Malaysia halts $22bn in China-backed deals

Projects were suspended to target Malaysia’s estimated $250 billion national debt and other liabilities.

Malaysia''s Prime Minister Najib Razak and Transport Minister Liow Tiong Lai look at a model of the East Coast Rail Line at Kuantan Bahang
Malaysia''s East Coast Rail Link project was launched by former PM Najib Razak in September [Reuters]

Malaysia on Thursday suspended three major China-backed projects worth billions of dollars, the latest big-ticket items to be axed by the new government as it reviews deals signed by former Prime Minister Najib Razak.

Finance Minister Lim Guan Eng said he had ordered the suspension of two pipeline deals and a 688km (430 miles) rail link worth a combined 90.4 billion ringgit ($22.35bn).

The pipeline projects had been awarded to the China Petroleum Pipeline Bureau, while the China Communications Construction Company served as the main contractor for the East Coast Rail Link.

Lim said Prime Minister Mahathir Mohamad had ordered the suspensions in a bid to target Malaysia’s estimated $250bn national debt and other liabilities.

“The decisions are solely directed towards the related contractors relating to the provisions mentioned in the agreements, and not at any particular country,” Lim said, in an apparent attempt to allay concerns that China was being singled out.

The deals were among several Beijing-backed projects signed by Najib, who was unseated by his former mentor Mahathir in elections last May.

Malaysia’s previous government under Najib had warm ties with China and signed a string of deals for Beijing-funded projects.

But critics say many agreements lacked transparency, raising suspicions they were struck in exchange for help in paying off debts from the 1MDB financial scandal which ultimately helped bring down Najib’s regime.

Mahathir, 92, has pledged to review Chinese deals seen as dubious, calling into question Malaysia’s status as one of Beijing’s most cooperative partners in its regional infrastructure push.

In May, he postponed plans to build a high-speed rail link between Singapore and Malaysia, which had been agreed on several years ago, saying it was too expensive.

Song Seng Wun, a regional economist with CIMB Private Banking, said the latest suspensions could prompt some investors to hold back.

“Anyone with any activities related to the previous administration itself will be lying low,” Wun told AFP.

“They wouldn’t be starting any new projects because they might not be sure that their existing project or contracts might (not) come under review,” he added.

Source: AFP