A train travels along a rail track near an elevated monorail track in the Bangsar area of Kuala Lumpur, Malaysia. (Photographer: Sanjit Das/Bloomberg)

Malaysia Nears Deal With China to Revive $20 Billion Rail

(Bloomberg) -- Malaysia is making progress in talks with China to revive a rail project that Prime Minister Mahathir Mohamad’s government said it would cancel, according to Foreign Minister Saifuddin Abdullah.

China is willing to reduce the $20 billion price tag for the East Coast Rail Link project and talks are “in the last mile,” Saifuddin said in an interview Tuesday. Discussions have been led by Daim Zainuddin, an adviser to Mahathir, with the aim of reaching a smaller project size and cost, he said.

Malaysia Nears Deal With China to Revive $20 Billion Rail

“It is not canceled until and unless we can’t settle on the numbers,” Saifuddin said. “China understands our constraint and they’re willing to scale down the size of the project and the cost. The discussion is probably in the last mile.”

In a wide-ranging interview at his office near Kuala Lumpur, Saifuddin discussed foreign investments, plans to reopen its embassy in Pyongyang and efforts to speak up for China’s Muslim minorities in a “tactful” way. Since returning to power last May, Mahathir has tested Malaysia’s relations with the world’s second-largest economy. Besides the railway, he has also canceled a gas pipeline project backed by China and warned against “a new version of colonialism” on a trip to Beijing.

China’s state-run Global Times newspaper last year blasted Mahathir’s “piercing” remarks, saying they “will definitely make Chinese investors worry about Malaysian public opinion and whether such an atmosphere will affect investment in the country.”

Ease Tensions

There are recent signs that Malaysia wants to ease tensions with China.

Mahathir struck a conciliatory tone last month and said the government canceled the rail project only due to cost, leading to renewed talks. Members of his cabinet have declined to confirm or deny a Wall Street Journal report that said senior Chinese leaders offered Mahathir’s predecessor help bailing out troubled state fund 1MDB in exchange for stakes in projects. Saifuddin said he hasn’t seen the meeting minutes cited by the Journal.

The nine-month old Malaysian government is seeking to balance efforts to attract investment with an anti-corruption drive that has led it to cancel and renegotiate billion-dollar contracts. The scales are set to begin tipping toward the former, Saifuddin said.

“We’re working around the clock to try to quickly get things moving in the right direction when it comes to those contracts that have been awarded, while also attracting new investments,” he said. “We have made clear that we plan to be business friendly.”

Sustained Peace

The Southeast Asian country is looking to play a small role in the ongoing talks between North Korea and the U.S. by linking the reopening of its Pyongyang embassy to the outcome of the upcoming summit in Hanoi. Malaysia’s link to North Korea deteriorated after leader Kim Jong Un’s half-brother Kim Jong Nam was assassinated at an airport near Kuala Lumpur in 2017. That led to a deep freeze in relations as Malaysia expelled the North Korean ambassador and banned travel between the countries.

“We are all for a sustained peace in the Korean peninsula,” Saifuddin said. “We want to ensure that the timing of the reopening of the embassy is directly or indirectly related to the current negotiations at the summit.”

Malaysia has also sought to tread carefully on the issue of China’s alleged human-rights abuses against its Muslim minority, even after releasing 11 of the ethnic Uighurs last year and sending them to Turkey in defiance of Beijing. Malaysia, which prides itself on being a moderate Muslim-majority country, has kept a muted public stance on the issue even as detailed reports continue to emerge over China’s crackdown against the predominantly Muslim population in Xinjiang.

“Malaysia has always been the voice of conscience especially in voicing the plights of those being suppressed,” Saifuddin said, when asked about Malaysia’s stance on the Uighurs. “At the same time, we don’t want to unnecessarily invite negative implication while we try to punch above our weight.”

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