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Debt and lawsuits are piling up around China's railway project in Malaysia

STEVE INSKEEP, HOST:

An old slogan for reporters holds, follow the money. One of our colleagues has been following the money from China to Malaysia. It's one of China's investments in the Belt and Road Initiative, in which China offers to build infrastructure around the world. In Malaysia, the initiative is now mired in debt and lawsuits. Many projects are delayed or never built. NPR's Emily Feng asked why.

(SOUNDBITE OF VEHICLE BEEPING)

EMILY FENG, BYLINE: This is the sound of construction on Malaysia's most expensive infrastructure project to date. It's called the East Coast Rail Link, connecting the country's east and west coasts.

UNIDENTIFIED PERSON #1: (Non-English language spoken).

UNIDENTIFIED PERSON #2: (Non-English language spoken).

FENG: Indonesian and Bangladeshi workers like this one drive construction trucks labeled with the letters CCCC, China Communications Construction Company. They're the Chinese state-owned contractor building this rail project.

MURNIATI YUSUF: It hits a lot of areas in which actually needed for development.

FENG: This is Sri Murniati Yusuf, research director at Malaysia's IDEAS Institute, a public policy think tank. Chinese companies were enthusiastically pitching Malaysian officials all kinds of projects as Belt and Road was taking off. Here's Ong Kian Ming, a former deputy trade minister from 2018 until 2020.

ONG KIAN MING: Usually, what will happen is that there will not be an open tender for these projects because they have to be awarded to - not just to a Chinese company but a Chinese company from the particular province in China.

FENG: And the Rail Link is China's flagship Belt and Road project in Malaysia. The Belt and Road is the brainchild of Chinese leader Xi Jinping, loaning about a trillion dollars so far to shore up basic infrastructure around the world. But it's also run into significant challenges on the ground, challenges China did not foresee. Take the Rail Link, which has become a political hot potato with Malaysia's current government.

MURNIATI: It's controversial because some of the debt that we receive from China for this project actually being funneled into 1MDB.

FENG: 1MDB, a government fund former Malaysian Prime Minister Najib Razak and cronies were charged with embezzling from at grand scale five years ago. It's Malaysia's biggest corruption scandal in history, and since then, some Chinese projects signed under Najib's government were scrapped, some never even built. Research outfit Rhodium Group estimates Belt and Road had $78 billion in loans go bad over the last three years around the world. Money went to countries who can't afford to pay it back or for projects that don't justify their cost, like the East Coast Rail Link. And this is happening at a time when China's own economy is slowing down. So Beijing is reevaluating the Belt and Road.

HONG ZHANG: You know, these kind of large-scale projects have been kind of put on hold. And now the slogan in China is small and beautiful.

FENG: This is Hong Zhang of Harvard's Kennedy School, who studies the initiative. She says Chinese companies in Belt and Road countries were often in a rush to land projects and skipped their due diligence.

HONG: These kind of large-scale projects are hard, and they don't necessarily buy goodwill of the local population. So why don't we do something that might be simpler, you know, smaller projects in the social development sectors?

FENG: Ironically, Malaysia's East Coast Rail Link is a relative success story. It is now more than a third built, albeit a few years behind schedule. In 2019, China's CCCC even renegotiated to lower the cost of construction a bit. But one point Malaysian politicians really wanted, eliminating an expensive tunnel path, did not happen.

UNIDENTIFIED PERSON #3: (Non-English language spoken).

FENG: When NPR visited last month, we found CCCC was almost done building the tunnel Malaysia wanted to avoid. The tunnel leads to here, where workers are constructing a new transport hub that will connect to the East Coast Rail Link stations. But the hub has been delayed, too - overbudget and understaffed, five workers there tell NPR. Here's one Malaysian contractor.

UNIDENTIFIED PERSON #4: (Through interpreter) During COVID, a lot of big bosses ran away with the funds and didn't pay the workers. So for a while, we were out of money.

FENG: He asked to remain anonymous because he's afraid of reprisal for speaking to media. Two other workers made the same claims to NPR.

UNIDENTIFIED PERSON #5: (Non-English language spoken).

FENG: He says if Malaysia wanted to get the project done, they should've called in a Chinese company to do the job. But in investing all over the world in complex environments like Malaysia, China may also have bitten off more than it can chew. And what Beijing might have seen as a win-win project could end up as a lose-lose situation. Emily Feng, NPR News, Kuala Lumpur. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Emily Feng is NPR's Beijing correspondent.