Last week, I had asked the Finance Minister to justify the award of the RM55 billion East Coast Rail Link project to China Communications and Construction Company (CCCC) and why Malaysian companies were not given the opportunity to tender for the project.
In the Finance Ministry’s reply, it said "to qualify for this financing offered by China Exim Bank, the project had to be executed by CCCC".
The Minister said that the Export Import Bank of China (China Exim Bank) offered a soft loan to Malaysia for the project at low interest rates. He added that the loan, for a period of 20 years, also allows for a grace period of seven years where the government does not need to repay the principal.
In addition, "the government has, in principle, agreed at least 30 percent of the infrastructure work will involve local companies and contractors".
If studied carefully, the reply carried very sinister undertones.
Malaysia now appears so desperate for foreign financing for its so-called national interest projects that it is willing to subject itself to terms and conditions of foreign powers.
Just because somebody is willing to lend you the money at seemingly favourable terms does not mean that you should accept the condition to select the product that will cost nearly double the estimated price.
This is no different from unscrupulous retailers to duped Malaysian shoppers into “zero-interest” financing schemes on products costing significantly higher than if you have paid for it in cash. Any financial consultant will educate you that the real cost of financing is already built into the jacked-up price of the product.
Worse, the real cost of funds for the project is now opaque because we do not know the real cost of the project as it was awarded without any open and competitive tender. We do know however, that the Government’s own appointed consultants, HSS Integrated has estimated that the cost of the 600km railway project will cost less than RM30 billion.
Therefore, to pay for the project at RM55 billion just because China Exim Bank offered an “attractive financing package” is absolutely scandalous!
Worse, only 30% of the project will involve local companies and contractors, despite an abundance of experience and expertise which are already widely available in Malaysia. We have now got many companies who have built double tracking railway projects, dug award-winning tunnels systems and constructed the MRT. And yet, the Government is awarding a standard rail link project at substantially higher cost to a foreign company with minimal local participation.
The irony is, the Finance Ministry has advised or even instructed our Government-Link Companies to halt their investments abroad and repartriate its foreign funds from overseas to check the drastic decline of the ringgit. Bank Negara even put in harsh measures to force private companies to convert their foreign currency receipts into ringgit. However, the Government clearly doesn’t practise what it preaches because the overwhelming bulk of the inflated RM55 billion cost will be paid to China despite available local options.
There can be no better example of the English saying, “penny wise but pound foolish”. What boggles the mind is, the Finance Ministry doesn’t comprise of idiots – they should know that we are paying well above what is a fair price for the project. What is the ‘real’ reason why the project has been awarded to CCCC – is the real ‘quid pro quo’ the fact that CCCC will help launder part of the astronomical profits to pay off 1MDB debts as widely speculated?