Stimson in the News

Do Axed Infrastructure Projects in Malaysia Spell Trouble for China’s ‘Belt and Road’?

By Yun Sun
in Program

Q: What are the political, economic and budgetary factors that led Mahathir to halt government contracts on three major China-linked infrastructure projects?

A: The projects that were canceled during Mahathir’s China trip are the East Coast Rail Link, or ECRL, and two oil and gas pipeline projects handled by Malaysia’s state-owned Suria Strategic Energy Resources. The ECRL came with an original price tag of $13.4 billion, 85 percent of which would be financed by the Export-Import Bank of China at an annual interest rate of 3.25 percent. However, the additional external agreement associated with the ECRL hiked up the total cost to $16.5 billion. Factoring in interest, land acquisition and other fees, the overall size of the project had ballooned to $20 billion by the time of its suspension. The total cost of the two pipelines is $2.3 billion, also with 85 percent financed by loans from the Export-Import Bank of China. When the Mahathir government audited the progress of the two pipeline projects earlier this year, it discovered that nearly 90 percent of the contracts had been paid out with less than 15 percent of the work being completed. The considerable inflation of the ECRL’s cost and the lack of progress on the two pipelines are both highly unusual and suspicious.

This interview originally appeared in World Politics Review on September 14, 2018. Continue reading the full interview here.

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