Friday, 7 September 2018

KL-Singapore High-Speed Rail postponed to May 2020; Malaysia to pay Singapore RM45 million for suspending project

Singapore, KL sign deal to defer high-speed rail; service targeted to start by January 2031, four years longer than first planned

Singapore has already spent $250 million on the project - some of which can be recovered - but Malaysia will have to bear the agreed costs incurred by Singapore should the project be terminated.
By Charissa Yong, Regional Correspondent In Putrajaya, The Straits Times, 6 Sep 2018

Singapore and Malaysia yesterday signed an agreement to defer the Kuala Lumpur-Singapore High-Speed Rail (HSR) project for about two years.

This stoppage - for up to May 31, 2020 - will mean that the HSR express service will now take four years longer than originally envisaged to start rolling.

Instead of the trains starting to ply on Dec 31, 2026, they will now do so only on Jan 1, 2031, if all goes to plan.

"By the end of May 2020, we hope to see the resumption of the high-speed rail construction," Coordinating Minister for Infrastructure and Minister for Transport Khaw Boon Wan said yesterday.

"If not, the project will be deemed to have been terminated, and Malaysia will reimburse Singapore for the wasted costs we have incurred fulfilling our HSR obligations till now."

Meanwhile, the ongoing joint tender for an assets company to operate the 350km line has been called off .

Under the deal, Malaysia has agreed to reimburse Singapore $15 million 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.

This payment is due by the end of January next year.

"Many Singaporeans have actually been looking forward to the realisation of this project, and we remain committed to this project. But of course we understand why Malaysia needs to temporarily suspend the construction of the HSR project," said Mr Khaw, adding that the negotiated outcome was fair.

Asked why a two-year delay means trains start running four years later, the Ministry of Transport said both countries need additional time to implement the project after it resumes, including calling fresh tenders and carrying out extra technical works.

Malaysian Prime Minister Mahathir Mohamad initially planned to scrap the HSR when he took over as he reviewed mega projects to reduce the country's RM1 trillion (S$332 billion) debt.

However, he later said his administration would negotiate a delay as a cancellation would entail a large compensation under the pact.

Since then, officials from both sides have been in "intense negotiations", said Malaysian Economic Affairs Minister Mohamed Azmin Ali, who inked yesterday's deal with Mr Khaw.

Datuk Seri Azmin said Malaysia had initially asked for a much longer postponement, while Singapore had offered a shorter one, before both sides eventually agreed to push it back by two years.

Mr Khaw said in a Facebook post: "Many will be disappointed by the delay, but at least there is now greater clarity on the way forward for this mega project."

The line between Kuala Lumpur and Jurong East is estimated to cut travel time to 90 minutes, compared with more than four hours by car.

Singapore has already spent $250 million on the project - some of which can be recovered - but Malaysia will have to bear the agreed costs incurred by Singapore should the project be terminated.

But there will be no further deferments, Foreign Minister Vivian Balakrishnan told reporters later.

On the abortive costs of suspending the project, Mr Khaw cited how work is already under way to divert utilities for the HSR, which will run mostly underground in Singapore.

These projects cannot simply be dropped, he noted.

In a separate interview, Deputy Prime Minister Teo Chee Hean said the agreement was a positive, balanced outcome that addressed Malaysia's financial concerns by giving it the opportunity to think about what it wanted to do with the HSR, while safeguarding Singapore's financial interests.

"It reflects the commitment of both Malaysia and Singapore to want to proceed with bilateral relations in a positive way," he said.

Twists and turns in high-speed rail project
The Straits Times, 6 Sep 2018

Feb 19, 2013: Prime Minister Lee Hsien Loong and then Malaysian Prime Minister Najib Razak announce at their Annual Leaders' Retreat that they have agreed to have a high-speed rail (HSR) link that will slash travel time between Kuala Lumpur and Singapore to just 90 minutes by 2020.

Dec 7, 2013: A high-speed rail work group is formed to discuss and jointly recommend requirements for the project.

