Malaysia said on Tuesday it was renegotiating a $3.8bn rail project awarded to a close business ally of Mahathir Mohamad, the former prime minister, as his successor prepared to crack down on alleged crony capitalism.
The government’s decision to give the rail project to Syed Mokhtar al-Bukhary in mid-October, shortly before Dr Mahathir left office, provoked controversy since the Indian and Chinese state-run railway construction companies had signed a joint letter of intent in 2001 to build parts of the line that would stretch from the Thai border to Singapore.
But during a visit to Malaysia, Satyabrata Mookherjee, India’s state minister for commerce and industry, said he was told that the participation of Indian Railway Construction (Ircon) in the rail project was still under consideration by the new Malaysian government of Abdullah Badawi.
Malaysian officials have expressed fears that India might retaliate for being frozen out of the rail project by refusing to buy Malaysian exports, such as palm oil.
A move to allow Indian involvement in the rail project would not only improve trade ties but also help Mr Abdullah to score political points ahead of general election expected early next year by appearing to tackle allegations of crony capitalism involving infrastructure projects.
It is uncertain how much the government is willing to reduce Mr Syed Mokhtar’s role in the rail project.
Samy Vellu, Malaysia’s works minister, on Tuesday said MMC-Gamuda would remain the lead contractor on the rail project even if Ircon is included in the consortium.
Mr Vellu said talks were under way between Malaysia and India about the pricing of the northern half of the track that was initially awarded to Ircon, but he made no mention of whether CREC would be included in the construction of the railway’s southern half. Financial Times