ECRL: Chinese president draws sword, says enough is enough

The two month ultimatum that Chinese President Xi Jinping gave Mahathir to reconsider the status of the ECRL and gas pipeline projects have long been up.

The GoM ignored Xi and went about business as if nothing happened.

A furious Xi has since convened a meeting with Li Keqiang and Chinese Foreign Minister Wang Yi to discuss the possibility of imposing trade sanctions on Malaysia.

Xi is determined to seek compensation from the GoM and is set to review China’s position on the Mahathir administration.


Recently, the social media went gaga with news that the East Coast Rail-Link (ECRL) Project, suspended mid last year, would resume on a smaller scale and tighter budget. In quoting Prime Minister Tun Dr Mahathir Mohamad, Sin Chew Daily reported that the project would be put back on track only if China agreed to some new terms, which, according to a well-placed source, have to do with matters related to project financing. Mahathir wants the state-owned Export Import Bank (EXIM) of China to tie up with banks belonging to Tun Daim Zainuddin in part financing Tan Sri Vincent Tan’s stake in the whole affair.

To recap, on the 25th of June 2018, The Third Force revealed that Tan Sri Vincent Tan had snapped up 22.2 million shares belonging to Syarikat T7 Global (T7), an oil and gas service provider that entered a bid for the project. Not long after, the GoM threw a bolt from the blue by announcing that the project, called off previously for being too pricey, was back on track at an added value of RM15 billion. Vincent then agreed to foot the difference by procuring soft loans from banks belonging to Daim. But China rubbished the whole thing as it made no sense whatsoever to renegotiate terms when the original deals were working fine.

So, to make the project appear more viable, Daim undertook to ‘rationalise’ the whole affair by quietly bundling parts of the construction into a new contract. The contract, yet in the pipeline, is set to be handed over to Vincent Tan through subsidiaries belonging to the Tan Sri Syed Mokhtar al-Bukhary owned AlBukhary Corporation Sdn Bhd. The rationalisation is supposed to bring the cost of the original project down by about RM25 billion with a small portion of the difference meant to compensate contractors for delays. However, the compounded cost of the two projects – the ‘scaled-down’ version and the one in the pipeline – is anticipated to be worth RM80 billion, 20 billion upstream of the initial RM55 billion cost.

See the scam?

Plans to construct the East Coast Railway-Link began with an agreement the Government of Malaysia (GoM) signed with the state-owned China Communications Construction Company Ltd (CCCC). On the 16thof November 2016, CCCC committed to constructing a standard gauge railway linking Port Klang in the southwest of the Malaysian peninsula with Pengkalan Kubor in the northeast for an estimated USD13.1 billion. EXIM agreed to fund the project by providing CCCC with soft loans.

On the 15thof July 2018, I wrote:

In case you’re wondering, the GoM got a Chinese banking institution involved simply because CCCC is China based and agreed to finance the project. EXIM came into the picture as it conforms to a framework of connectivity that the People’s Republic of China has long established. The framework concerns efforts by the Chinese government to expand its official development aid (ODA) to ASEAN member nations.


To facilitate the plan, the Chinese government established EXIM in 1994 and placed it directly under the purview of China’s State Council (SC), the chief administrative authority of the People’s Republic of China. Not many are aware that Robert Kuok owns 13 percent of a Hong Kong based investment entity that has some serious links with the SC.

The entity, CITIC Limited (previously known as CITIC Pacific), is an investment firm that is subsidiary to a state-owned conglomerate, CITIC Group Corporation Ltd (CITIC). Last year, CITIC was listed as among China’s biggest conglomerates and registered the largest foreign assets reserves in the world. In 1984, the People’s Bank of China approved the setting up of a banking division under CITIC that came to be known as the China CITIC Bank.

Of late, the bank has been involved in the administering of assistance provided by the Chinese government via the MPAC framework. On the 26th of June 2015, CITIC Limited announced that its securities, trust and banking divisions would jointly invest more than 700 billion yuen to support China’s “One Belt, One Road” (B&R) initiative. Two years later, CITIC committed to deepening that backing without specifying the exact amount it intended to allot.

The ECRL constitutes part of China’s broader B&R initiative

Less than a year later, Dato’ Seri Najib Tun Razak was removed as Prime Minister of Malaysia following an electoral debacle part triggered by the South China Morning Post (SCMP).

A coincidence?

Mahathir’s decision to revive the project is not by gesture of goodwill. On contraire, it has everything to do with a two month ultimatum Chinese President Xi Jinping gave him during the former Malaysian premier’s August 2017 visit to the People’s Republic. On the 20th that month, the republic’s premier, Li Keqiang, told Mahathir that the stop work order issued by the GoM to contractors and sub-contractors resulted in losses close to USD1 billion. Li added that smaller players linked to those contractors were finding difficult to bear losses and resorted to ceasing operations altogether.

On the 24thof August 2018, I wrote:

The Star Online put the number of workers retrenched as a result of the stop work order at 1,000 people. Quoting unnamed sources, the report alleged that the suspension affected a significant number of Chinese expatriates and senior executives who The Third Force was told were skilled and paid millions in compensations. An industrial source familiar with the matter, when met, related that the contractors also paid massive amounts in deposits for three year-long blanket orders to anticipate a rise in construction material costs.

Thus, when Mahathir sought a US40 billion loan from EXIM to offset losses in GST revenue suffered by the GoM and pay these contractors compensations (READ HERE OR FOLLOW LINK BELOW), Xi was dumbstruck. The Chinese president quickly pointed out that the idea of using money borrowed from China to pay China made no sense whatsoever and reminded Mahathir that the latter’s administration had repeatedly questioned China’s business ethics. Xi then shot down Mahathir’s offer for China to embark in deep sea drilling with the Syed Mokhtar owned Melati Pertiwi Sdn Bhd. Mahathir had intended for the offer to be a quid pro quo of sorts, hoping that the Chinese president would agree to renegotiate terms of the ECRL and gas pipeline projects.

But it was a firm “no.”

Both Xi and Li made it absolutely clear that China would go by terms agreed upon by the previous Barisan Nasional administration and wouldn’t budge an inch. Xi then gave Mahathir two months to reconsider his position on projects without specifying the penalty involved should Malaysia dilly-dally the affair. Mahathir ignored the ultimatum and went about business as if nothing had happened. A furious Xi has since convened a meeting with Li and Chinese Foreign Minister Wang Yi to discuss the possibility of imposing trade sanctions on Malaysia. Xi is determined to seek compensation from the GoM and is set to review China’s position on the Mahathir administration.

To be continued…



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