China contractor confirms halts work on Malaysia rail link project

HONG KONG (Reuters): The Chinese contractor for Malaysia’s $20 billion East Coast Railway Link has confirmed that it suspended all work on the project as Kuala Lumpur seeks to renegotiate the terms of the deal with China. The rail link was among several projects halted by Malaysia since a new government was elected in May, promising to review major projects by the previous administration led by Najib Razak.

China Communications Construction Co Ltd said late on Thursday it halted all work at the request of the project owner Malaysia Rail Link SDN BHD. “Recently, the company has received a letter from Malaysia Rail Link SDN BHD, the employer, which requires an immediate suspension of the contract under the ECRL project until further instructions,” the Chinese firm said in a filing to the Hong Kong bourse. The company said the suspension would not have a significant impact on its operating performance in 2018.

The company was contracted to build a 530 km (329 miles) railway traversing the Malaysian peninsula from east to west. The seven-year contract was valued at 72.8 billion yuan ($10.93 billion).

The entire 688-km (428-mile) ECRL will connect the South China Sea off the east coast of peninsular Malaysia with the strategic shipping routes of the Straits of Malacca to the west.

Malaysia has also cancelled two pipeline projects that involved other Chinese state-owned firms.

“The decisions are solely directed towards the related contractors, relating to the provisions mentioned in the agreements, and not at any particular country,” Malaysia’s finance ministry said in a statement on Thursday.

Malaysian and Chinese officials are in talks for Prime Minister Mahathir Mohamad to visit Beijing soon, two sources with knowledge of the discussions told Reuters.