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China rail project revived to avoid US$5b penalty: Mahathir

Kuala Lumpur

MALAYSIA would have faced a US$5-billion penalty if a China-backed rail project was axed entirely, Prime Minister Mahathir Mohamad said on Monday, after a deal was reached to revive the controversial scheme.

Last week, Malaysia and China agreed to push ahead with the railway at a 30-per cent lower cost, lifting a suspension slapped on the project when a corruption-plagued regime lost power last year.

It was among several Beijing-financed deals in Malaysia put on hold after the change of government, amid concerns they lacked transparency and were aimed at funnelling cash to the administration of ex-leader Najib Razak.

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The 640-km east coast rail link will run from northern Malaysia, near the Thai border, to a port outside Kuala Lumpur, and is seen as a key project in China's Belt and Road infrastructure drive.

Announcing further details Monday, Dr Mahathir said the government "was faced with the choice to either renegotiate or pay termination costs of about 21.78 billion ringgit (S$7.15 billion), with nothing to show for it. As such, we chose to go back to the negotiating table and call for a more equitable deal, whereby the needs of the Malaysian people would be prioritised".

He also announced the main Chinese company in the scheme, China Communications Construction Company, had agreed to help with operation and maintenance of the line, which would ease the financial burden on Malaysia.

Under the new agreement announced last week, the project cost has been reduced to 44 billion ringgit. Malaysia will still need to take a loan from a Chinese state-owned bank to fund the line but it will be less than under the original deal.

Dr Mahathir, 93, returned for a second stint as premier in May last year after he led a reformist alliance to a surprise victory at the polls, toppling Najib's coalition which had been in power for over six decades.

Najib has since been slapped with dozens of charges over his alleged role in looting state fund 1MDB.

He returned to court for the second day of his high-profile corruption trial on Monday. Proceedings began with the defence team cross-examining Companies Commission of Malaysia official Muhamad Akmaluddin Abdullah, who had testified when the trial opened, on matters related to SRC's records.

The court then heard from Azizul Adzani Abdul Ghafar, an investigating officer from the central bank, who took part in a raid on the branch of a local bank, AmBank, and seized documents.

"We went there in relation to an investigation of a crime under (anti-money laundering laws)," he said.

The money stolen from the 1MDB unit was allegedly transferred into Najib's accounts at the bank. Prosecutors also handed over documents to the court containing details of Najib's AmBank accounts. AFP