DUNGUN, Terengganu: China and Malaysia resumed construction of the East Coast Rail Link (ECRL) project in peninsula Malaysia on Thursday (Jul 25), after a year-long suspension and following a rare agreement to cut its cost by nearly a third to about US$11 billion.
The project was initially cancelled by Malaysian Prime Minister Mahathir Mohamad, who came to power after a shock election victory in May last year, as he followed through a pledge to renegotiate or cancel "unfair" Chinese mega-projects approved by his predecessor, Najib Razak.
But in April, the close trade partners agreed to proceed with the ECRL project at a cost of RM44 billion (US$10.7 billion), reducing it from RM65.5 billion.
The 640km line, with China Communications Construction as the lead contractor, will connect Port Klang on the Straits of Malacca with the city of Kota Bharu in northeast peninsular Malaysia.
The agreement to resume work on the project had immediately boosted confidence in Malaysia among foreign investors, China's ambassador to Malaysia said at a ceremony in the coastal district of Dungun.
Flanked by cranes and trucks parked near a partly completed section of a tunnel, ambassador Bai Tian spoke of "a great wave" of potential Chinese investors coming to Malaysia for field studies, and he expected many of them to decide to invest.
China is debt-heavy Malaysia's biggest trade partner and the countries have close cultural ties too.
Mr Bai said the completion of the ECRL, expected by December 2026, could more than double the number of Chinese tourists coming in to Malaysia from 3 million last year.
Malaysia Rail Link, the project's local partner, said in a statement that up to 70 per cent of the workers will be local and that domestic contractors will get 40 per cent of the civil works.
During the suspension, Singapore and Malaysia would hold discussions aimed at cost reduction, according to a joint statement issued at that time. Malaysia has paid Singapore S$15 million for costs incurred in suspending the project.
There were signs of progress last month as the Malaysian company managing the project, MyHSR, said it had appointed technical and commercial consultants to review proposed design changes and identify options to cut cost.
China's Belt and Road Initiative (BRI) has been praised for its potential to speed up economic development in many developing countries but criticised for potentially saddling many of them with unsustainable debt.
Malaysia's Finance Minister Lim Guan Eng told Reuters on Monday that Beijing had offered Malaysia more BRI infrastructure investments and that Kuala Lumpur would consider them "if the pricing is right".
Malaysia is already identifying new joint investment opportunities with China along the ECRL corridor, Malaysian Transport Minister Anthony Loke said at the Dungun event.