As I had written in an earlier post, Mahathir did NOT succeed in his attempts to persuade Chinese leaders to accept him withdrawing from projects contracted with China without any penalties.
At most, China might have allowed a longer period for Malaysia to settle the compensations. They might have offered Mahathir 'tea & sympathy' but probably ended up saying, "Business is business, we cannot interfere with the companies who signed those contracts with Malaysia".
I gather that unfavourable outcome for Mahathir after reading the Hong Kong English daily, the Southern China Morning Post, which tells a different story from what Malaysian press reported, that Mahathir did succeed in his reach-out to China and that Chinese leaders understood him.
But alas, no, the Malaysian look-good news might have been the diplomatic gloss and frills of the visit, but they didn't reveal the Chinese very firm stand on compensations.
Mahathir was probably so stunned by the quantum of the compensation required by the Chinese that he showed his anger when he uttered rather dejectedly:
“If we have to pay compensation, we have to pay. This is the stupidity of the negotiations before. We must find a way to exit these projects … this is our own people’s stupidity.”
He has blamed Najib's "stupidity" for not having an exit clause to the projects' contracts, but Najib came back with a challenge which Mahathir has yet to respond to, namely, to hold a RCI on the project contracts and exit clauses, which Najib assured us do exist.
For more, see MM Online - Najib challenges Putrajaya to RCI on cancelled China projects (extracts):
He said the public have a right to know all the reasons why the projects were cancelled on the Malaysian government’s insistence, instead of only depending on the allegations made against him and the defeated Barisan Nasional (BN) government.
“I urge the government to conduct RCIs (royal commissions of inquiry) into all three projects to determine if there was wrongdoing,” he wrote on his Facebook page this evening.
Hmmm, maybe Mahathir dares NOT because those exit clauses do exists.
But let's leave those aside for a while and discuss what's the penalty for abandoning the projects - since I am not an expert I defer you to Suara Kmp (KijangMAS Perkasa) FB page on the ECRL.
Extracts of what he (I am assuming KijangMAS is a 'he') are as follows:
Land Acquisition : RM 2.0 billion
-----------------------
RM42.0 billion
add Finance Charge RM 7.7 billion
-----------------------
Total Cost RM49.7 billion
Ok?
Faham?
Now . . . that's over RM31 billion LESS than LGE's oft-repeated RM81 billion plucked from thin air!
LGE might ask again: "what about operating costs? RM600 million to RM1.0 billion annually wohhh!"
Haiyaa . . . first of all, those figures come from where?
Thin air again?
Secondly, of course lah got "operating costs" once you start to operate things.
IWK plant got operating costs. Water treatment plant got operating costs. The future Penang LRT and undersea tunnel also got operating costs. Zoo Negara got operating costs. My cars and trucks got operating costs. My houses and rental properties got operating costs. Even kapchais got operating costs maaa.
BUT . . . you cannot plough "operating costs" into the project Capex.
You buy a RM500,000 house. Do you add the monthly TNB bill and water bill and Astro subscription and gardener fees and helper salary and neighborhood watch bill and Cukai Pintu and Cukai Tanah to the "purchase price" of your house?
Gila kah?
Mana boleh treat the operating costs of a project or asset as Capex and tally them up as "project cost" in perpetuity.
Once the trains start to roll, of course lah MRL will generate revenue from passenger tickets and freight charges. And of course lah it will NOT be enough to cover all costs, but this is PUBLIC transport lah dei.
Mana boleh fully cover cost?
KL MRT and LRT ridership charges can cover loan servicing and operating costs ka? Singapore MRT? London Underground? New York Subway? Tokyo Subway? Japanese Shinkansen? France's TGV? Penang Ferry? The two Penang Bridges? Rapid Penang?
Semua mana boleh cover cost.
We all must understand, railways by and large are public amenities paid mostly by public funds for the public good.
To read his full article, which is fairly long, please go to his FB page (linked as above), but I'll provide a short extract here on the consequence of cancelling the ECRL project:
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By the time the dust settles, we are staring at RM25-30 billion down the drain with nothing to show for it!
That is IF we cancel the project.
That's why back in June 2018, I said that Malaysia faced two choices: a painful choice or a more painful choice.
We either spend an additional RM20+ billion to complete Phase 1 and have a modern 600km high-speed rail line from Gombak to Kuantan, KT and KB . . . OR . . . we abandon the project and incur RM25-30 billion in sunk costs, breach of contract penalties and major clean-up and rehab of worksites along the 600km route.
That is IF we cancel the project.
That's why back in June 2018, I said that Malaysia faced two choices: a painful choice or a more painful choice.
We either spend an additional RM20+ billion to complete Phase 1 and have a modern 600km high-speed rail line from Gombak to Kuantan, KT and KB . . . OR . . . we abandon the project and incur RM25-30 billion in sunk costs, breach of contract penalties and major clean-up and rehab of worksites along the 600km route.
We will end up almost RM30 billion in debt payable NOW with nothing tangible to show in return.
(1) ABC (Aug 21, 2018, 5:47 AM ET) - Malaysian PM says China-financed projects canceled:
(2) TMI (23 Aug 2018 5:09PM) - No cancellation of Chinese projects yet, says PM:Yes, KijangMAS said that the cancellation costs will be MORE than continuing, though of course for Mahathir to continue with a Najib project is far too much for his poor heart - at this stage anyway.
I have seen two headlines which I reproduce for your reading pleasure, as follows:
As I had written in an earlier post:
And on the US$20 billion East Coast Rail Link and two pipelines worth over US$2 billion, when queried by reporters, he stated rather ambiguously that the projects had been cancelled outright, but also they may be “deferred”.
I have to admit I cannot read what that ambiguous statement means.
But what I can read between the lines would be that he probably isn't enamoured with China, Chinese and probably Chinese Malaysians, especially now.
And it's worthwhile reading what the Chinese spokesman said: ... it would take a “long-term” view to resolving the underlying tension with Kuala Lumpur.
“When … two countries cooperate, it is unavoidable that various problems may emerge and we may take different views at different times.”
So Mahathir has failed and presumably Daim too must have failed in their pow-wow with the Chinese leaders.
I have to admit I cannot read what that ambiguous statement means.
But what I can read between the lines would be that he probably isn't enamoured with China, Chinese and probably Chinese Malaysians, especially now.
And it's worthwhile reading what the Chinese spokesman said: ... it would take a “long-term” view to resolving the underlying tension with Kuala Lumpur.
“When … two countries cooperate, it is unavoidable that various problems may emerge and we may take different views at different times.”
So Mahathir has failed and presumably Daim too must have failed in their pow-wow with the Chinese leaders.
But now it becomes clearer that on realising the painful consequences of cancelling the ECRL, he might have swallowed his pride, wait for a while to regain his 'face', and then backtrack on his earlier cancellation ..... which has been why he now says as per the TMI report (23 Aug 2018 5:09PM) that there is No cancellation of Chinese projects yet:
