Malaysia investigates China-backed project links with 1MDB

07 July, 2018, 09:41 | Author: Carlos George
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Malaysian Finance Minister Lim Guan Eng pegged the total cost of the rail link project at almost 81 billion Malaysian ringgits and called it as "highly inflated", after taking into account various factors such as land acquisition, land interest fees and operational costs.

Najib's close relationship with China, which has been pouring billions of dollars into Malaysian infrastructure and real estate, has now come under the spotlight.

Finance Minister Lim Guan Eng said the project's final cost, which is almost 50 percent higher than estimated by the previous government, includes land acquisition, interest, fees and other operational costs. Weeks later, Mahathir said that his government would review the bullet-train project.

The new Malaysian government has also halted $2.3bn worth of pipeline projects awarded to a Chinese firm under Najib's watch, saying it has been paying for work not done, and asking the Chinese government for help in investigating money laundering (more below).

Mr. Najib had been defeated in the May 9 elections and was charged with corruption over the 1MDB (1Malaysia Development Berhad) fund on July 4, 2018.

Finance Minister Lim Guan Eng and Daim Zainuddin, who chairs a top-level economic advisory council drawn from the private sector, are also visiting China separately.

The suspension came just a day after Finance Minister Lim Guan Eng called for a sharp price reduction in the 688-kilometer (430-mile) East Coast Rail Link after discovering that the project's actual cost is 81 billion ringgit ($20 billion), almost 50 percent higher than that estimated by the previous government. It has urged Mahathir's government to "honor and respect" the contract signed by Najib's administration.

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Malaysia suspended three of its largest China-backed projects worth $22 billion on Thursday.

"We're confident [that] first of all, this project is based on business principles - it is very open and transparent", he said that in the case of the ECRL, the project was in response to internal demand with the aim towards creation of value.

"While the duration of the suspension has not been specified, we are concerned about incurring additional cost, losses and damages arising from the suspension".

"This suspension shall take effect immediately and will be in force until further instruction from us", said the letter signed by MRL chief executive officer Datuk Sri Darwis Abd Razak.

Lim said the Chinese contractor, state-owned China Communications Construction Company (CCCC), would have to make a "drastic price reduction" for the scheme to go ahead.

CCCC said it hoped both sides can find a win-win solution through negotiations and that the suspension will be lifted soon. 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.

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