Malaysia, Singapore ink agreement to defer high-speed rail project for 2 years; KL to pay S$15m for suspending work

PUTRAJAYA, Malaysia (The Straits Times/ANN) - Malaysia and Singapore have signed an agreement to postpone work on the Kuala Lumpur-Singapore High Speed Rail (HSR) for about two years

Malaysia and Singapore have signed an agreement to postpone work on the Kuala Lumpur-Singapore High Speed Rail (HSR) for about two years, up to May 31, 2020.

A joint statement released by both countries on Wednesday (Sept 5) said the HSR express service is now expected to commence by Jan 1, 2031, four years later than the original start date of Dec 31, 2026.

Under the deal, Malaysia has agreed to reimburse Singapore S$15 million by end-January 2019 for abortive costs incurred by the deferment of the mega project, which has had a question mark over its future since Malaysia elected a new government in May.

Both sides have also committed to resume work on the project by the end of May 2020, failing which it will be deemed to be terminated. In that event, Malaysia will bear the costs incurred by Singapore in fulfilling the HSR agreement.

The joint statement said both countries will call off the ongoing international joint tender for an assets company to operate the 350km line due to the suspension.

Coordinating Minister for Infrastructure and Minister for Transport Khaw Boon Wan and Malaysian Economic Affairs Minister Mohamed Azmin Ali inked the agreement at the Prime Minister's Office in Putrajaya on Wednesday.

Witnessing the deal were Malaysian Prime Minister Mahathir Mohamad, Malaysian Deputy Prime Minister Wan Azizah Wan Ismail and Singapore Deputy Prime Minister Teo Chee Hean, who is in Malaysia for a week-long visit.

The two-year deferment puts an end - for now - to the twists and turns over the project, which Tun Dr Mahathir initially wanted to scrap as part of a review of mega projects to reduce the country's RM1 trillion (S$333 billion) debt.

But he later said KL would negotiate a delay, as a cancellation would entail a high amount of compensation under the HSR agreement both countries had signed.

Officials from both countries had been in talks over deferring the planned 350km line between Kuala Lumpur and Jurong East.

Questions had swirled this week over whether Malaysia would pay a penalty should the project be deferred, with Mr Azmin saying the two countries had agreed that there would be none.

The legally-binding, multibillion-dollar deal was inked under previous Malaysian prime minister Najib Razak in 2016.

Mr Khaw said in July that Singapore has spent more than $250 million on the project and is likely to pour in another $40 million by year end.

Initially slated to start by Dec 31, 2026, the high-speed rail is estimated to cut travel time between the two cities to 90 minutes, compared with more than four hours by car.

During a press conference after the signing, Mr Azmin said he had initially asked for a postponement of at least three to four years when he met Mr Khaw on Aug 11 this year. But Mr Khaw, at a subsequent meeting a week later, said Singapore was willing to consider a deferment period of one year. Both sides eventually agreed on two years.

Mr Azmin said he agreed that if the deferment period is beyond two years, the business model will change and costs will escalate.

There is a limit to how far the project can be postponed, Mr Khaw said, as projections become increasingly uncertain further into the future.

On the abortive costs of suspending the project, Mr Khaw cited how work is already under way to divert utilities for HSR, which will run mostly underground in Singapore. These projects cannot simply be dropped when the project is suspended, he noted.


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