Malaysia may revive at least part of a M$14.5bn ($3.8bn) railway modernisation project, the nation's biggest infrastructure contract, after it was delayed in 2003 to reduce the government's large budget deficit.

The decision to freeze the rail programme by Abdullah Badawi soon after he became prime minister was seen as a sign his administration would stop spending on expensive infrastructure projects favoured by Mohamad Mahathir, his predecessor.

But Mr Abdullah has come under increased pressure to resume state spending on construction in response to complaints by the politically influential building industry, which suffered a 1.9 per cent contraction last year in spite of the economy expanding by 7 per cent.

Chang Kong Choy, the transport minister, suggested at least half of the rail project would be included in the government's next five-year economic plan, which begins next year. The project would include upgrading single-track sections of the railway network to dual tracks and electrifying the system, which runs the length of the Malaysian peninsula. The project is part of a planned trans-Asia rail link from Singapore to China.

The Transport Ministry wants the cabinet to approve the next phase of the project, which would cover the northern part of the railway network that would stretch from the Thai border to the town of Ipoh, about 180km north of Kuala Lumpur.

Few have questioned the need to overhaul the inefficient rail network but there was criticism that Dr Mahathir had awarded the original project contract to a close business associate, Syed Mokhtar al-Burkhary, without open bidding during his last weeks in office.

In postponing the project in December 2003, Mr Abdullah said Mr Syed Mokhtar's Malaysia Mining Corp and Gamuda, its construction partner, could reapply for the contract, which was expected to be subject to open tender.

Ismail Shahudin, MMC chief executive, said yesterday that no contract had been signed for the project, although a letter of award had been granted. "We don't know what the government's position is," he said.

Other possible bidders include China Railway Engineering and Indian Railway Construction, which had been shortlisted as co-contractors for the project. The sudden decision by Dr Mahathir to switch the contract to Mr Syed Mokhtar's MMC provoked allegations of crony capitalism, although the government said the Malaysian businessman's offer was 30 per cent lower than that of the two foreign rail companies.

Mr Abdullah last week announced he would speed up the award of M$2.4bn in construction contracts, which include schools, hospitals and roads, initially scheduled for next year to help relieve the plight of the building industry.

Source: http://news.ft.com/cms/s/491c19ce-b6ad-11d9-aebd-00000e2511c8.html