New details in the 1MDB trial point to a conspiracy between Najib and the Chinese government to defraud Malaysian taxpayers through overpriced infrastructure projects. Despite its renegotiation, does the East Coast Rail Link (ECRL) need an independent investigation?
In early September, a special officer of former Malaysian Prime Minister Najib Razak testified in the 1 Malaysia Development Berhad (1MDB) corruption case. Amhari Efendi Nazaruddin confirmed that Najib offered Chinese state-run businesses contracts on overpriced infrastructure projects in exchange for the bailout of 1MDB and its subsidiary SRC International.
In exchange for Chinese involvement in the ECRL, the Trans-Sabah Gas Pipeline and the Multi-Product Pipeline (MPP), the Chinese State-owned Assets Supervision and Administration Commission (SASAC) would funnel at least RM30 billion (US$7.1 billion) to hide the debts incurred by 1MDB and SRC.
Amhari’s testimony confirmed the existence of a conspiracy between the then sitting Prime Minister and a foreign government to defraud the Malaysian taxpayers and funnel money into 1MDB to cover up embezzlement and graft.
The ECRL has had a rocky road to fruition
On the campaign trail, Mohamad Mahathir was fiercely critical of the ECRL. He questioned its utility and brandished it as “unfair”. It was also a key pillar in the construction of a narrative focused on resisting Chinese debt traps which Mahathir used to drum up political support.
Unsurprisingly, one of his first moves as Prime Minister following his GE14 victory was to cancel the project. But following a nine-month suspension and fresh negotiations with Beijing, Mahathir’s government announced that the 648km rail project would go ahead with a 30% reduction in cost. The new project would cost the Malaysian taxpayer RM44 billion (US$10.5 billion), instead of the RM65.5 billion (US$15.7 billion) negotiated under Najib.
For Pakatan Harapan (PH) this was a clear victory. They had averted a RM21.7 billion (US$5 billion) fine for breaking the terms of the contract and managed to get the Chinese government to budge on the price.
Where do the latest revelations leave the high-profile project?
Following Amhari’s revelations about the nature of Najib’s negotiations on the ECRL, PH has been swift to defend its renegotiation of the project. They point to the negotiated price cut as evidence that the ECRL has shed its murky beginnings and been revived with a clean bill of health under Mahathir.
Transport Minister Anthony Loke called the ECRL a “done deal”. The country’s foreign minister, Saifuddin Abdullah was also quick to claim that the problems that previously dogged the project have been “fully resolved”.
But can PH continue with the project in good faith? Despite Saifuddin’s insistence, there is nothing to suggest that the problems have been resolved. Many questions remain unanswered.
No feasibility studies have been made public. It is also not clear if, under the terms of the new agreement, any of the RM20 billion (US$4.8 billion) previously paid to Chinese firms has been recovered.
Only Anwar Ibrahim has expressed any reservations about jumping straight back into a project of which one of the primary purposes was to defraud the Malaysian public and line the pockets of Chinese construction firms.
There are also question marks over the way it was renegotiated
Mahathir tasked Daim Zainuddin with negotiating the revised ECRL deal with China. The appointment of the former finance minister to head up negotiations raised questions at the time. Daim, as head of the Council of Eminent Persons, is one of Mahathir’s principal economic advisors, but he is not a part of any ministry. Traditionally, the renegotiation of an infrastructure project of this nature would be handled by the appropriate ministry, in this case, the transport ministry.
Daim also has a checkered past in government. Anwar once called him the nation’s “most corrupt person.” During Mahathir’s previous stint in office, Daim’s political and business interests became deeply entangled. Daim and Mahathir’s government bailouts and privatisation initiatives poured public funds into private companies owned by party affiliates and personal acquaintances.
He was investigated by the Malaysian Anti-Corruption Commissions (MACC) in 2018 over allegations of corruption dating back to the previous Mahathir administration. The commission cleared him of any wrongdoing.
He was also interviewed by the MACC in December as part of a separate investigation into land transactions around Kuala Lumpur.
To simply accept on face value that Daim’s renegotiated deal has solved the issues of overpricing would be a failure of due diligence. With so many details remaining undisclosed and the absence of any feasibility study, it would be irresponsible to push on with the project without further investigation.
What next for the ECRL?
In the interests of Malaysian taxpayers, the MACC should open a full and thorough investigation into the ECRL. Every aspect of the renegotiated deal must undergo scrutiny to ensure the Malaysian people will be the main benefactors. A feasibility study should also be made public. The report should make some attempt to provide a cost-benefit analysis to rule out any lingering inflated charges associated with the project.
If the report uncovers evidence that the costs remain inflated, the PH government can attempt to cancel the project without paying the penalties. Evidence of corruption should absolve the Malaysian government from the financial penalties associated with cancelling the project. Given Amhari’s statement and the debt resolution plan submitted to the court, there is ample evidence to suggest that the contract was corrupt.
At a bare minimum, the government needs to learn from 1MDB and ensure all government projects undergo an open and transparent tendering process, with publicly released feasibility studies and price disclosures. Without full transparency, the ECRL project and 1MDB scandal are doomed to repeat themselves in many forms across government contracts and development projects.