Malaysia's Mahathir cancels China-backed rail, pipeline projects

Malaysian Prime Minister Mahathir Mohamad (C) speaks to Chinese President Xi Jinping (not pictured) during their meeting at Diaoyutai State Guesthouse in Beijing, China, 20 August 2018. Roman Pilipey/Pool via REUTERS

KUALA LUMPUR/BEIJING (Reuters) - Malaysian Prime Minister Mahathir Mohamad said on Tuesday that the Chinese-funded $20 billion East Coast Rail Link (ECRL) project and a natural gas pipeline project in Sabah will be cancelled for now, according to media reports.

Mahathir made the comments while addressing the media in Beijing during his five-day trip to China. He said the projects, would be cancelled until such time as Malaysia can afford it.

The Prime Minister's office confirmed the comments Mahathir made to reporters in Beijing.

Prior to his China visit, Mahathir had vowed repeatedly to discuss what he called "unfair" Chinese infrastructure deals authorised by his predecessor Najib Razak, whose near-decade long rule ended in electoral defeat in May amid a massive financial scandal.

Mahathir said he relayed the matter to China and they understood the problems faced by Malaysia, the New Straits Times (NST) reported.

"I believe China itself does not want to see Malaysia become a bankrupt country," the NST quoted him as saying during a press conference marking the end of his China trip.

The ECRL project was the centrepiece of China's infrastructure push in Malaysia but work has been suspended pending discussions over pricing and graft accusations.

Project contractor, China Communications Construction Co Ltd told Reuters that more than 1,800 of the 2,250 people hired for the ECRL project had been laid off since the suspension.

Chinese foreign ministry spokesman Lu Kang told a daily news briefing in Beijing that Mahathir had said during his visit that China's development was an opportunity for Malaysia.

Both countries' peoples benefit from their trade and business relations, Lu said on Tuesday.

"But in the cooperation between any two countries, it can't be avoided that there may be various kinds of problems, and different views at different times."

Lu said such differences should be "appropriately resolved by friendly consultations", and that it was an important consensus reached by both countries.

Mahathir said in a joint press conference with Chinese Premier Li Keqiang on Monday that he believed China would sympathise with Malaysia's "internal fiscal problems".

Mahathir also told the press on Tuesday that he did not bring up Low Taek Jho, the Malaysian financier wanted for his role in the multi-billion-dollar scandal at state fund 1MDB, in his dialogue with the Chinese leaders, local reports said.

The Wall Street Journal reported on Friday that Malaysia believed Low was being harboured in China and that a request to extradite him would be high on Mahathir's agenda.

Mahathir's predecessor Najib Razak is set to stand trial in February next year on charges linked to a multi-billion-dollar scandal at state fund 1Malaysia Development Berhad (1MDB). Najib has consistently denied any wrongdoing related to 1MDB.


(Reporting by Liz Lee and Rozanna Latiff in KUALA LUMPUR; Ben Blanchard in BEIJING; writing by Praveen Menon; editing by Simon Cameron-Moore)