April 7, 2014: Malaysia says the HSR terminal in Kuala Lumpur will be in Bandar Malaysia, an upcoming development about 5km from the Petronas Twin Towers, while Singapore names three possible locations for Singapore's terminal: Tuas West, Jurong East and the city centre.

Oct 22, 2014: Malaysia confirms the HSR will have seven stops on its side: Kuala Lumpur, Putrajaya, Seremban, Ayer Keroh, Muar, Batu Pahat and Nusajaya.

May 5, 2015: PM Lee announces that the Singapore terminus will be in Jurong East. He also says the project will not be completed by the 2020 target year, as it is unrealistic, given the complexity of the 350km route.

Oct 21, 2015: Pakatan Harapan says that if it wins federal power, it will scrap the project.

July 19, 2016: Mr Lee and Datuk Seri Najib witness the signing of a memorandum of understanding on the HSR. It is not legally binding, but indicates firm commitment on both sides and that major issues have been ironed out. The agreement sets 2026 as the target year for the HSR to start running.

Dec 13, 2016: Mr Lee and Mr Najib witness the signing of a legally binding agreement on the HSR. It marks the formal start of the implementation stage for the project and includes key details such as how it will be funded and how joint tenders will be decided. It also specifies a target date for trains to start running: Dec 31, 2026.

May 12, 2018: Newly elected Prime Minister Mahathir Mohamad says his government will review all foreign contracts and projects, including the HSR.

May 26, 2018: Tun Dr Mahathir says his government may drop the project, and is looking at how it may reduce the compensation to Singapore if it does do so.

May 28, 2018: Dr Mahathir tells reporters that Malaysia wants to scrap the HSR to slash its federal debt. Cancelling it could incur a penalty of $500 million, but he says he is unsure if this is in ringgit or Singapore dollars.

June 12, 2018: Dr Mahathir says the project has been postponed, not scrapped.

July 9, 2018: Transport Minister Khaw Boon Wan tells Parliament that Singapore has spent more than $250 million on the project, and is likely to expend another $40 million or so by year-end as it waits for Malaysia to clarify its position.

July 19, 2018: Dr Mahathir says Malaysia, to avoid paying compensation, will negotiate to defer the project.

July 20, 2018: Singapore's Transport Ministry asks Malaysia to give a written response by July 31 clarifying its position on the project.

Sept 5, 2018: Singapore and Malaysia ink an agreement to delay the HSR by two years, with Malaysia paying Singapore $15 million for suspending work on it.

Kuala Lumpur-Singapore High-Speed Rail: How both sides reached deal to defer for two years
Ministers who led the talks disclose details of the give and take from Singapore and Malaysia
By Charissa Yong, Regional Correspondent In Putrajaya, The Straits Times, 6 Sep 2018

When Malaysian Economic Affairs Minister Mohamed Azmin Ali first met minister Khaw Boon Wan in Singapore on Aug 11, he conveyed the Malaysian Cabinet's position that it would like the Kuala Lumpur-Singapore High-Speed Rail (HSR) project to be postponed for at least three to four years.

Mr Khaw, who is Coordinating Minister for Infrastructure and Minister for Transport, then met Mr Azmin in KL a week later and said Singapore was willing to consider a delay of one year, Mr Azmin recounted on Wednesday (Sept 5).

"Again, I went back to Singapore to appeal to our friends to consider for a longer period," Mr Azmin told a press conference in Putrajaya after both ministers signed a deal to defer the HSR for two years.

"I agree with minister Khaw that if the deferment period is beyond two years, the business model will certainly change and the cost will continue to escalate," he added, in reply to a question on the deal.

As both countries formally announced the deal to defer construction of the 350km line up to May 31, 2020, the two ministers who led the negotiations yesterday disclosed details of the give and take involved in talks between the two sides over the past few weeks to review the project as Malaysia's new government sought to cut costs.

