s cancellation of the ECRL project could be an economic catastrophe as compensation would come up to MYR20bn.
It is also 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.
Also, the Straits Times reports fear of retaliation from Beijing could be one of the reasons for the lack of a coherent response from the Malaysian government to the question of whether it would proceed with the MYR81bn project.
Cancellation of the project contracted to the state-owned China Communications Construction Company could provoke “tough” actions from Beijing, such as suspending its contract to purchase palm oil from Malaysia – a move that will hurt producers like Felda, which is already financially strapped.
“More punishing for Malaysia would be if the Chinese were to make a full-blown declaration of a default on the project that was awarded by the previous government in Oct 16 to state-owned CCCC with financing from the Export-Import Bank of China,” the report said.
Also, CCCC and Exim Bank could demand compensation and penalties amounting to as much as MYR19.53bn ringgit and failure to settle which could lead to complications for other similar loans taken by the Malaysian government.
Senior government officials familiar with discussions with Beijing over the issue said Beijing has consistently taken the position that it would not accept a termination of the ECRL project because it formed an integral part of its One Belt, One Road network and that it ranked as the single-largest project in South-east Asia under the ambitious plan. China was, however, open to continuing the project on revised terms.