The government will revoke the letters of intent (LoI) issued to the main contractors in the multi-billion ringgit double-tracking railway project, but shied away from disclosing a specific date.

Last year, the government gave LoI to three foreign contractors to design, build and commission the 623-km Malaysian stretch of the 5,500-km trans-Asia railway line between Singapore and southern China.

Ircon International Ltd, China Railway Engineering Telecommunications (Cret) and Mitsui & Co had been the three main players in the double-tracking and electrification project since preliminary works began almost two years ago.

When met in Kuala Lumpur today, Transport Minister Chan Kong Choy said the government would "have to revoke" the LoI since the contract has been given to Gamuda-MMC JV (Gamuda Berhad-Malaysian Mining Corporation Berhad JV).

"Of course, we will have to revoke the letters, (but) I don't know the information (on when that will happen)," he told reporters after signing a memorandum of understanding with Syria's transport ministry.

"But Mitsui is still in negotiations. That's all I can say at the moment. I do not wish to elaborate further because the government has already answered all questions about the project."

30 percent of cost

Mitsui's LoI was for systems works which includes signalling and communications. This alone takes up 30 percent of the entire project cost, making it the single largest component in the country's largest infrastructure project to date.

On Oct 22, local infrastructure giants Gamuda-MMC JV suddenly announced that they got the contract the previous day following a RM14.5 billion bid, lower than the government-quoted estimate of RM17 billion.

The final combined price-tag offered by the Ircon, Cret, Mitsui and their local partners was RM19.7 billion.

Asked who had signed the letter of award (LoA) that granted the lucrative deal to Gamuda-MMC, Chan merely stuck to saying "the government".

Pressed further to name either the transport ministry or the treasury, he said: "Like I said, the LoA was signed by the government. The government works as a collective.

"What more do you want to know? I'm telling you that the government signed the LoA," he exclaimed before walking away.

The double-tracking deal involves two parcels between Ipoh-Padang Besar (northern sector) and Seremban-Johor Baru (southern sector). Ircon is handling the northern sector while Cret is the main infrastructure contractor in the south.

Industry sources had told malaysiakini that the foreign contractors, pending any revocation of the LoI, are proceeding with their work as stipulated in the LoI.

The government has also yet to set a date to seal the rail deal with Gamuda-MMC JV.

"I don't know when the agreement will be signed but it will take some time because we need to finalise many things first," said Chan.

Normal procedure

Asked if negotiations following the award of a contract, as in this case, is normal procedure, he said it was.

"Yes, of course it is normal procedure to award the contract first before negotiating the terms of the agreement."

The minister said the sub-contractors should continue with their own negotiations on the delegation of work for the project, which is scheduled for completion in 2010.

The required local partners for Ircon and Cret, namely DRB-Hicom/Emrail (north) and DRB-Hicom/MMCE/Hikmat Asia (south), are now believed to be in talks with Gamuda-MMC for the sub-contracts.

Many believe that the sudden award of the railway project to Gamuda-MMC has a lot to do with backdoor government machinations.

There is also the fear of a reprisal from India and China following the decision which 'nullifies' the initial contra-deal stipulating payments in kind through crude Malaysian palm oil imports.

Opposition PAS, in refuting the government's grounds for giving Gamuda-MMC the contract as due to their 'lowest bid', claimed that the clause on the variation order contained in the LoA would see an inflated final cost.

The DAP wants the government to call for a fresh open tender to restore foreign investor confidence in Malaysia and to avert a possible trade war with two of its largest trading partners in Asia.