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NEWS ADMIN

Mahamad Rodzi Abdul Ghani

DATE

24/06/2003

NEWS PROVIDER

Mahamad Rodzi Abdul Ghani

NEWS SOURCE

Business Times

CATEGORY

HEADLINE

Palm oil-for-rail deal with China still on track
Tuesday, June 24 2003 - CHINA Railway Engineering Corp (CREC) is stillinterested in getting paid in palm oil for double-tracking works on thesouthern railway grid, and has not pulled out of the billion-ringgit deal.

There are a lot of rumours in the market regarding CREC pulling out fromMalaysia and not wanting palm oil as payment. As far as CREC is concerned,the rumours are baseless. There is no change in the current China-Malaysiatrade policy on receiving palm oil as payment, Cai Ze Min, AsiaRepresentative, CREC told Business Times.

Cai believes that the rumours started because the negotiations over thepayment are still going on.

The rumours started because negotiations are still ongoing, and perhapsthey are taking a longer time.

(But) this is normal for a transaction of such nature, he said.

He also denied talk that CREC was negotiating to be paid in cash for theRM6 billion double-tracking project linking the 297km between Seremban andJohor Baru because it was dissatisfied with the pricing of the project.

The deal is a counter-trade between Malaysia and China to swap palm oil inexchange for double-tracking works to increase uptake of palm oil.

When the deal was signed in May 2001, crude palm oil was selling at RM750per tonne. Today, the price is around RM1,500.

On whether adjustments on pricing will be made due to the increase in palmoil prices, Cai said that the amount of palm oil China receives in returnfor building the RM6 billion project is still under negotiation.

It was reported that China is to take up between 4 million and 8 milliontonnes of palm oil for a period of between five years and six years.

The barter agreement for the rail project between China and Malaysia istied up with the Bakun project.

The billion-ringgit barter trade deals, using palm oil to pay, would havethe cumulative effect of reducing supply, which in turn should reflectpositively on the CPO price.

Apart from CREC, which has a 70 per cent stake in the project, MMCEngineering Group Bhd and DRB-HICOM Bhd hold an equal share of 15 per centeach.

Ircon International Ltd, a state-run engineering and construction firm, isset to undertake double-tracking and electrification works for thenorthern grid spanning 338.8km and linking Ipoh to Padang Besar.

On May 28, The Bangkok Post quoting a source reported that bids from theIndian and Chinese contractors had come in at RM18 billion — with theformer putting the price for the project at RM10 million while the Chineseat RM7.5 billion.

Then Transport Minister Datuk Seri Dr Ling Liong Sik said the Treasury andthe project management committee were evaluating the bids to see if theprice could be lowered.

Both deals were to see the delivery of about 8 million tonnes of palm oilover a period of five to six years.

The northern and southern grids as well as the Ipoh-Rawang rail route arepart of KTM Bhd’s modernisation plan. It is currently in the second phaseafter the completion of the Kuala Lumpur-Seremban-Rawang-Port Klang linkon August 3 1995.

The Ipoh-Padang Besar and Seremban-Johor Baru routes will be completed instages by 2007 and 2008 respectively.

These are part of a huge project that will eventually see a high-speedTrans-Asian rail link constructed to connect several Asean cities fromSingapore to Kunming in China.

Asean members are also working on the construction of the 240km stretchfrom Cambodia to Vietnam.