Huge blow to China as Malaysia cancels China-backed projects worth $22 billion

Malaysia’s Prime Minister Mahathir Mohamad. Image: Reuters

DHARAMSALA, August, 22: In a huge blow to China, Malaysia has cancelled two Chinese government-backed infrastructure projects worth over $20 billion fearing it will bankrupt the country already battling its financial woes.

The Malaysian Prime Minister Mahathir Mohamad has confirmed the cancellation of two major infrastructure projects which includes a railway and two gas pipelines for being too expensive for his debt-ridden country, media reports said.

“At the moment, the priority is for us to reduce our debt. With that debt if we are not careful we can become bankrupt,” the Malaysian Prime minister said reports ABS-CBN.

The project namely the $20 billion East Coast Rail Link and the Trans-Sabah Gas Pipeline projects worth over $2 billion are part of China’s ambitious Belt and Road Initiative and construction had already started for the $20 billion East Coast Rail Link which was launched last year and slated for completion in 2024.

While the East Coast Rail Link would have connected the South China Sea with strategic shipping routes in Malaysia’s west providing an essential trade link. The other was a natural gas pipeline in Sabah, a Malaysian state on the island of Borneo, the report said.

Malaysia is already in some financial woes and Mahathir Mohamad holds his predecessor Najib Razak accountable for it.

According to the report, some 85 percent of the financing of the project was being provided through a 20-year loan at 3.5 percent interest from the Export-Import Bank of China with a condition that the contract is given to a Chinese company, using its own workers with everything brought from China.

The Malaysian Prime Minister was on a five-day visit to China and the rejection of the projects came a day after he sat for a dinner with Chinese President Xi Jinping.

Mahathir Mohamad, 92, become the world’s oldest prime minister after defeating Najib Razak in a fiercely contested election that put an end to the ruling coalition’s six-decade hold on power. Previously, he served as the Malaysian Prime Minster between 1981 and 2003.


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