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Malaysia in transition

Malaysia to send envoy to China to renegotiate contracts

Kuala Lumpur deemed project terms unfavorable and may seek to cancel some

Malaysia's Finance Minister Lim Guan Eng
Minister of Finance Lim Guan Eng will negotiate with Beijing over infrastructure projects deemed to have unfavorable terms for Malaysia.    © Reuters

KUALA LUMPUR -- Malaysian Prime Minister Mahathir Mohamad said Wednesday the country's finance minister will head to Beijing to renegotiate infrastructure contracts with the possibility of terminating some of them, following the discovery of unfavorable terms committed to by the previous government.

"We will investigate but the idea that you should pay contractors according to timeline is wrong," Mahathir told reporters on Wednesday. 

The government has discovered so far three Chinese-funded and built projects where payments have been made based on agreed time milestones and not work completed. Mahathir said such a practice was unique to the previous government led by Najib Razak.

"They made the decision in the cabinet but the decision was wrong," explained Mahathir. "We don't want to do that."

Najib in a posting on social media defended his actions, saying that all necessary procedures were completed in the negotiation of the two oil pipeline projects referred to by the Ministry of Finance on Tuesday. Minister of Finance Lim Guan Eng told media that he suspected money laundering at play involving two projects worth $2.36 billion and it was "all part of the 1MDB scam."   

1MDB refers to the scandal-tainted 1Malaysia Development Berhad -- directors in one of its subsidiaries were also the people behind the two pipeline projects. Najib is under investigation for his role in 1MDB and hundreds of millions of dollars in his personal accounts that have murky origins. 

These two projects share similar contract terms with the 688km East Coast Rail Link currently also under construction at a cost of $14 billion. The government had said all these big-ticket projects would be scrutinized to ensure they would truly benefit the country.

The government pointed to the ECRL project for which over a third of total payment was disbursed to the contractor in the first year of a seven-year project although only about 14% of the work was completed.

"We will study the ECRL project, either to defer or terminate it," said Mahathir, although it was still subject to negotiation with the Chinese contractor, state-owned China Communications Construction.

 

 

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