Nazir Razak has reportedly called for government scrutiny on the China-led investments under its One Belt, One Road (Obor) initiative.
The CIMB Group Holdings Bhd chairperson is quoted by The Edge Financial Daily today as saying the projects – particularly the RM55 billion East Coast Rail Line (ECRL) – should not only be measured in terms of the scale of the investment, but also on the value proposition.
“I think it is very important that we get away from this traditional Malaysian excitement for everything that is large and sexy. That is very dangerous,” Nazir was quoted as saying.
“(The) ECRL is very beneficial, no doubt about it. But are the benefits, say (is it) worth RM10 billion or RM60 billion? That’s a fundamental question. Just because it is an Obor initiative and it (the construction contract has been awarded) to China; is Malaysia getting it at the right price?” he asked.
The prominent banker, who is also the prime minister’s brother, supposedly said this during a roundtable discussion themed “China’s Belt and Road Initiative in Asean: Economic opportunities and Asean centrality”.
The ECRL deal was signed in November last year. It would be constructed by China Communication Construction Company Ltd (CCCC), and financed with a soft loan provided by the Export-Import Bank of China. Both are China state-owned companies.
The 620km-long rail line would be built in three phases, from Tumpat through places such as Kota Bharu, Kuala Terengganu, Kemaman, Kuantan, Bentong and Gombak, before finally ending in Port Klang. Construction is to begin this year and last till 2022.
Among the loan conditions are that the 20-year loan has a grace period of seven years, where the government does not need to repay the principal, and supposedly has a low interest rate, according to a written parliamentary reply by the Ministry of Finance.
Loan repayment questioned
However, despite this, Nazir questioned the project’s loan repayment.
“Are we generating enough tax revenue to pay for it? I’ve not seen the cash flow. Otherwise, it is going to flush in the government funds and suddenly, we are going to get a huge debt pile,” he said.
Nazir added that the government should also review Malaysia’s negotiations with China to ensure that Malaysia will get the best out of the deal, and ensure that it has learnt the lessons of the 60 countries that have had experience negotiating with China.
Malaysia should also have learnt lessons from the 1997 Asian Financial Crisis, The Edge quoted him as saying.
“This year is the 20th anniversary of the Asian financial crisis. What caused it? It is the infrastructure debt. Isn’t there a risk? This (Obor) is going to create huge infrastructure debts in the 60 countries.
“Nobody will not dare not to repay China. Therefore, the risk will eventually end up in sovereign balance sheet and then we have a problem. If this happens in many countries, then we have an Asian problem. That is one caution that we need to bring to the table,” Nazir added.