Prime Minister Mahathir Mohamad said Friday he will visit Beijing next month to renegotiate terms for China-backed rail and gas pipeline projects in Malaysia worth more than $22 billion. It is largely financed by China and the main contract was awarded in 2016 to China Communication by former Prime Minister Najib Razak, who was defeated in May 9 elections.
The announcement by the foreign ministry came a day after Najib was criminally charged in a Kuala Lumpur court following his arrest on suspicion of corruption linked to 1MDB, a state investment fund he started in 2009.
East Coast Rail Link is a key part of China's regional Belt and Road infrastructure initiative.
The entire 688-km (428-mile) ECRL will connect the South China Sea off the east coast of peninsular Malaysia with the strategic shipping routes of the Straits of Malacca to the west.
One project involves the construction of Malaysia's longest railway. (CCCC) responded to the notice with its own news release stating that the ECRL contract had been signed with Malaysia Rail Link Sdn Berhad (MRL), which represented the Malaysian government.
The government also says it will halt pipeline projects.
Malaysian exporters, especially palm oil producers, have been urged to take advantage of the current US-China trade war which may see the later facing difficulty in replacing its soybean supplies.
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"While the duration of the suspension has not been specified, we are concerned about incurring additional cost, losses and damages arising from the suspension".
CCCC said in a statement it regretted the suspension and was "upset and concerned" over the livelihood of its more than 2,250 local staff and other indirect hires. "We also hope that the suspension will be lifted as soon as possible", it said in a brief statement.
The bulk of the work on the 620-kilometer (385-mile) rail line was awarded to state-owned China Communication Construction Company past year, and 85 percent of the financing was provided by the Export Import Bank of China.
Apart from the cost, the rail project came under scrutiny for "unfavourable terms" in the agreement between CCCC and MRL, wherein the former is allowed a 15 percent upfront payment of the total project cost of 66.78 billion Malaysian ringgits as "mobilisation fee", as per the report.
He said negotiations will be held as the project can only be financially and economically feasible with a "drastic" price cut by China Communication.
Malaysia's new government has axed a high-speed rail line to Singapore because it is too costly and is reviewing other large infrastructure projects financed by China.