Malaysia seized $240 million from Chinese company over pipeline project: PM Mahathir

KUALA LUMPUR (Reuters) - Malaysia seized more than 1 billion ringgit ($243.5 million) from a bank account of state-owned China Petroleum Pipeline Engineering (CPP) over incomplete pipeline projects, Prime Minister Mahathir Mohamad said on Monday.

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The seizure comes nearly a year after Malaysia suspended two pipeline projects, valued at $2.3 billion, on which CPP was the lead contractor. CPP is a unit of state energy giant China National Petroleum Corp.

“I understand that money for 80% of the pipeline was paid, but the work completed was only 13%,” Mahathir told reporters. “So the government is entitled to get back the money, since the project was canceled.”

His comments followed a report on Saturday from Singapore-based Straits Times, which said that Malaysia had seized the funds from CPP’s account at HSBC Malaysia.

HSBC declined to comment, citing client confidentiality.

In an email sent to Reuters late on Monday, CPP said it understood Malaysia’s Anti-Corruption Council ordered the fund transfer and that it was made without the company’s knowledge.

“CPP is currently speaking to the relevant parties in a bid to obtain and understand the basis of the transfer. Once we have further information, CPP will take the necessary and appropriate actions to protect its rights,” the Chinese company said.

In 2016 CPP won a contract from the government of former prime minister Najib Razak to build a 600km petroleum pipeline along the west coast of peninsular Malaysia and a 662km gas pipeline in Sabah, the Malaysian state on Borneo island.

Both projects were suspended by Mahathir in July last year after he defeated Najib in the 2018 national election.

Mahathir had vowed to renegotiate or cancel what he calls “unfair” Chinese projects authorized by Najib, straining ties with Malaysia’s biggest trading partner.

Malaysia and China this year agreed to resume a multibillion-dollar rail project after shaving off nearly a third of its cost to 44 billion ringgit.

Mahathir on Monday said he was not concerned about a fallout with China for seizing money from a state-owned Chinese firm.

“I don’t see why the Chinese would feel unhappy about it because we are not taking back money for what they have done,” he said.

Speaking in Beijing, Chinese Foreign Ministry spokesman Geng Shuang said that both countries should have “friendly consultations” on any problems arising during the project to resolve them in an appropriate way.

China and Malaysia have a strong cooperative relationship, and China is confident this will continue, Geng told a daily news briefing.

Reporting by Joseph Sipalan; Additional reporting by Chen Aizhu in Singapore and Ben Blanchard in Beijing; Writing by A. Ananthalakshmi; Editing by David Goodman