Mr Khaw noted that although the HSR Bilateral Agreement has no provision for a project suspension, Singapore gave Malaysia's request serious consideration "in the spirit of bilateral cooperation".

"After several rounds of discussions with minister Azmin, we have reached a fair arrangement on the way going forward," he said.

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

A joint statement issued by both countries said Malaysia and Singapore will continue to discuss the best way forward for the HSR project during the suspension, "with the aim of reducing costs".

The decision to suspend the project will impact a number of stakeholders, from existing contractors to potential bidders for the HSR, Mr Khaw noted.

"They have been concerned about the future of the project and are continuing to incur costs. So today's announcement will help to clarify the situation," he said.

In response to queries, a Ministry of Transport spokesman said registered bidders have been informed that the HSR Assets Company tender will be aborted "with immediate effect". As for ongoing contracts, the spokesman said infrastructure company SG HSR and the Land Transport Authority (LTA) have informed affected contractors of the suspension and will be engaging them directly.

SG HSR said over 100 of its affected staff will be offered alternative jobs in LTA, and SG HSR's work is expected to be scaled down until the project resumes.

The Government acquired Jurong Country Club in 2016 to make way for the HSR terminus station. A Singapore Land Authority spokesman yesterday said the acquired land will continue to be used for the HSR when work resumes. "We do not foresee any major impact on the overall development plans for the Jurong Lake District."

Former chairman of the Government Parliamentary Committee for Transport Cedric Foo described the deferment as an "excellent outcome", given the earlier uncertainty. He noted the new legally binding agreement and the clarity provided. It would have been ideal if the project could proceed based on the original agreement, Mr Foo said. "But if doing so comes with a deterioration of ties, that is a very high price to pay."

On whether he was confident the project would proceed after May 2020, he said: "I don't think we should speculate... Given the fact that both parties signed, one must assume they are serious about the dates."

Deal signals intent to continue win-win cooperation: DPM Teo Chee Hean
By Nadirah H. Rodzi, Malaysia Correspondent In Kuala Lumpur, The Straits Times, 6 Sep 2018

Malaysia and Singapore have worked together on many projects in the past, and the deal to defer the Kuala Lumpur-Singapore High-Speed Rail project signals an intent and commitment on both sides to want to do so in future, Deputy Prime Minister Teo Chee Hean said.

"It provides a good start point in which we can look to the future and see how we can develop more win-win cooperation," he added, noting it was significant that Prime Minister Mahathir Mohamad himself and Deputy Prime Minister Wan Azizah Wan Ismail decided to witness the signing.

He was speaking to Singapore media after meeting a range of Malaysian leaders over two days, including Tun Dr Mahathir yesterday and Dr Wan Azizah on Tuesday.

"It is important that we continue to have close relations with our colleagues here in Malaysia so that we can further develop cooperative relations," he said. "Overall, the sentiment expressed is that we are certainly the closest neighbours of each other, and there are many things we are doing together."

Mr Teo said talks with Malaysian ministers showed both sides had challenges in common. "Many of the social, economic, infrastructure and environment issues are very similar. We can benefit from sharing our experiences with each other," he said.

Other Malaysian leaders Mr Teo met included Finance Minister Lim Guan Eng, Economic Affairs Minister Mohamed Azmin Ali, Communications and Multimedia Minister Gobind Singh Deo, Foreign Minister Saifuddin Abdullah, Transport Minister Anthony Loke, Works Minister Baru Bian, and Energy, Science, Technology, Environment and Climate Change Minister Yeo Bee Yin.

This week, Mr Teo will also travel to Kuching and Kota Kinabalu to meet the governors and chief ministers of both states. Singapore hopes to strengthen its economic and people-to-people ties with the two states in Borneo.

"We already have ongoing interactions with our friends from Sarawak and Sabah, and we should see whether we can find ways to strengthen them further," he said.

"There will be opportunities for that, and I wish to explore that together with the chief ministers of both Sarawak and Sabah, and their colleagues."

