China Offered to Slash Malaysia Rail Project Cost, Reuters Says

(Bloomberg) -- China offered to nearly halve the cost of a $20 billion rail project in Malaysia to save it, Reuters reported, citing unidentified people familiar with the matter.

China Communications Construction Co Ltd., the contractor for the East Coast Railway Link, had offered to cut construction costs of 67 billion ringgit ($16.4 billion) for the 688-kilometer (428-mile) project by as much as half, Reuters said. Contradictory remarks by Malaysian ministers over the past week on the status of the project leave the outcome uncertain, Reuters said.

Malaysia’s Economic Affairs Minister Mohamed Azmin Ali said Monday it will terminate the project as it was beyond the government’s financial capability. Finance Minister Lim Guan Eng wouldn’t corroborate those comments, saying an official announcement would be issued if necessary by next week on the instructions of Prime Minister Mahathir Mohamad. The premier said a day later that the government’s reason for canceling the rail was a lack of funds.

Since the July suspension of the project, negotiations between the two sides have continued with Malaysia indicating it was looking for cheaper proposals, according to Reuters. Malaysia’s government decided to cancel the contract this month despite the proposed discount, Reuters said. The negotiations had been complicated by the involvement of too many Malaysian officials, it said, citing its sources.

The high-speed rail link across the Malay Peninsula was to be part of Chinese President Xi Jinping’s so-called Belt and Road Initiative, a sweeping infrastructure plan that the U.S. has warned could leave countries indebted to Beijing.

To contact the reporter on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net

To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, Daniel Ten Kate

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