China-backed railway revived to avoid $5bn penalty: Malaysia PM

Malaysia would have faced a $5-billion penalty if a China-backed rail project was axed, the prime minister said yesterday, after a deal was reached to revive the controversial scheme. 

Last week Malaysia and China agreed to push ahead with the railway at a 30-per cent lower cost, lifting a suspension slapped on the project when a corruption-plagued regime lost power in Malaysia last year.

It was among several Beijing-financed infrastructure initiatives put on hold after the change of government, as new leaders sought to reduce a mammoth national debt and amid concerns of corrupt dealings under the administration of ex-leader Najib Razak.

Malaysia and China’s agreement to restart the project at a reduced cost of 44 billion ringgit ($10.7 billion) -- inked in Beijing on Friday -- could help improve ties which had been strained since Najib, a close Beijing ally, was ejected from power. The 640-kilometer (400-mile) east coast rail link will run from northern Malaysia, near the Thai border, to a port outside Kuala Lumpur, and is seen as a key project in China’s Belt and Road infrastructure drive.

Announcing further details Monday, Prime Minister Mahathir Mohamad said that the government “was faced with the choice to either renegotiate or pay termination costs of about 21.78 billion ringgit ($5.3 billion), with nothing to show for it.

“As such, we chose to go back to the negotiating table and call for a more equitable deal, whereby the needs of the Malaysian people would be prioritized.”