Malaysia PM Aims to Renegotiate ‘One Belt, One Road’ Projects While Visiting China

August 14, 2018 Updated: August 14, 2018

KUALA LUMPUR/BEIJING—Malaysian Prime Minister Mahathir Mohamad is set to visit China on Aug. 17 seeking to renegotiate, and perhaps cancel, billions of dollars worth of Chinese-invested projects entangled in domestic graft probes.

Ties between the two countries have been strained since a stunning election victory returned Mahathir to power in May as he suspended unpopular Chinese projects authorized by former premier Najib Razak.

During his decade-long rule, Najib courted Chinese investment and was a cheerleader for China’s “One Belt, One Road” (OBOR, also known as Belt and Road) initiative in Southeast Asia.

But Mahathir has vowed to discuss the “unfair” deals on his visit.

“Where we can drop the project, we will,” Mahathir told reporters this week. “But we may have to postpone some because we have made agreements, and to breach the agreements will cost us a lot.”

The centerpiece of China’s infrastructure push in Malaysia is the ambitious $20 billion East Coast Rail Link (ECRL) project, which has suspended construction pending discussions over pricing and graft accusations.

Hit by ballooning costs, lack of transparency, and the risk it could saddle Malaysia with uncomfortably large debt, the 428-mile (688-kilometer) project has come to symbolize Najib’s scandal-ridden administration.

Najib, charged with money laundering and corruption over state fund 1Malaysia Development Berhad (1MDB), has denied wrongdoing and pleaded not guilty to all charges.

During his election campaign, Mahathir was critical of the benefits of the Chinese projects, which helped him win.

His government also halted work on two projects worth more than $2.3 billion awarded to the China Petroleum Pipeline Bureau that has been linked to graft at 1MDB.

Mahathir’s trip is set to run until Aug. 21, but he will first visit the eastern city of Hangzhou to meet Chinese e-commerce giant Alibaba’s chief Jack Ma before flying to Beijing, the source said.

China’s eagerness to save the OBOR from another embarrassing setback leads some analysts to believe it might be open to striking a pragmatic compromise with Malaysia.

“They don’t want a failure to taint their name,” said one Malaysian source involved in the contract reviews. “They don’t want to be involved in a project that is clear-cut corruption.”

Other major projects that have hit hurdles include a rail link from Indonesia’s capital of Jakarta to southeastern Bandung and the ports of Hambantota in Sri Lanka, and Gwadar in Pakistan.

“The Chinese are open to ideas and negotiation in many OBOR countries where projects run into problems,” said Abdul Majid Ahmad Khan, president of Kuala Lumpur’s Malaysia-China Friendship Association.

“But Malaysia has to be clear on what it wants.”

Mahathir has courted Japan in recent weeks, announcing plans for a big yen-denominated loan when he visited Tokyo.

By Liz Lee, Philip Wen, Ben Blanchard, & Joseph Sipalan

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