China takes the lead in Malaysian mega-projects
Tadashi Maeda was visibly agitated. Addressing an investment forum in Kuala Lumpur, the senior managing director at Japan Bank for International Cooperation assured the packed hall that Japan would redouble its efforts to secure a contract to build the proposed 350km high-speed railway to link the Malaysian capital to Singapore, at an estimated cost of between $9.7bn and $14.5bn.
Mr Maeda had good reason to be agitated. He was speaking last October, a month after the Indonesian government surprised many by awarding a $5.5bn, 150km Jakarta to Bandung high-speed railway contract not to Japan — which had spent five years on feasibility studies and pushing Jakarta to get the project going — but to China. It shocked the Japanese establishment , which had been certain of success.
Mr Maeda should brace himself again. FT Confidential Research, a unit of the Financial Times, believes China is the early favourite to win the Malaysian contract, too.
Japan was the favoured development partner for Malaysia under former premier Mahathir Mohamad in the 1980s and the 1990s. But under Najib Razak, prime minister since 2009, China has moved to the fore.
Over the past five years, China-based companies have successfully participated in high-profile infrastructure projects. The $1.1bn Second Penang Bridge — partly financed by an $800m loan from the Chinese government — was built by the state-owned China Harbour Engineering Company (CHEC) together with Malaysia-based UEM Group.
More significantly, in the rail sector about 80 per cent of Malaysian rolling stocks are Chinese made. The Malaysian rail business is so lucrative that China Railway Rolling Stock Corporation (CRRC) opened a $97m rolling stock manufacturing plant in the country in July 2015.
CRRC is part of the Chinese consortium led by freight transporter China Railway bidding for the Kuala Lumpur-Singapore line. The party also includes China Railway Signals & Communication and China Communications Construction (the parent company of CHEC).
China’s cause may have been helped by its support for 1MDB, the controversial state investment fund at the centre of corruption allegations bedevilling Mr Najib. The prime minister and 1MDB deny any wrongdoing over $680m that landed in his personal bank accounts from a mysterious foreign source.
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