CCCC still upbeat about ECRL project
China contractor hopes government review will not take long
BEIJING: China Communications Construction Co Ltd (CCCC), the contractor for the 688km East Coast Rail Link (ECRL), hopes the suspension of the project will not be prolonged.
Vice-president Sun Ziyu said the company believed that the issues regarding the ECRL could be resolved amicably but the review should not take too long as it would cause more losses.
“ECRL is the one project that has been significantly affected since the new government took over the country’s administration.
“The value of the contract is high due to the long and complex alignment of the track via tunnels and bridges,” Sun told a delegation of Malaysian journalists during a visit here organised by the China Embassy in Malaysia.
“It is understandable for the new government to review such a big project, but they should not take too long to come to a decision. For any country, infrastructure development is vital, and the people’s livelihood should be the main focus,” Sun said.
“We fully understand the new government’s concern about the debt crisis, but as a public company we are also accountable to our shareholders,” Sun said.
ECRL, a key component in the Belt and Road Initiative, comprises a rail line linking Selangor to Pahang, Terengganu and Kelantan.
In July, Malaysia Rail Link Sdn Bhd (MRL) had notified CCCC to suspend work on the project on the grounds of national interest.
The suspension came after the Finance Ministry disclosed that the final cost of the ECRL project is RM81bil and that CCCC needs to cut the construction cost significantly to make it viable financially.
The ECRL project was first approved by the government on Oct 21, 2016 while the engineering, procurement, construction and commissioning agreement was signed with CCCC on Nov 1, 2016.
“We have received suspension notice from the asset owner and we are discussing with them on future arrangements,” Sun said.
“We will follow the contract and we believe that the issue could be resolved by negotiations.
“However, we are suffering losses every day as long as the suspension is still in effect.
“Therefore, we cannot afford for it to be suspended and leave the issue unresolved for too long,” Sun said.
CCCC had begun earthworks, excavating tunnels, building road foundation, procuring bridge construction equipment and materials, and the hiring workers.
According to Sun, the group had also established partnerships with over 700 local subcontractors, suppliers and consultants.
“Ever since the suspension of work, losses are incurred every day.
“As contractors, this is upsetting and impacts us negatively,” Sun said.
He explained that 50% of its workforce for the ECRL were locals and could reach up to 70%.
Except for some special technicians who were from China, all other employees were local.
“We have also launched the industrial training programme and plan to train and develop 3,600 railway experts. So far, we have hired and trained 447 local graduates,” he said.
The group also experienced similar situation for its Colombo Port City Project in Sri Lanka.
The Colombo Port City Project that CCCC invested in Sri Lanka was also suspended for one year due to a change in the political environment, but it has now resumed and is progressing well.
He said the company still has confidence in the ECRL project and Malaysia has always been CCCC’s preferred market in terms of its
overseas business.
Sun explained that the cost of the ECRL would depend on the quantity of work.
The price would be different if the scope of work in the contract fluctuated.
For example, whether it is single track or double track, the complexity of the track alignment, and geological conditions along the route will all make a difference in terms of costing.
“The phase one of our EPCC contract with MRL totals RM46bil and the double-track and extension line contracts total RM20.78bil. So the total contract value is RM66.78bil,” Sun said.
He said the railway would extend to the border with Thailand in the north and from Gombak to Port Klang.
From a technical perspective, over 30% of the ECRL alignment are bridges and it goes through many mountains, and also cuts across many rivers and highways.
“The geological analysis shows that ECRL goes through swamps in the east coast so we need to mitigate the soft foundation to prevent sinking of the base,” Sun said.
In the flooded area of the east coast, Sun said CCCC needed to build many discharge channels and culverts to prevent floods.
ECRL will also go through the Titiwangsa Ranges and the tunnel will be the longest in South-East Asia.
Sun also noted that the contract was signed between two parties based on bilateral agreement with fair and equitable principles.
“We still have confidence and negotiations are still ongoing.
“But if the project is cancelled, we will protect our legal rights and interests according to law,” he said.
Despite previous financial crises and trade uncertainties, CCCC’s commitment to develop Malaysia in partnership with Malaysians remained unchanged.
“We set up our South-Eastern Asia regional management centre in KL, which oversees CCCC marketing and project management work for South-East Asia.
“So far, we have over 20 ongoing projects in Malaysia and they are proceeding well as per our contractual obligations,” he said.
Sun also explained that ECRL is a project financed by preferential loans, and it is not an investment project.
“It is essentially a project financed by a low-interest loan from the Chinese government and the government will subsidise the bank to do that.
“Since the Malaysian government needs to provide sovereign guarantee for such loan, its national debt will increase.
“The fact that the project is financed by a preferential loan demonstrates the friendship between the two countries and bears great long-term significance for the economy and society of the host country,” Sun pointed out.
To a question if CCCC would consider being an equity partner in ECRL, Sun said: “We are open for discussion. We can adopt the transit-oriented development (TOD) concept in the railway project.”
He said in the Mombasa-Nairobi SGR Project, CCCC has successfully switched roles from a contractor to railway operator.
Going forward, Sun said CCCC is transforming itself from being an EPCC contractor to an investor, developer, as well as an operation service provider.
“We are actively seeking investment opportunities to help develop Malaysia. For example, we are exploring TOD along the ECRL.
“We plan to invest in targeted industries along the ECRL, and lead investments from China and other countries as well.
“Besides infrastructure development, we also hope to participate in other fields, such as property development and urban development,” Sun added.
On dealing with the negative perception of Chinese company, Sun said companies in China and Malaysia were different in their own ways, and CCCC should not be tarred with the same brush.