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Malaysia suspends China-backed deals

07 July 2018

"And the interest also is of concern to us, because the interest is much higher than when governments borrow".

Malaysia Link Sdn Bhd (MRL) has ordered China Communications Construction Ltd (CCCC) to suspend all construction-related works of the East Coast Rail Link (ECRL) project with immediate effect.

"Out of all the projects in Malaysia it's the one most closely associated with [the] Belt and Road Initiative, so that will be the project Beijing will be most anxious about", Peter Mumford, Asia director at Eurasia Group, told the Financial Times.

Yesterday, Minister of Finance Lim Guan Eng said the final cost of the East Coast Rail Link (ECRL) project is actually RM81 billion and must be reduced significantly to make it viable financially.

Malaysia on Thursday suspended three major China-backed projects worth billions of dollars, the latest big-ticket items to be axed by the new government as it reviews deals signed by former Prime Minister Najib Razak.

Mahathir returned to power in May's lower house election.

Malaysia's Prime Minister Mahathir Mohamad speaks during an interview with Reuters in Putrajaya, Malaysia June 19, 2018.

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"There are several issues to be brought up, among which is the unfairness of the terms of the contract and also the loan", Mahathir said at a news briefing.

A Malaysian Foreign Ministry source said both sides had yet to finalise dates, but Dr Mahathir was "looking forward to visiting China". The Malaysian authority is also reviewing other large infrastructure projects financed by China, according to the Associated Press.

The finance minister noted that the expected cost rail link, the most expensive of the three projects, had increased by 26 billion ringgit (U.S. $6.4 billion) to 81 billion ringgit ($20 billion).

Lim said a report on the pipeline scandal would be filed with the Malaysian Anti-Corruption Commission, adding that he would "seek the assistance of the China government to help trace the flow of funds in China, in order to investigate the possibility of money laundering". He said the government has paid 8.3 billion ringgit ($2.1 billion) to the China Petroleum Pipeline Bureau but it has completed only 13 percent of the work.

Concerned over the country's finances, one of Mahathir's first acts was to scrap the $27.6bn high-speed railway between Kuala Lumpur and Singapore, which had been in the advanced planning stage.

He is showing a potential willingness to scrap global projects that he believes are not in the country's interests.

Najib was charged Wednesday for criminal breach of trust and corruption arising from investigations into alleged corruption at the 1MDB state investment fund.

Malaysia suspends China-backed deals