East Coast Rail Link (ECRL)

The ECRL project is owned by Malaysia Rail Link Sdn. Bhd. (MRL), a special purpose vehicle (SPV) established in 2016 and wholly owned by the Ministry of Finance Incorporated, a corporate body owned by the Ministry of Finance and established by an act of parliament.

The estimated construction cost of the project was originally RM66.78 billion (USD $15.9 billion) until early 2019. Under the terms of the agreement, 85% of the estimated construction cost is to be funded by a loan from EXIM Bank – making the total loan equivalent to RM56.7 billion (around USD 13.5 billion). The EXIM Bank loan term is for 20 years at a 3.25 percent interest rate with a seven-year repayment moratorium. In 2016, the government decided to fund the remaining 15% of the cost via “a sukuk programme managed by local investment banks.

As part of the financing agreement with EXIM bank, the Malaysian government agreed to award the ECRL Engineering, Procurement, Construction, and Commissioning (EPCC) contract to the China Communications Construction Company (CCCC). In 2019, the Malaysian government renegotiated the agreement, reducing the total cost to RM44 billion (USD $10.5 billion). As part of this renegotiation, MRL signed a Supplementary Agreement (SA) with CCCC to form a joint venture company (MRL 50 percent: CCCC 50 percent) to undertake the operations and maintenance of the ECRL.

Non-competitive selection of main project contractor tied to loan

The EPCC contract was directly awarded to CCCC during the signing of agreements between Malaysian and Chinese government officials on November 1, 2016. CCCC’s appointment was part of the requirements for the loan. The Malaysian finance minister stated in answer to a question before Parliament in 2016 that “to qualify for this financing offered by China Exim Bank, the project had to be executed by CCCC.” CCCC’s selection attracted criticism not only because it is a direct appointment but also because the government has seemingly made few attempts to tender the project among Malaysian companies as well as for the perceived high cost of the project. CCCC remained the main project contractor after Pakatan Harapan renegotiated the deal in 2018.

Repeated changes to the scope of the project without disclosure of feasibility studies

Three administrations that have so far overseen the development of the railway have all failed to disclose adequate information about the feasibility studies. Since its initial proposal in 2007, extensive planning, financing modelling, market sensing exercises, and studies have been done to assess the feasibility of the project. Under the Najib administration, at least two feasibility studies were conducted for the project: the first by HSS Integrated Sdn Bhd in 2009 and completed in December 2015, and the second by McKinsey in 2016. Following the renegotiation of the ECRL scope, MRL started working on a new feasibility study and environmental impact assessment for the new alignment of the ECRL that includes the Southern alignment and realignment on certain stretches. However, none of these feasibility studies have been made publicly available. The significant cost reduction from RM65.5 billion to RM44 billion was based on a comprehensive value engineering exercise, but no report on the exercise has ever been published. The new government that adjusted the route and cost has not disclosed any plan to conduct further feasibility studies or other exercises to justify the changes.