The Malaysian government would have had to pay “termination costs” of RM 21.8 billion ($5.3 billion) if it had cancelled the Chinese rail project connected to the Belt and Road Initiative (BRI) infrastructure scheme, said Malaysian Prime Minister Mahathir Mohamad, reported the Financial Times.
In a five-page statement issued days after Malaysia and China agreed to reduce the cost of the East Coast Rail Link (ESCRL) by one-third, from RM 66.7 billion to RM 44 billion. Mahathir criticized “the way and speed at which the original contract was negotiated” by his predecessor, Najib Razak.
According to Mahathir’s statement, the original ECRL contract would have saddled Malaysia with “an unjustified, hefty, lump-sum price, which lacked clarity in terms of technical specifications, price and . . . economic justification.”
“The [Malaysian] government was faced with the choice to either renegotiate or pay termination costs of about RM 21.78 billion, with nothing to show for it,” the statement added. “As such, we chose to go back to the negotiation table and call for a more equitable deal.”