BOMBSHELL – WHAT MAHATHIR REALLY PLANS TO DO TO ECRL, GAS PIPELINES & HSR DEALS …BUT CAN’T SAY SO IN PUBLIC

Cancelled, deferred, or postponed?

The knives appear to be out for Malaysian Prime Minister Mahathir Mohamadover what critics say is his “flip-flopping” on the fate of controversial multibillion-dollar Chinese-backed projects in his country.

But people close to Mahathir say that while in public he may have been vague about the fate of the projects, in private he is crystal clear.

The sources – directly involved in talks over the future of the Chinese-backed projects – say the 93-year-old is absolutely firm on permanently cancelling the US$20 billion East Coast Rail Link and a US$2.3 billion gas pipeline even though he continues to suggest that they may be deferred.

Meanwhile, the high-speed rail project between Kuala Lumpur to Singapore – a multibillion-dollar project still to be awarded that has attracted interest from Chinese rail builders – will be deferred for two years rather than be cancelled as Mahathir had claimed, the sources said.

Chinese State Councillor Wang Yong and Malaysia’s then prime minister, Najib Razak, at the ground-breaking ceremony of the East Coast Rail Link in Kuantan, Malaysia, in August 2017. The project’s fate is no longer clear. Photo: Xinhua

Economic Affairs Minister Azmin Ali will be in Singapore today and tomorrow for final talks before signing an agreement on deferring that project. Malaysia faces a hefty reimbursement fee if it terminates the deal with its closest neighbour.

Projects such as the US$100 billion Forest City and the US$10.5 billion Melaka Gateway projects are likely to be allowed to continue because they involve private funds and are not “government to government” projects like the railways and gas pipeline, the sources said.

The sources say Mahathir has been deliberately vague about some of the deals so that the Chinese do not “lose face” from the cancellation of projects at a time when Beijing is facing criticism that its “Belt and Road Initiative” projects around the world represent a type of debt-trap diplomacy.

The Malaysian government’s efforts to blame the scandal-tainted former premier Najib Razak, and not China, for agreeing to contracts deemed lopsided against Malaysian interests is also a “face-saving” strategy, the sources said.

And in some instances, Mahathir’s off-the-cuff remarks should not be taken as firm government policy, they said.

This week’s kerfuffle over his remarks on refusing visas to foreigners who have bought units in the China-backed Forest City development – may be one such instance.

Concerns about Mahathir’s stance on the projects rose again this week when the government was forced to clarify his comment on Monday that authorities would not be issuing visas for foreign buyers of housing units in the Forest City project being built by China’s Country Garden Holdings.

A bulk of the buyers are mainland Chinese who hope to qualify as Malaysian residents under a scheme called “Malaysia My Second Home”.

AS WE ALL KNOW, FACE IS VERY IMPORTANT FOR THE CHINESE

Mahathir’s housing minister later said the matter would be reviewed by a committee.

Observers had been expecting clarity on the future of the projects following Mahathir’s return from China last week. He is thought to have discussed his plans for the projects during meetings with President Xi Jinping and Premier Li Keqiang.

Chinese Premier Li Keqiang and Malaysian Prime Minister Mahathir Mohamad in Beijing. Photo: Xinhua

Instead, Mahathir would say only that he had the assent of the Chinese leaders to negotiate terms for the cancellation of the East Coast Rail Link and gas pipeline project. He left open the possibility the projects could still go ahead.

Government sources told This Week in Asia that for now Mahathir was unlikely to cancel outright the two projects – involving Chinese state-backed firms – to “make sure the Chinese do not lose face”.

“As we all know, face is very important for the Chinese … but there is agreement on both sides that the projects have to be cancelled because of Malaysia’s financial position,” said a source dealing directly with Chinese negotiators.

Workers brought in from China to work on the East Coast Rail Link had returned home because of the firm’s move towards cancelling the project, the source said.

Officials in the new administration say large portions of government-backed loans for the projects have been drawn down even though only a fraction of the work has been completed.

“Tough talks” were now ongoing to pay only for work done, the source said.

“As far as the Chinese are concerned … if there is outright cancellation, the whole world will know. Nobody will want to do business with them. Already there are problems in Sri Lanka, Pakistan in Africa and so on,” the source said.

Malaysia’s then prime minister, Najib Razak, at the launch of the East Coast Rail Link in Kuantan last year. File photo

“This is why we keep saying it’s on Najib, it’s on Najib, it’s on Najib, and not China … we don’t want to embarrass you but you must protect our interests as well.”

Despite the delicate public relations exercise, three sources – all in contract negotiations involving the East Coast Rail Link, the gas pipelines and the Singapore-Kuala Lumpur high-speed rail – said they were satisfied with the progress made since the May 9 election.

Mahathir was elected on a platform that promised to review these Chinese-backed projects.

He and his allies in the ruling Pakatan Harapan bloc believe the projects need to be cancelled or reviewed.

They believe Najib was too lax in endorsing the deals in his enthusiasm to bring the country closer into Beijing’s diplomatic sphere.

Reviewing the projects was one of 10 things the bloc promised to do within the first 100 days of its administration.

– https://www.scmp.com

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