Mr Teo added that there are trade and people-to-people exchanges between Singapore and both states, and a good flow of tourism, with opportunities to develop this further.

He also said the trip was a good opportunity for younger members of his team to meet their colleagues, including new political office-holders in Malaysia, and find common ground and share experiences.

Deferment safeguards Singapore's financial interests, says Foreign Minister Vivian Balakrishnan
By Charissa Yong, Regional Correspondent, The Straits Times, 6 Sep 2018

PUTRAJAYA • • The agreement to defer the Kuala Lumpur-Singapore High-Speed Rail project safeguards Singapore's financial interests as it deals with abortive costs as well as compensation should the project not proceed after 2020, Foreign Minister Vivian Balakrishnan said in an interview with Singapore media.

He also noted yesterday that the deal was a positive development: It showed both sides were able to respect the sanctity of agreements, and also gave Malaysia up to two years to consider how to proceed on the project if it wishes to.

Dr Balakrishnan pointed out that the deal Singapore and Malaysia inked yesterday stated that if Malaysia did not resume the HSR before May 31, 2020, the project would be considered terminated.

In this scenario, Malaysia would be liable for full compensation as specified by the agreement, he said.

"So, our financial interests are also absolutely safeguarded," he said.

"The abortive cost and the compensation cost will all be dealt with at the appropriate times specified in the agreements, which are legally binding," he added.

Deputy Prime Minister Teo Chee Hean, in an interview with Singapore media yesterday, also stressed the distinction between abortive costs of $15 million as a result of suspending the HSR for two years, and compensation costs to be paid if the HSR does not resume.

Singapore has spent about $250 million implementing the HSR project to date, some of which are recoverable costs like land acquisition, said Mr Teo.

"We still kept the land, so it is not reasonable to put that on Malaysia. But there are costs which we have spent which will need to be recovered if the HSR does not proceed after the deferment period," he said.

"Subsequently, if for whatever reason the project does not resume, then there are agreed upon compensation costs that come into effect," he said.

Transport Minister Khaw Boon Wan elaborated on abortive costs at an earlier press conference, citing how work was already under way to divert utilities such as gas and water pipes and electricity cables for the HSR, which would run mostly underground in Singapore.

These projects could not simply be dropped when the project was suspended, he noted.

Singapore will incur $15 million in abortive costs to pay contractors to terminate ongoing contracts, and to wind down operations during the suspension period, the Ministry of Transport (MOT) said in response to media queries.

For example, some contracts include contract breakage costs, which need to be paid as a result of this suspension. MOT said: "These are 'abortive' costs, as they are not useful for the HSR project after it resumes."

These costs are different from the $250 million Singapore has incurred so far on the HSR, as that can still be used for the HSR after the project resumes, it added.

If the project did not proceed and is terminated at the end of May 2020, there will again be reimbursements "for the cost incurred by Singapore fulfilling our obligations for the bilateral agreement up to today's suspension", added Mr Khaw.

This potential future reimbursement would be a larger sum, he said, without specifying an amount.

Singapore-KL high-speed rail deferment: Issues at play in project's future
By Reme Ahmad, South-east Asia Editor, The Straits Times, 7 Sep 2018

Singapore and Malaysia have agreed to defer the high-speed rail (HSR) link project to May 31, 2020.

Will Malaysia proceed with building the railway from Kuala Lumpur to Jurong East then? Or will it decide to scrap the HSR for good?

Here are some factors that could influence the decision in two years.


If at the end of May 2020 Tun Dr Mahathir is still prime minister, he might be inclined to cancel the HSR.

Soon after his Pakatan Harapan (PH) coalition won the May elections, he said the project would be scrapped to reduce debt. He demurred only due to the high compensation costs this would entail.

Dr Mahathir had also said there is a cheaper alternative: Upgrading the existing Keretapi Tanah Melayu (KTM) line.

