High-speed rail project cancellation just tip of the iceberg in Malaysia’s recent rail controversies

KUALA LUMPUR : Malaysia’s cancellation of the Kuala Lumpur-Singapore High-Speed Rail (HSR) project is the latest in a series of controversies involving train projects that has cast a light on the governance of these billion-dollar deals.

Since the Perikatan Nasional (PN) government came to power 10 months ago, at least two other tracks which traverse Kuala Lumpur’s greater metropolitan area are facing government intervention over the selection of contractors.

The RM4.4 billion (S$1.44 billion) Klang Valley Double Tracking Phase 2 (KVDT2) deal was terminated abruptly in August after Transport Minister Wee Ka Siong said the award should be retendered, leading to a civil suit by the appointed firm, Dhaya Maju LTAT.

Artist’s impression of the Bandar Malaysia High Speed Rail (HSR) station in Kuala Lumpur.PHOTO: EDELMAN

Meanwhile, Umno MP Tajuddin Abdul Rahman’s chairmanship of Prasarana has also invited scrutiny, especially after the national public transport firm’s decision to withhold up to RM1 billion owed to a consortium tasked with building the Light Rail Transit 3 (LRT3).

Datuk Seri Tajuddin, the election director of Malaysia’s largest party, cited Prasarana’s liquidity problems and the lack of bumiputera sub-contractors selected by turnkey developer MRCB-George Kent (MRCBGK) for withholding the sum in the RM17 billion project.

These government interventions have led to calls from across the political divide as well as civil society for more transparency, with some implying cronyism was at play.

Weighing in on the HSR project cancellation, former premier Najib Razak, under whose leadership the HSR agreement was first signed in 2016, accused the “PN government of not agreeing with the AssetsCo model because it would not be free to hand the project to whoever it wished”.

He was referring to the assets company (AssetsCo) which, under the HSR bilateral agreement, was to be appointed through an open and transparent international tender to assume the role of the systems supplier and network operator.

Singapore revealed that the HSR agreement lapsed on Dec 31 last year when it could not agree to Malaysia’s request to do away with a jointly-appointed AssetsCo.

Also calling for transparency following the cancellation of the HSR project, Sunway University economics professor Yeah Kim Leng said “if everything is kept under the veil of secrecy, there will be a negative impact on credibility and good governance”.

“If it is cloaked in secrecy, it may create the impression that the government has something to hide,” he was reported as saying by Free Malaysia Today.

Former finance minister Lim Guan Eng called for the Malaysian Anti-Corruption Commission (MACC) to act “professionally and independently by investigating the cancellation of the KL-Singapore HSR due to the Malaysian government’s refusal to abide by the international tender process”.

The secretary-general of opposition Democratic Action Party (DAP) noted that the anti-graft agency had also opened a probe into Prasarana following revelations that it could pay out RM80 million in compensation to a developer partly owned by Mr Tajuddin’s family, and the RM1 billion owed in the LRT3 construction.

Official sources told The Straits Times that Mr Tajuddin’s assertion that Prasarana did not have the cash to pay MRCBGK was puzzling, as the finance ministry injects an annual grant of over RM2 billion.

The Pasir Salak MP had insisted the firm was left with RM844 million after allocating RM600 million to service loans and capital expenditure of RM350 million.

“The amount outstanding to MRCBGK is since July so Prasarana could have asked for more funds.

“The government has never rejected requests for an injection in the past because it has to keep public transport running,” said a senior executive on condition of anonymity.

MRCBGK also disputed Mr Tajuddin’s claim that the firm has not met a bumiputera quota for LRT 3 sub-contractors, saying that the 40 per cent of vendors selected from the community – made up of the politically crucial Malay majority and other native minorities – exceeded the 30 per cent minimum.

Meanwhile, the government has had to settle out of court with Dhaya Maju LTAT after cancelling its KVDT2 agreement, citing how the deal was directly negotiated in 2019 by the Pakatan Harapan (PH) administration.

But Mr Anthony Loke, who was transport minister under the PH government, questioned the move to retender the project, saying an original bill of RM5.2 billion had been negotiated down to RM4.4 billion by PH.

He estimated a compensation of about RM1 billion was paid as part of the settlement.

The initial sum for the 110km rail upgrade was agreed by Datuk Seri Liow Tiong Lai, Datuk Seri Wee’s predecessor as Malaysian Chinese Association president and transport minister, just weeks before Barisan Nasional’s defeat at the 2018 election.

In November, Mr Loke told Parliament that an affidavit filed by Dhaya Maju LTAT in its suit said that “on or about April 14, 2020, the plaintiff had a meeting with the second defendant (Mr Wee)”.

“In this meeting, the plaintiff was asked to sub-contract the whole project to a ‘China company’. After the plaintiff declined to do so, the meeting ended,” he added.

“Is it true the company’s contract was terminated because they failed to follow a request made by the transport minister?” the Seremban MP asked.

In an essay last weekend, Malaysia and former Asean environment division chief Raman Letchumanan decried the “string of projects that were terminated, redesigned and retendered” as “klepto-economics”.

“None of the above cases cited resembles anything close to standard economic, business or accounting theories, practices, rules and regulations,” said Dr Raman, a former senior fellow at the S. Rajaratnam School of International Studies.

By : Shannon Teoh – THE STRAITS TIMES

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