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Malaysia Better Off Scrapping Lopsided China-Backed Projects, Says Experts

There would be short-term negative effects if Malaysia axes some lopsided infrastructure projects backed by China, but the country would be better off in the long run experts told The Star.

The termination of the RM55 billion East Coast Rail Link (ECRL) as well as the Multi-Product Pipeline (MPP) and Trans-Sabah Gas Pipeline (TSGP), which have a combined cost of RM9.41 billion, could lead to lower economic growth as well as weaker trade and investments in the short-term.

On the other hand, not scrapping these projects would result in the government being burdened by more loans, given that Putrajaya’s debt has already reached over RM1 trillion.

But because Malaysia cannot axe the agreement for the ECRL, it could become a white elephant as it’s unlikely to be financially sustainable to operate given its high cost, said Omni Capital Partners Managing Director Scott Lim.

“The cost of running the ECRL is very high. You can’t transport goods cheap, so you can’t cover the operation cost.”

“The ECRL will not enhance economic activities in the long run. Overall, these projects are not viable at the current price tag. So, there is no point in having them even if it means lower growth in the short term for Malaysia,” he explained.

To alleviate the short-term negative impact of scrapping the aforementioned projects, experts are urging the government to craft its own master plan for long-term drivers of GDP growth.

The authorities should also explore other markets for investment and trade, and don’t be to largely depended on China, said Asli Center of Public Policy Studies Chairman Tan Sri Ramon Navaratnam, who added that such trade and investment deals should be fair to all parties.

“There was no strong leadership at the top in the previous administration. There was a lack of coordination. Corruption was thriving. The one-sided deals are only possible with corruption,” he explained.

Furthermore, Prime Minister Tun Dr Mahathir Mohamad’s move to renegotiate China-backed deals may also prompt other nations in Southeast Asia to follow suit.

Should the terms of the agreement for China-backed projects be disadvantageous to countries like Singapore, Indonesia, Thailand, Myanmar, Laos and Cambodia, they could renegotiate contracts. This could put pressure on Beijing to be more reasonable with its dealings with other countries, added Navaratnam.

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