He described the project thus in late May: "We need to do away with some of the unnecessary projects, for example, the high-speed rail, which is going to cost us RM110 billion (S$36.6 billion) and will not earn us a single cent."

Then again, Dr Mahathir might hand over the prime ministership to Datuk Seri Anwar Ibrahim by end-May 2020, and the fate of the HSR with it. But there is no fixed date for the handover.


If Mr Anwar takes over as Malaysia's eighth prime minister by then, he might use other parameters to evaluate the HSR. The project is a legacy of former PM Najib Razak. Would Mr Anwar want to carry a high-profile baby left by a political foe, and add debt to the nation?

Further, the HSR comes under the purview of the Economic Affairs Ministry led by Datuk Seri Mohamed Azmin Ali, Mr Anwar's political rival in Parti Keadilan Rakyat (PKR). They have dismissed talk of rivalry and tensions, but whispers continue about Mr Azmin's own ambitions in the party and government. Proceeding with the massive project could strengthen Mr Azmin's standing in Malaysian politics.

Mr Anwar, as the new prime minister, will have three years before facing the next general election.

Even without the HSR, he will have a lot on his plate - holding together PKR as its president, ensuring fewer public complaints about costs of living and ensuring strong economic growth, among them.

Unlike former prime ministers Abdullah Badawi and Najib who leaned towards closer ties with Singapore, Mr Anwar's stance on bilateral relations is less clear.


The seven HSR stops in Malaysia are all in areas controlled by PH. This could make it tough for the PH government to simply scrap the project.

There are three stops in Johor - Iskandar Puteri, Batu Pahat and Muar - one in Ayer Keroh (Melaka), and another in Seremban (Negeri Sembilan). These states were freshly won by PH in May. There is also a stop in Putrajaya, Malaysia's administrative capital, and the HSR terminus in Kuala Lumpur - the federal territory where PH controls all 11 parliamentary wards.


When he was prime minister in the 1990s, Dr Mahathir built Putrajaya and the Kuala Lumpur International Airport (KLIA) despite resistance from naysayers who said the project costs were prohibitive. Today, some 20 years later, townships and businesses have grown between KL and these two landmarks, boosting the economies of Selangor and Negeri Sembilan with mushrooming highways joining Kuala Lumpur, Putrajaya and KLIA.

Similarly, the HSR line is seen by some as the catalyst to boost the economies of the areas where the stations will be located.

With most of these places quite a distance from airports, the rail line will boost their connectivity to the big cities of Singapore and KL. Companies and factories could have their front offices in Singapore, KL and Putrajaya, with their backroom operations tucked away in the lower-cost areas.

Singapore-KL high-speed rail deferment: Delay not likely to affect prices of property, say experts
High-speed rail project only one part of plans for rejuvenation of the Jurong area, they say
By Sue-Ann Tan, The Straits Times, 7 Sep 2018

The high-speed rail (HSR) between Kuala Lumpur and Singapore would have been a bonus for the Jurong area, but now that the project is postponed, property analysts and businesses do not believe that it will have a significant impact on the prices of homes, retail or office buildings.

But when the railway is eventually built, retail property, in particular, may get a slight boost in value from the expected increase in human traffic, they said.

On Wednesday, Malaysia and Singapore signed a deal to postpone the HSR work until May 31, 2020.

The reason the deferment will have a muted impact on property prices is that the HSR is only one component of the blueprint for the rejuvenation of the Jurong area, said PropNex executive chairman and chief executive officer Mohamed Ismail Gafoor.

The blueprint for the Jurong Lake District was first released in 2008, as part of the Urban Redevelopment Authority's efforts to grow new employment centres beyond the central area. Plans for the area include turning it into a Western Business District and upgrading Jurong Lake Gardens. In 2015, the Government announced the HSR terminus would be located in Jurong East.

Mr Ismail also noted that existing shopping malls, such as Jem and Westgate, had sprung up even before the HSR developments.

