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Thursday, 5 July 2018

(The Edge Financial Daily) ECRL, SSER projects ordered to cease work

(Subtitle) Suspension takes effect immediately, MRL tells main contractor CCCC in letter

BY SURIN MURUGIAH & WONG EE LIN

KUALA LUMPUR: The East Coast Rail Link (ECRL) project and two projects under the finance ministry (MoF) unit Suria Strategic Energy Resources Sdn Bhd (SSER), namely the Multi-Product Pipeline (MPP) and the Trans-Sabah Gas Pipeline (TSGP) projects, have been instructed to suspend all works with immediate effect.

In a letter dated July 3 sighted by The Edge Financial Daily, ECRL’s project owner Malaysia Rail Link Sdn Bhd (MRL) had instructed its main contractor China Communications Construction Co Ltd (CCCC) to suspend all works under the engineering, procurement, construction and commissioning contract (EPCC) in respect of the ECRL project, among others, on grounds of national interest.

“During this period of suspension, you shall protect, store and secure the works against any deterioration, loss or damage. Additionally, you shall not remove any equipment, materials or any part of the works from the site, without our prior written consent.

“This suspension shall take effect immediately and will be in force until further instruction from us,” said the letter signed by MRL chief executive officer Datuk Seri Darwis Abdul Razak.

An MRL spokesman confirmed with The Edge Financial Daily the instruction to suspend the ECRL project.

Yesterday evening, China Communications Construction (ECRL) Sdn Bhd, a unit of CCCC confirmed receiving a notice to suspend all work on the ECRL from MRL.

In a statement, the company expressed its “regret that the suspension comes at this junction, as substantial work has been progressing well”.

It added that the ECRL is an important project for Malaysia which will benefit the people and economic development along the route.

Noting that the contract has been signed by CCCC and MRL via legal processes, the company is hopeful that MRL will honour and respect the contract signed.

“We respect and comply with Malaysian laws. Under the situation, we have no choice but to adhere to the suspension instruction,” said the company.

While the duration of the suspension has not been specified, the company also expressed its concern about incurring additional costs, losses and damages arising from the suspension.

“We are upset and concerned about the livelihood of our 2,250 local staff, as well as several hundred subcontractors, suppliers and consultancy firms,” it said.

“We hope that both sides will be able to find a win-win solution through sincere negotiation with goodwill. We also hope that the suspension will be lifted as soon as possible for the benefit of all parties,” the company added.

On Tuesday, Finance Minister Lim Guan Eng said the final cost of the ECRL project was actually RM81 billion and must be reduced significantly to make it viable financially.

Guan Eng also said the cost did not cover its operating costs. “Indeed the RM81 billion project cost does not include the operating deficit, which cannot be determined for now.”

It is understood that the government will be sending a delegation to China later this month to renegotiate the contract cost.

Meanwhile, sources said work on the MPP and TSGP projects have also been suspended.

Last month, MoF revealed that SSER, which contracted a Chinese firm to develop two pipeline projects worth RM9.4 billion, had failed to secure the necessary rights and land to lay pipes for the two projects.

SSER was set up on May 19, 2016 with the specific intent to undertake the MPP and TSGP projects. Both projects were approved by the cabinet on July 27, 2016.

It was reported that, as at end of March this year — about 12 months after the three-year projects started — RM8.3 billion or 87.7% of the total contract value had been paid to China Petroleum Pipeline Bureau, although only 13% of the projects had been completed.

Additionally, MoF also found that “for some reason”, the ECRL and SSER projects were always presented together in the same cabinet paper.

It was also noted, then, that the projects were uncovered when the MoF looked into “red files” that were only accessible to certain parties.