Malaysian authorities have confiscated more than RM1 billion (US $ 328 million) held by Chinese state-owned company China Petroleum Pipeline Engineering Company Limited (CPP).

The Malaysian banking industry has taken unprecedented action. The Pakatan Harapan (PH) government earlier this month ordered the global banking giant HSBC to transfer the funds held by CPP in its Malaysian account to Suria Strategic Resources Sdn Bhd, which is wholly-owned by the Ministry of State have. financial.

Lawyers and bankers familiar with the situation said the move was carried out in the context of an ongoing dispute involving two multi-billion dollar energy pipeline projects that were suspended last July.

In response to the Straits Times inquiry, CPP was the main contractor for the pipeline project awarded by the previous government of the former Prime Minister Najib Razak in November 2016 and confirmed that the funds had been transferred.

The company is a subsidiary of China's state-owned oil and gas giant China National Petroleum Corporation.

HSBC's Kuala Lumpur-based corporate office declined to comment on customer confidentiality.

It is not clear why the money was seized, nor is the power used by the government to seize it.

CPP added that it is currently in dialogue with the parties concerned to understand the basis of the transfer.

"Once more information is available, CPP will take the necessary and appropriate action to protect its rights. We hope that our Malaysian counterparts can resolve this issue with us in a friendly manner."

Shortly after PH took office in May last year, bilateral relations between Beijing and Kuala Lumpur became tense and began reviewing or canceling a series of high-profile deals with China during the Najib administration. Prime Minister Tun Mahathir Mohamad has ordered the suspension of the multi-billion dollar East Coast Railway (ECRL) and two pipeline projects led by CPP.

The ECRL project-from Kota Bharu in the northeast to Kuantan, extends along the east coast and then crosses the peninsula to reach the port of Klang on the west coast of the Malacca Strait-has been restored under revised terms and will now be constructed at an estimated cost of 440 RM100 billion, a sharp drop from the previous RM66.5 billion.

However, the CPP pipeline project (a 600km multi-product pipeline on the west coast of Peninsular Malaysia costing RM5.35 billion and a gas pipeline network in Sabah in eastern Malaysia cost RM4.06 billion) is still in trouble.

The PH government also questioned why the former government paid about RM8.3 billion, or 88% of the contract value of RM9.41 billion, through Suria Strategic Resources, which is owned by the Ministry of Finance, although only 13% of the work is said to be being completed.

Bankers familiar with the situation said that after the pipeline project was suspended, the Malaysian government froze certain bank accounts held by CPP, including HSBC money.

When the pipeline project was suspended, Malaysian media reported that the initial payment made by Suria Strategic Resources had been transferred to a third-party Cayman Islands company related to the 1Malaysia Development Bhd (1MDB) scandal. However, CPP has firmly denied the allegations.

Latheefa Koya, head of the Malaysian Anti-Corruption Commission (MACC), did not respond to questions about the government's latest move.

(Source by The Straits Times)