"Prices in Jurong had started to move upwards in the last few years because of developments like the malls and Ng Teng Fong General Hospital. Looking ahead to the next five years, the prices will be sustained as the west continues to be rejuvenated, with construction like the mega port," he added.

Moreover, since the deferment is around two years, Mr Ismail said it will not have a "major impact" on properties. "If it is delayed for 10 years, maybe there would be a problem. But at this point, it is not unexpected for a major project."

In July, National Development Minister Lawrence Wong said the vision for the Jurong Lake District has not changed regardless of HSR developments.

Mr Nicholas Mak, executive director of real estate investment management firm ZACD Group, noted: "Many offices are there because of the business park or because they want to be near the manufacturing spaces there... The malls also serve the resident population."

Developer CSC Land added that they were drawn in by the whole Jurong Lake District plan, which included HSR but also other developments that will transform the west. It launched its project Twin VEW in West Coast Vale in May.

Still, the HSR will give a small fillip to property prices, including retail, when completed. Mr Ismail said: "There will be greater convenience for people travelling and it will improve the human traffic flow in the retail spaces and maybe in some offices... However, I don't expect the property prices will be that much enhanced."

Mr Wang Dong, owner of clothes shop S&D, said that his customers are mostly residents in the area. "We sell daily necessities rather than large items, so we are sustained by the people living here. People also come because we are near Jurong East MRT," he said.

A mobile phone shop owner in Jurong, who wanted to be known only as Mr Fan, said: "Business here will definitely be better with more people passing through. I am glad to hear it is being deferred and not cancelled altogether".

Hitting pause button will allow KL to review project specifications
By Shannon Teoh, Malaysia Bureau Chief, The Straits Times, 7 Sep 2018

When Tun Dr Mahathir Mohamad announced plans to scrap the high-speed rail (HSR) to Singapore within days of returning to power, it was ostensibly because Malaysia could not afford to add to liabilities worth RM1.1 trillion (S$366 billion) his government claimed to have inherited from the hitherto long-ruling Barisan Nasional.

But since May, the language has evolved to "deferment" of the project, so that the two neighbours can push back the thorny question of penalties said to be worth up to RM500 million for breaking the agreement inked in December 2016. Singapore said it has spent about $250 million implementing the HSR project to date.

"At this moment, we don't have the funds," Prime Minister Mahathir said in July, having earlier explained that "the most important thing for us now is to reduce the amount of borrowings by the government".

Economic Affairs Minister Mohamed Azmin Ali, who leads Malaysia's negotiations on the 350km link, echoed this, saying that "if the project is viable at a later stage, then we can discuss. But our priority now is to cut costs and reduce government debt".

These assertions make clear that Malaysia will not simply resume the project in its current shape and form in May 2020.

The reality is it is just not possible for Malaysia to significantly whittle down its RM1.1 trillion debt within the two-year timeframe.

Thus, the official joint statement after Wednesday's agreement to pause the project opens the door to a review of the HSR specifications. "During the suspension period, Malaysia and Singapore will continue to discuss the best way forward for the HSR project with the aim of reducing costs," it said.

An official source told The Straits Times: "Fewer stations or just a direct express are possible. Definitely not the current set-up."

Malaysia has said that the project in its current form would commit its taxpayers to a financial outlay of up to RM120 billion.

As it stands, nearly all of Kuala Lumpur's RM40 billion development budget is financed by deficit spending. Analysts expect the deficit to worsen now that the Pakatan Harapan (PH) government has scrapped the unpopular goods and services tax. The sales and service tax that returned this month will bring in about RM20 billion less annually.

Tellingly, Finance Minister Lim Guan Eng has refused to commit to a deficit reduction. In an interview with The Straits Times in July, he said that the government needed to uncover how deep the alleged scandals left behind by their predecessors run before it can indicate if Budget 2019, to be unveiled in November, will reduce the current deficit of 2.8 per cent of GDP.

Unless the government comes close to balancing its budget - which it will not in the short run - the absolute amount of debt will continue to rise.

