By Tripti Lahiri
Shortly before his first trip to China since taking office, Malaysian prime minister Mahathir Mohamad said in an interview that he would like to cancel a pair of Chinese projects he had earlier ordered suspended and probed for its ties to the scandal-ridden 1MDB state-development fund. “We don’t think we need those two projects. We don’t think they are viable. So if we can, we would like to just drop the projects,” Mahathir told the Associated Press today (Aug. 13). The projects include the $20 billion, 688-kilometer (430 miles) East Coast Rail Link, which would have linked ports on peninsular Malaysia’s east and west coasts, and was being built by the China Communication Construction Company. It was a key feature of the sprawling global infrastructure plan envisioned by China since 2013. Financed with loans and expected to take a decade to build, the project would have reduced China’s dependence on shipping via the narrowest reaches of the Malacca Strait for its energy needs. The other project involved a pair of gas pipelines to be funded by China’s Exim Bank.
Separately, Malaysia also scrapped a $27 billion high-speed railway to Singapore in June, with Mahathir saying at the time he was trying to stop his country from going bankrupt (paywall).
The projects were agreed upon under former prime minister Najib Razak, who signed Malaysia up for a number of big-ticket infrastructure projects while in office. Since Mahathir’s electoral upset in May, an investigation into the corruption at 1MDB was revived, and Malaysia’s finances have been found to be in disarray. The country’s new finance minister announced that government debt, including those related to 1MDB, had reached the equivalent of $250 billion. Najib, under whom the fund was created ostensibly to help Malaysia develop, has been arrested and charged with criminal breach of trust and money laundering. He has denied any wrongdoing.
Less than a month after the election, the Malaysian finance ministry in June called the gas pipeline projects a “scandal,” noting in a press release that nearly $2 billion in payments, or nearly 90% of the project value, had been disbursed, yet less than 15% of the work on either had been completed since construction was started by China Petroleum Pipeline Bureau. The entity overseeing the project was linked to 1MDB, the ministry noted, adding that Malaysia would consider seeking the help of China in its investigations of potential money laundering.
This is not the first time a China-funded project has been overturned by a change in leadership, but it is one of the biggest setbacks yet to China’s Belt and Road plans. Now observers are looking to see what happens in Pakistan, where former cricket star Imran Khan was elected prime minister last month. It’s home to the Belt and Road’s flagship China-Pakistan Economic Corridor, which involves a port, power plants, and other projects estimated to total nearly $60 billion.
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