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Malaysia Nixes 3 Beijing-backed Pipeline Projects

Ali Nufael and Hadi Azmi
Kuala Lumpur
2018-09-10
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Finance Minister Lim Guan Eng announces that Malaysia will not cancel a Kuala Lumpur skyscraper project billed as the tallest in the region even though it is linked to 1MDB, June 21, 2018.
AP

Malaysia’s new government has canceled three Chinese-backed oil and gas pipeline projects to deal with the country’s debt previously estimated at 1 trillion ringgit (U.S $241 billion), officials said.

A letter was sent to relevant parties in China to terminate contracts on the three projects valued at about 12.4 billion ringgit ($3 billion), a report published on Sunday by the Financial Times quoted Malaysian Finance Minister Lim Guan Eng as saying.

“We are canceling the pipeline projects … I have already sent the communication,” he told the FT.

On Monday, a Finance Ministry official who asked to not be named confirmed the cancellation.

“No compensation was mentioned. It could still be under negotiation,” she told BenarNews when asked if Malaysia would be required to pay for the cancelled projects.

Guan Eng said the cancelled projects included two oil and gas pipelines projected to cost more than 4.1 billion ringgit ($1 billion) each in Peninsular Malaysia and on Borneo Island, and a 3.3 billion ringgit ($795 million) pipeline that would link the state of Malacca to a refinery operated by the national oil company Petronas in southernmost Johor state.

Economist Adli Amirullah, of the Institute for Democracy and Economic Affairs, urged the Malaysian government to be transparent regarding the pipeline cancellations.

“If the government cancels it, they must also produce the cost and benefit [analysis] to the public so we will know the profits or losses incurred due to the cancellation,” he said.

Investigation sought

The finance minister’s announcement came about three months after his ministry alleged in a report that two of the pipeline projects were hidden from the scrutiny of most treasury officials.

On June 5, Guan Eng announced that he had asked the nation’s anti-corruption commission to investigate a highly suspicious payment totaling U.S. $2 billion to a Chinese firm when only 15 percent of its work building gas pipelines in Malaysia was complete.

More recently, Guan Eng revealed that Suria Strategic Energy Resources Sdn Bhd (SSER), a wholly owned subsidiary of the finance ministry, was embroiled in a scandal related to the two gas line projects, which were approved in July 2016 by the government of then-Prime Minister Najib Razak.

Since taking control of the government in May, Malaysia’s new government, led by Prime Minister Mahathir Mohamad, has taken steps to rein in the debt including reviewing infrastructure projects undertaken by Najib’s administration.

The cost-cutting efforts are aimed at tackling the country’s liabilities, which accumulated through government guarantees on borrowing linked to the troubled 1MDB state fund.

The U.S. Justice Department described 1MDB as the “worst kleptocracy scandal in recent times.” Prosecutors allege that at least $4.5 billion was stolen from 1MDB and diverted through acquisitions of real estate, artwork and luxury properties by Najib and his associates.

During an official state visit to Beijing in August, Mahathir called for free trade between the two nations, while announcing the cancellation of two of the pipelines and a high-speed rail project.

Last week, Malaysia and Singapore agreed to postpone a multibillion-dollar high-speed rail project between the two countries until the end of May 2020.

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