PUTRAJAYA: Prime Minister Mahathir Mohamad said on Monday (Apr 15) that Malaysia intends to take advantage of the revived East Coast Rail Link (ECRL) project to sell more palm oil to China, after a successful renegotiation saved it from having to fork out RM21.78 billion (US$5.3 billion) in cancellation fees.
The rail project, which was suspended last July, is now back on track after the two governments and their respective companies agreed to cut the cost of the project by a third to RM44 billion and shorten the route.
The initial deal signed by former premier Najib Razak was projected at RM65.5 billion and deemed “lopsided” by Dr Mahathir, a critic of China’s investments in Malaysia.
The 640km line will now be rerouted through Negeri Sembilan and cover the states of Selangor, Pahang, Terengganu and Kelantan.
The signing of a supplementary agreement between Malaysia Rail Link and China Communications Construction Company (CCCC) to resume the project took place in Beijing last Friday.
THE "IMPROVED" ECRL DEAL
Listing the successes of the renegotiation, Dr Mahathir said in a press conference on Monday that Malaysia aims to use the deal to sell more palm oil to China.
“It’s not directly related, but we are taking advantage of the signing of the agreement to work out purchase of palm oil by China,” said Dr Mahathir.
Dr Mahathir, who previously said that Malaysia would be "impoverished" if it continued the deal, said on Monday that the government would have had to fork out RM21.78 billion “with nothing to show for it” if it insisted on calling off the project.
Hence, Pakatan Harapan decided to go back to the negotiation table with China and strike a mutually beneficial agreement, he said.
Dr Mahathir also said it is in negotiations with the Export-Import Bank of China on a reduced loan for the ECRL, which would now be reduced substantially.
“We envisage that this will result in lessening the financial burden of the government in terms of the principal repayment amount, total interest costs and other fees,” he said.
The prime minister also revealed that CCCC has agreed to refund part of the RM3.1 billion advance payment Malaysia has already paid for the second phase of the project.
China has also agreed to share the operational risk of the rail link when it is completed in 2026 – two years later than the initial target, Dr Mahathir said, thereby easing the financial burden on Malaysia, which under the previous agreement was to bear the entire operational and maintenance costs.
In an earlier report, the Star quoted a source saying that China had been very accommodating during the negotiation to revive the ECRL as it is a flagship project under Chinese President Xi Jinping’s Belt and Road Initiative.
Back when bilateral ties were at an all-time high under Najib’s administration, Mr Xi had promised to buy Malaysia’s palm oil “without upper limit”.
However, Malaysia - the world’s second largest palm producer after Indonesia - has suffered a decline in palm oil exports to China since last year, following suspension of Chinese projects in Malaysia.
Dr Mahathir's confirmation that higher palm oil exports from Malaysia to China was expected with the new ECRL deal could lead to stock reduction and a rebound in Malaysia's crude palm oil price.