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Malaysia revives China-backed rail link, cost cut by a third

AP  |  Kuala Lumpur 

said Friday it has decided to resume a China-backed rail link project, after the Chinese agreed to cut construction cost by one-third.

The deal ended months of vacillating over the 688-kilometer (430-mile) East Coast Rail Link, which connects to eastern rural states and is a key part of China's Belt and Road infrastructure initiative.

The prime minister's office said in a statement it welcomed the signing of a supplementary agreement between Rail Link Sendirian Berhad and state-owned Communications Construction Company Ltd. to revive the project. The agreement covering engineering, construction and other aspects of the project followed months of negotiations.

It said the construction cost of the first two phases of the project will be cut to USD 10.7 billion, down one-third from the original cost of USD 15.9 billion.

"This reduction will surely benefit and lighten the burden on the country's financial position," the statement said. will give further details at a conference on Monday, it added.

Since winning elections last May, has axed or reviewed large-scale infrastructure projects to rein in a surging national debt that it blames mostly on corruption in the previous government.

The government last year suspended works on the rail link pending renegotiations.

Mahathir initially suggested the rail project will be called off because the high cost could burden the country with debts for decades. But he later said negotiations were ongoing and the government hadn't made a final decision.

The project is largely financed by and the main contract was awarded in 2016 to CCCC by former has said the final cost could balloon to over USD 24.2 billion but bids to terminate the project pose a challenge to the government, which has to pay compensation and risk angering China, Malaysia's largest trading partner.

Apart from the rail link, the government last year also cancelled two China-backed pipelines costing USD 2.3 billion after discovering that 90 percent of the project's costs had been paid but only 13 percent of work had been completed.

The government has said it is investigating whether any money in the rail project has been channeled by to repay debts at the 1MDB state investment fund. A massive financial scandal at 1MDB led to the shocking election loss of Najib's coalition last and Najib is currently on trial for multiple corruption charges linked to 1MDB.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, April 12 2019. 13:25 IST