THE East Coast Rail Link (ECRL) project will carry on even after it was linked to the 1Malaysia Development Bhd (1MDB) scandal, said Prime Minister Dr Mahathir Mohamad.
Najib’s former aide Amhari Efendi Nazaruddin, while giving testimony during the ongoing 1MDB trial, had alleged that the ECRL, Trans-Sabah Gas Pipeline and Multi-Product Pipeline projects were used to bail out 1MDB and SRC International Sdn Bhd.
Dr Mahathir said the claim that the ECRL project was part of the negotiations to bail out 1MDB was Amahri’s claim.
“That is my opinion. The Chinese government has not asked for anything to date. We have a contract with them to build it. We have reduced the scope of the work and trimmed cost. So ECRL will continue,” he told reporters today after launching the Piagam Warisan dan Budaya Tanah Air in Kuala Lumpur today.
On September 4, Amhari told the high court that the ECRL was among several projects that were used to bail out 1MDB.
Amahari told the court that the Chinese funding into the ECRL, Multi-Product Pipeline and Trans-Sabah Gas Pipeline projects were discussed with China’s State-owned Assets Supervision and Administration Commission of the State Council in mid-2016.
The court revelation had prompted prominent economist Prof Dr Jomo Kwame Sundaram to call on Putrajaya to review the mega infrastructure project.
He noted that the government had relaunched the ECRL project before Amhari’s disclosure last week.
“All my position [against the ECRL] in the past had been based on publicly available information. But now we have a very important disclosure about the circumstances under which the ECRL was hashed out. Nobody has refuted that and certainly [senior lawyer] Muhammad Shafee Abdullah, in interrogating the witness, did not fundamentally challenge the statements he made,” Jomo was quoted as saying in reports.
The mega project was originally slated to cost RM81 billion but following renegotiations by the Pakatan Harapan government, the cost has now been scaled down to RM44 billion.
Dr Mahathir said those who want to call it off should negotiate with Beijing.
“They have to negotiate. If they are willing to negotiate with the Chinese and tell me that they can suspend, I will follow them,” he said sarcastically.
Putrajaya likely to miss fiscal deficit target of 3% in 2020
PUTRAJAYA is unlikely to achieve its fiscal deficit target of 3% for 2020 if an expansionary budget is implemented next year, said economists.
They said this is because of the government’s limited fiscal flexibility, adding that the government will have to look at revising its target to 3.3%-3.4% instead.
The Finance Ministry is expected to take a slight step back from the earlier commitment of lowering the fiscal deficit to 3% of GDP in 2020, said Stantley Tan, head of global treasury at OCBC Bank (Malaysia) Bhd.
It’s likely the fiscal deficit will stand at 3.4% of GDP in 2020, which is the same as the target for 2019, he said.
Tan told The Malaysian Insight that Malaysia’s debt level is seen as standing at a higher end of the range when compared with similarly rated countries.
“Malaysia has unfortunately seen a large portion of its fiscal flexibility tapped in the years preceding the change of government with the ramp up of direct and indirect debts, commitments, guarantees (e.g. 1MDB) and contingent liability undertakings,” Tan said.
According to data from Bank Negara Malaysia, the government’s current liabilities stand at RM799.11 billion as of the end of the second quarter this year.
However, an accommodative monetary policy will ensure that the country’s financial condition remains supportive of the economy in the face of heightened global economic uncertainties, said Tan.
“Broad populist measures may be put in place to persuade the top 20% of EPF contributors to withdraw their discretionary EPF savings beyond the RM1 million mark in favour of spurring local private investments and domestic consumption, which also ensures that the dividend payout to the less privileged 80% faces less dilution in light of lower returns now of the EPF’s investment income,” he added.
Meanwhile, Dr Shankaran Nambiar, senior research fellow at the Malaysian Institute of Economic Research (MIER), said an expansionary budget might be implemented out of limited choice, as a mechanism to counter the negative effects from the US-China trade war.
He said it’s difficult to envision on how the government will be able to spend more without raising its debt, adding that Putrajaya could cut corners by curbing spending on operating expenditure, perhaps by freezing hiring in the civil service or by cutting down on pension payments.
“One cannot expect largesse from a government that is cash-strapped. There is likely to be some hold back on allocations for public institutions.
“There has to be some flexibility with the fiscal deficit. The 3% target will have to be bent, perhaps to 3.3% or 3.4% and that will not evoke punishment from the rating agencies. They know that this is a prudent government, it is not a kleptocratic government,” he said.
Sunway Business School professor of economics Dr Yeah Kim Leng, said the government can ease up the fiscal deficit position to up 3.2% or 3.3% of GDP, instead of 3% for 2020.
Each 0.1% percentage point will amount to an additional spending of about RM16 billion, assuming that nominal GDP growth is maintained at around 5.5%-6.5% for 2020, added Yeah.
Agreeing with Shankaran, Yeah said the government can slash its operating expenses, especially on supplies and services.
Finance Minister Lim Guan Eng earlier suggested that the government will consider implementing an expansionary budget next year to weather the negative effects of the Sino-American trade war, despite its aim of consolidating the fiscal debt.
Budget 2020, the second budget under Pakatan Harapan, will be tabled on October 11.