Malaysia government secures record cost reduction for Chinese rail construction

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Malaysian Prime Minister Mahathir Mohamad says the new deal is a 'mutually beneficial agreement' [Vincent Thian/AP]

The Malaysia government has succeeded in renegotiating a major rail project with China.

The negotiations secures a reduction for the cost of the rail construction by a third and increase the level of local involvement.

This signals a shift in China’s approach to its six-year-old Belt and Road Initiative (BRI).

Nine months of protracted negotiations over the East Coast Rail Link (ECRL) following last May’s historic change in government, resulted in a “mutually beneficial agreement” for both China and Malaysia, Malaysia’s Prime Minister Mahathir Mohamad told journalists at his office in Putrajaya on Monday.

The original agreement was negotiated and signed in 2016 by Mahathir’s predecessor Najib Razak.

“It was an unjustified, hefty lump sum price which lacked clarity in terms of technical specifications, price and, by extension economic justification,” Mahathir told the media.

“We chose to go back to the negotiating table and call for a more equitable deal, whereby the needs of the Malaysian people would be prioritised.”

Under the agreement signed in Beijing on Friday, the 640-kilometre and 20-station railway will cost 68.7 million ringgit ($16.7m) per kilometre, compared with 95.5 million ringgit ($23.2m) previously, Mahathir said.

Work on the project, which was suspended last year, is expected to resume in May with completion set for the end of 2026.