Datuk Seri Mohamed Azmin Ali said the Cabinet decided to scrap the project after it was found that the government would have to fork out RM500 million in interest it the project continued. — Picture by Ahmad Zamzahuri

KUALA LUMPUR, Jan 26 — Economic Affairs Minister Datuk Seri Mohamed Azmin Ali today said that the cancellation of the East Coast Rail Link (ECRL) project was due to the high annual interest of a least half a billion ringgit that the country would have incurred.

Mohamed Azmin said the Cabinet decided to scrap the project during a meeting on Thursday after it was found that the government would have to fork out RM500 million in interest it the project continued.

“The Cabinet made the decision because the cost to develop ECRL is too high and we do not have the financial capability (to see it through) at this moment because the interest reached to nearly half a billion ringgit.

“This is something that we can’t afford to shoulder.

“Therefore we needed to terminate the project without jeopardising the good relationship between the People’s Republic of China and that we still welcome all forms of investment from China subjected to a case-by-case basis depending on the present country’s financial capabilities,” he said after launching an event with Silat Cekak Hanafi association earlier.

However he said the amount expected to compensated to China Communications Construction Group Ltd (CCCC) will be decided by the Finance Ministry.

“They have performed their due diligence to ensure that the cost (compensation) will not burden the financial situation at this moment,” he said.

Azmin said the federal government has yet decided whether to appoint a new contractor to take over the project to build the ECRL at half the estimated project cost.

“As I have said earlier, we welcome all forms of investment but it will be subjected to a case-by-case basis depending on the present country’s financial capabilities.

“We always review all the new applications of new investment into Malaysia and not necessarily on ECRL alone.

“We want to maintain our Foreign Direct Investments (FDI) in Malaysia coming from abroad and we want to ensure that our FDIs would be sustainable so that we can create wealth and job opportunities for the country,” he said.

Earlier this week, The Straits Times reported that the federal government had laid down a maximum cost of RM40 billion and asked for more local products and services to be included in the works.

However, CCCC could not meet these requirements, resulting in negotiations coming to an end.

CCCC was originally awarded the engineering, procurement, construction and commissioning contract for the ECRL, which was to be funded by Malaysia taking a soft loan from Export-Import Bank of China to cover 85 per cent of the cost. The remaining sum was to be raised from local bond issues.

The ECRL ― meant to be a land bridge linking Kuantan Port with Port Klang that would allow shipped cargo to bypass Singapore ― was touted as a game-changer when the project was launched.

Two pipeline projects with China costing RM9.3 billion were also cancelled after the government found that only 13 per cent of the works had been completed despite nearly 90 per cent of the project sum being paid out.