Why Malaysia is pulling out of the high-speed rail (HSR) project

  • For most observers, the announcement that Kuala Lumpur was scrapping the 350km HSR line to Singapore came a lot quicker than expected, as it was the ECRL project that was singled out for heavy criticism by the Mahathir-led Pakatan Harapan coalition during the 2018 election campaign.
  • A decision was taken to review mega projects undertaken by the Najib administration in the first Cabinet meeting of the Mahathir-led government on 23 May 18.
  • The revelations that MYR199bn in government guarantees had to be honoured and another MYR201bn of borrowings were hidden as “lease payments” for other big-ticket items gave the new administration ample political space to begin reversing the commitments of its predecessor.
  • Putrajaya has yet to officially communicate its desire to cancel the HSR deal with Singapore, and one expects it will be awhile yet before Malaysia is ready to talk terms.
  • Dr Mahathir was also keen on not wasting time. It was important to show decisive action to convince not just the public but also investors that, despite giving up a cash cow like the MYR45bn per annum GST while adopting a slew of populist measures, this government could balance its books.
  • The ECRL was a difficult tangle to unwind. Some MYR20bn of the China Exim bank loan was already drawn down and paid directly to the contractor, China Communications and Construction, based on a predetermined timeframe.
  • Boots and shovels were already on the ground, and “poking a dragon in the eye”, as one fund manager put it, would be a dangerous gamble.
  • The final call on the terms of cancelling the deal would be up to the Prime Minister. That negotiation process has not started. In fact, even up to the second Cabinet meeting on 30 May 18, a full accounting of documents pertaining to the HSR agreement had yet to be discovered.
  • Only on 31 May 18 did Finance Ministry officials hold a meeting with MyHSR, the Malaysian special purpose vehicle created as the co-owner of the rail project along with Singapore’s Land Transport Authority.
  • Putrajaya has yet to officially communicate its desire to cancel the HSR deal with Singapore, and one expects it will be awhile yet before Malaysia is ready to talk terms.

External Link: https://www.straitstimes.com/asia/se-asia/why-malaysia-is-pulling-out

3-Jun-2018


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