by NG MIN SHEN / pic by AFIF ABD HALIM
The Ministry of Finance Inc (MoF Inc) has ordered all services and operation works on the Multi-Product Pipeline (MPP), Trans Sabah Gas Pipeline (TSGP) and East Coast Rail Link (ECRL) projects to be suspended immediately.
Finance Minister Lim Guan Eng (picture) said the prime minister, after seeking advice from the Attorney General’s Chambers, had instructed MoF to issue a suspension notice via MoF Inc, for all contracts related to MPP, TSGP and ECRL on July 3, 2018.
“The services and operation suspension notice takes effect immediately until further notice is issued by MoF.
“The decisions are solely directed towards the related contractors relating to the provisions mentioned in the agreements, and not at any particular country,” Lim said in a statement yesterday.
Suria Strategic Energy Resources Sdn Bhd (SSER) is the company mandated to undertake MPP and TSGP, while Malaysia Rail Link Sdn Bhd (MRL) is in charge of ECRL.
Both SSER and MRL are wholly owned subsidiaries of MoF Inc.
The MPP and TSGP projects, with a total construction cost of RM9.4 billion, were awarded to China Petroleum Pipeline Bureau on Nov 1, 2016.
“SSER has paid RM8.3 billion, or 88% of the project’s construction value of RM9.4 billion, even though progressive work completion (that has not been audited) is only at 13%,” Lim said.
He added that the contracts worth RM9.4 billion have not taken into account the cost related to land acquisition, two expert consultancy agreements and a maintenance agreement, which would comprise a total additional cost of RM1.7 billion.
SSER was established on May 19, 2016, with the specific purpose of undertaking the MPP and TSGP projects, both of which were approved by the Cabinet on July 27, 2016.
Meanwhile, ECRL contractor China Communications Construction (ECRL) Sdn Bhd, a unit of China Communications Construction Co Ltd (CCCC), said on Wednesday that it had received a notice from MRL to suspend all work on the rail link.
Under the previous administration, the rail line spanning 688.3km from Port Klang to Pengkalan Kubor, Kelantan, was said to have an estimated cost of around RM55 billion.
However, Lim said the true cost of the ECRL is expected to reach RM81 billion, including land acquisition cost and loan interest during the construction period.
The minister had also said on Tuesday that the project cost does not include operating deficit — which cannot yet be determined — and that the project will only become financially and economically feasible if there is a drastic price reduction of the project by CCCC.
He said the project was first approved by the Cabinet on Oct 31, 2016, while the engineering, procurement, construction and commissioning contract was signed with CCCC on Nov 1, 2016.
On May 13 last year, the previous government then signed an additional agreement with CCCC to undertake Phase 2 of the rail link, which entailed extending the line from the Integrated Transport Terminal in Gombak to Port Klang for RM9 billion.
The Cabinet had also approved the northern extension of the project from Wakaf Baru to Pengkalan Kubor in Kelantan for RM1.28 billion on May 3.
On Aug 23, 2017, it further approved upgrading of ECRL to a double-tracking project which would cost an additional RM10.5 billion.