Malaysia and China have agreed to resume the China-backed East Coast Rail Link (ECRL) project -- but at a reduced cost and smaller scale.

Cost reduced by a third

According to a statement released by the prime minister's office of Malaysia on Friday, April 12, the project will now cost RM44 billion (S$14.5 billion) instead of the original RM65.5 billion (S$21.5 billion).

This means a cost reduction of about one-third of the original price tag.

"This reduction will surely benefit Malaysia and lighten the burden on the country’s financial position," the statement read.

The two countries arrived at the agreement.

Malaysia says it is an "improved deal", after "months of negotiations" between the companies involved, and the governments on both sides.

Malaysia Rail Link Sdn Bhd (MRL) and the China Communications Construction Company Ltd (CCCC) signed the Supplementary Agreement (SA) at about 11am.

Massive savings

According to Malaysiakini, former finance minister and new government advisor Daim Zainuddin, who was in Beijing to lead the negotiations, said the savings will be enough to build two more Petronas Twin Towers.

Daim also told the media that the rail link will be 648 kilometres, which is 40 kilometres shorter, reported The Star.

ECRL a key part of China's BRI

The ECRL project is a key part of China's Belt and Road Initiative (BRI).

Launched in 2017, it will link Malaysia's east coast on the South China Sea with the strategic shipping routes of the Malacca Strait on the west.

[caption id="" align="alignnone" width="800"] Graphic via Malaysia's Public Transport Agency (SPAD).[/caption]

According to Bloomberg, China wants the project to resume quickly.

China-backed projects under review

Previously, Malaysia suspended the project in July 2018, Reuters reported.

A month later, Malaysian Prime Minister Mahathir Mohamad said the project would be deferred until a time when Malaysia could afford it.

More recently, in an interview with South China Morning Post (SCMP) in March 2019, he said it would be "difficult" to come to a resolution anytime soon regarding negotiations on the project, and that it was "not enough" for the Chinese to propose a reduction in cost.

Since coming to power, the new Pakatan Harapan (PH) government has pledged to review major projects signed by the previous administration under Najib Razak in order to reduce the national debt.

The latest move to resume the ECRL project in Malaysia is undoubtedly good news to Beijing, as it comes amidst a slew of negative reports regarding Chinese-backed infrastructure projects in other parts of Asia.

Mahathir is scheduled to attend the BRI Summit in Beijing later this month.

Joint projects with Singapore

Malaysia had also come to an agreement with Singapore to suspend the Kuala Lumpur-Singapore High Speed Rail (HSR) project till 2020.

In addition, Singapore agreed to consider Malaysia's proposal to suspend the Johor-Bahru-Singapore Rapid Transit System (RTS) Link project for six months from April 1, 2019.

Top image via The Star Online/YouTube