July 3, 2018 / 4:04 AM / 5 months ago

Major Malaysian rail link to cost $20 billion, finance minister says, up 50 percent from estimates

Malaysia's Finance Minister Lim Guan Eng speaks during a news conference in Putrajaya, Malaysia May 24, 2018. REUTERS/Lai Seng Sin

KUALA LUMPUR (Reuters) - Completing Malaysia’s biggest rail project as previously planned would cost $20 billion, its finance minister said on Tuesday, nearly 50 percent higher than estimates under the previous government.

The 688 km (430 miles) East Coast Rail Link will connect the South China Sea in the east with the strategic shipping routes in the west and is a major part of Beijing’s Belt and Road infrastructure push. Malaysia aims to renegotiate the terms of the deal with its Chinese partners.

“We expect that the ECRL project will only become financially and economically feasible if there is a drastic price reduction of the project by the CCCC (China Communication Construction Company),” Lim Guan Eng said in a statement, referring to the company leading the project’s construction.

“Discussions on cost will be held with the contracting parties and others involved in the project.”

Since a surprise election win in May, Malaysia’s new government has pledged to cut the national debt, stamp out corruption and review major projects agreed by the scandal-plagued previous administration led by Najib Razak.

The finance ministry said the basic cost of the ECRL project was around 67 billion ringgit, but when land acquisition, interest, fees and other operation costs are taken into account costs will rise to 81 billion ringgit ($20 billion).

The project was initially estimated to cost some 55 billion ringgit ($13.60 billion). Construction began almost a year ago.

The government said it will also consult with the state government of Selangor, taking note of their objections to the last leg of the rail line that connects to Port Klang, a major trading hub on the west coast near the capital Kuala Lumpur.

Reporting by John Geddie; Editing by Michael Perry

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