Malaysia and China restarted a multibillion-dollar “One Belt, One Road” rail project on Thursday after nearly a year of renegotiations led to a deal slashing its construction cost by almost a third.
The project, known as the East Coast Rail Link (ECRL), was among Chinese-financed projects in Malaysia that were shelved months after Prime Minister Mahathir Mohamad took power in a stunning electoral triumph in May 2018.
Mahathir initially rejected the railway’s original price tag of 65.5 billion ringgit (U.S. $16 billion) but announced in April this year that the Chinese engineering firm contracted for the project had agreed to cut its cost to 44 billion ringgit (U.S. $11 billion).
“I think today’s ceremony was made possible after a very long process of renegotiations, nine months in total,” Transport Minister Anthony Loke told reporters during the re-launch of the project in Dungun, a coastal district of Malaysia’s eastern Terengganu state.
He said the 640-km (398-mile) railway, which will connect Port Klang on the Strait of Malacca with the city of Kota Bharu in northeast peninsular Malaysia, would provide a robust train service for cities in the east coast corridor, and potentially lure new investments through industrial parks.
“This will ensure that a huge number of products would be transported along the ECRL,” Loke said, adding that the government expected a boost in foreign direct investment, especially from China.
ECRL was initially suspended when Mahathir followed through with his electoral promise to renegotiate what he had described as “unfair” Chinese-backed projects approved by Najib Razak, his predecessor. He later announced that the project was cancelled, telling Chinese leaders during a visit to Beijing in August 2018 that Malaysia could not afford the railroad and other China-backed infrastructure projects.
But as part of the renegotiated deal struck three months ago over the rail project, Loke said the Export-Import Bank of China would finance 85 per cent of its cost, with the two countries agreeing to a 50-50 joint venture between the state-owned Malaysia Rail Link (MRL) and China Communications Construction Co. to operate the train services.
The renegotiation also saw changes of the alignment of the project, which now will extend across Negri Sembilan, south of Kuala Lumpur, avoiding the fragile densely forested areas of Bentong, east of the nation’s capital.
As he stood near a partially-completed tunnel for the railway project, Chinese Ambassador Bai Tian expressed confidence that “a great wave of potential Chinese investors will come to Malaysia” upon completion of the train.
“Many of them will decide to invest,” he said during a speech at a ceremony for the project’s relaunch.
The project is expected to be completed in December 2026, Beijing’s envoy said, adding that Malaysia could see more than double the number of Chinese tourists coming into the country from three million in 2018.
ECRL is part of Beijing’s One Belt One Road initiative that stretches to 70 countries. It aims to become a 21st-century Silk Road by connecting the countries through networks of railways, bridges and ports, linking China with Africa, Europe and Southeast Asia.
Oh Ei Sun, an expert on Malaysia-China relations and a senior fellow at the Singapore Institute of International Affairs, said the project’s re-launch signaled the warming up of bilateral relations between Beijing and Kuala Lumpur.
“Malaysia is in need of massive foreign investments,” he said. “So it is hoped that the resumption of this project, which China sees as extremely important, would spur further Chinese investments in the country.”