The Malaysian government may opt for a bond issue of up to RM15 billion ringgit (US$3.95 billion) to finance a double-tracking railway project, a report said Sunday.

The Edge business weekly quoted sources as saying financial proposals called for the government to issue papers or guarantee a bond issue for up to 20 years to ensure the project was viable and could be completed in three to four years.

The report said the Indian Railway Construction Co. and the China Railway Engineering Corp. were initially picked as main contractors for the north-south railway project, although no letters of award were issued.

The cost estimated then was about RM32 billion, 70 percent of which was to be paid in the form of crude palm oil (CPO) and remaining in cash.

Bidding war

But last month, a joint venture between Malaysian Mining Corp. and Gamuda put in a bid to complete the job for only RM14 billion.

This sparked a bidding war with the companies from India and China, which immediately brought down the project cost to RM20-24 billion, the report said.

The new bid called for Malayan Railways, which has been running at a loss since 1996, to be privatised.

"Irrespective of how the project is paid for, whether with CPO or hard cash, eventually the government will have to fork out the money. No bank will touch it on a project-financing basis because it is not viable," said a source. - AFP