Govt can claim back RM10b advance paid if ECRL spiked

KUALA LUMPUR (Oct 23): The Malaysian government could claim back RM10.02 billion paid to East Coast Rail Link (ECRL) contractors if the project is terminated, said Finance Minister Lim Guan Eng yesterday.

Speaking in Dewan Rakyat, Guan Eng also said the Malaysian government has not decided on the final status of the project as negotiations are still ongoing. “Four sessions of negotiations had been conducted since July 2018. Malaysia Rail Link Sdn Bhd (MRL) and China Communications Construction Co [Ltd] (CCCC) had also conducted several technical discussions between July and October, looking into suggestions and steps to reduce the costs to complete the ECRL project,” said Guan Eng.

“However, until now, MRL and CCCC have not reached any agreement on the suggestions to reduce the costs,” he added. MRL is a body under the finance ministry.

The ECRL was not included in the list of high-impact projects under the midterm review of the 11th Malaysia Plan 2016-2020 published last Thursday.

According to the minister, the ECRL would cost around RM80.92 billion to build, and that Malaysia had paid RM19.68 billion comprising RM10.02 billion as an advance payment bond and RM9.67 billion for works completed as at Feb 15, 2018.

“It must be stated the advanced payment bond can be redeemed by MRL if the project is terminated,” he added.

Guan Eng also emphasised that while the federal government understood the socio-economic benefits of the ECRL to the east-coast states, it cannot manage the cost burden as upon the project’s completion, the ECRL’s operations would not be expected to cover the estimated RM1 billion operational cost per annum, let alone break even on the development costs.

A more appropriate solution, he said, is to complete the unfinished parts of the proposed Central Spine Road from Pahang to Kelantan, also part of the high-impact projects underlined by the government in the 11th Malaysia Plan review tabled last week.

It is unclear, however, whether the advance payment redemption will be used to offset any possible compensation to be sought by CCCC if the contract is terminated under the Malaysian government’s order.

Guan Eng, when contacted later, declined to elaborate.

China Communications Construction (ECRL) Sdn Bhd (CCCECRL), the unit under CCCC undertaking the project, said it is “not in a position to comment on what the finance minister has said”.

“As discussions are still ongoing with MRL, CCCECRL is not at liberty to disclose any further details,” it said in a reply to The Edge Financial Daily.

“Nevertheless, CCCECRL is committed towards reaching an amicable solution with MRL and is confident that a positive outcome can be achieved for all parties,” the company added.

This article first appeared in The Edge Financial Daily, on Oct 23, 2018.

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