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Malaysia has been a tease. For months it has hinted that if China reduced the price tag by billions, it might once again support a high-speed rail project that is central to China's push into Southeast Asia. Hopefully, a deal will be announced soon.

Malaysia is making progress in talks with China to revive a high-speed rail project that Prime Minister Mahathir Mohamad’s government said it would cancel, according to Foreign Minister Saifuddin Abdullah.

China is willing to reduce the $20 billion price tag for the East Coast Rail Link project and talks are “in the last mile,” Saifuddin said in an interview Tuesday at his office near Kuala Lumpur. Discussions have been led by Daim Zainuddin, an adviser to Mahathir, with the aim of reaching a smaller project size and cost, he said.

“It is not canceled until and unless we can’t settle on the numbers,” Saifuddin said. “China understands our constraint and they’re willing to scale down the size of the project and the cost. The discussion is probably in the last mile.”

Since returning to power last May, Mahathir has tested Malaysia’s relations with China. Besides the railway, he has also canceled a gas pipeline project backed by China, criticized foreign ownership in a housing development marketed to Chinese investors, and warned against “a new version of colonialism” on a trip to Beijing.

China’s state-run Global Times newspaper last year blasted Mahathir’s “piercing” remarks, saying they “will definitely make Chinese investors worry about Malaysian public opinion and whether such an atmosphere will affect investment in the country.”

There are recent signs that Malaysia wants to ease tensions with China.

Mahathir struck a conciliatory tone last month and said the government canceled the rail project only due to cost, leading to renewed talks. And members of his cabinet have declined to confirm or deny a Wall Street Journal report that said senior Chinese leaders offered Mahathir’s predecessor help bailing out troubled state fund 1MDB in exchange for stakes in projects.

It’s part of China’s Belt and Road Initiative, also known as the new Silk Road.

©2019 Bloomberg L.P.

This article was written by Anisah Shukry and Anuradha Raghu from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected]

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Tags: high-speed rail, malaysia, Silk Road

Photo credit: A to-scale model of Malaysia's East Coast Rail Link project. Last year, the country scrapped the project, but China's investors are attempting to persuade the government to change its mind. Xinhua News Agency/Bloomberg

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