There is no realistic chance of finding RM120 billion to build the HSR. For context, that is more than half of Malaysia's annual fiscal revenue in recent years.

Still, the debate over the financials of the project should not detract from what was an astonishing diplomatic victory for the two countries. The agreement on Wednesday was sealed despite prickly bilateral relations since PH won the May 9 elections.

It took less than a month since Datuk Seri Azmin finally met Coordinating Minister for Infrastructure and Minister for Transport Khaw Boon Wan on Aug 11 to seek the deferment for the deal to be sealed.

Compare that to the six years it took for ousted prime minister Najib Razak to sign the HSR deal with Singapore since it was first mooted in 2010. And now that old deal may give way to something very different.

Singapore agreed on high-speed rail deferment to show goodwill to neighbour
By Royston Sim, Deputy Political Editor, The Straits Times, 7 Sep 2018

At a press conference after signing a new deal to defer the Kuala Lumpur-Singapore High Speed Rail (HSR) project by nearly two years, Transport Minister Khaw Boon Wan noted on Wednesday that the original bilateral agreement inked in 2016 had no provision for a suspension.

In other words, there was no obligation on Singapore's part to agree to any delay. But the Republic gave Malaysia's request serious consideration, Mr Khaw said, "in the spirit of bilateral cooperation".

The end result is what he called a fair arrangement - a suspension of the HSR project up to end-May 2020, and for Malaysia to reimburse Singapore $15 million for abortive costs incurred by the deferment.

In agreeing to put the planned 350km line on hold, Singapore has taken a big-picture view and moved to keep bilateral ties on an even keel.

The Republic has also signalled that it values its relations with Malaysia by exercising flexibility on a legally binding agreement that was signed in December 2016.

The HSR line is now slated to start its express service by Jan 1, 2031, about four years later than the original start date.

The move has brought some clarity to the project and resolved one prickly bilateral issue, at least for now.

Mr K. Kesavapany, who was Singapore's high commissioner to Malaysia from 1997 to 2002, said the deferment was a logical approach. He noted that Malaysia asked to delay the mega project because of its huge RM1.1 trillion (S$366 billion) federal debt.

"On our side, we can afford to be understanding of our neighbour's problem," he said.

Soon after assuming power at the general election in May, Malaysian Prime Minister Mahathir Mohamad told reporters that Malaysia wanted to scrap the HSR to slash its debt.

Tun Dr Mahathir later changed tack to say Malaysia would negotiate a deferment to avoid paying compensation, which reportedly could come up to RM500 million.

MP Vikram Nair, who chairs the Government Parliamentary Committee for Defence and Foreign Affairs, said there was no point presenting Malaysia with two unpalatable options: to either abide by the original agreement, or terminate the deal with compensation kicking in.

"At least now there is a commitment to continue the project," he said.

Singapore has already spent more than $250 million in fulfilling its obligations for the HSR bilateral agreement, from acquiring two country clubs to awarding contracts for engineering studies and technical work.

While suspending the project means the Republic will incur opportunity cost, the move keeps the prospect of having a 90-minute express service between Kuala Lumpur and Singapore alive.

Dr Mustafa Izzuddin, a fellow at the ISEAS - Yusof Ishak Institute, said the deal reflects that Malaysia and Singapore want a good, stable and strong bilateral relationship.

"The agreement has created a positive diplomatic climate where negotiations on other issues can be resolved expeditiously," he said, adding that both countries can now look towards strengthening cooperation in areas that are mutually beneficial.

Singapore agreed to defer the HSR out of goodwill and neighbourliness to Malaysia.

The key question that remains is whether the HSR project will resume after May 2020.

Malaysian Economic Affairs Minister Mohamed Azmin Ali said on Wednesday that the new agreement "clearly stated our commitment to continue with the project".

Singapore's leaders have sounded a cautiously optimistic note in their remarks to the media.

Deputy Prime Minister Teo Chee Hean said: "Both sides hope that we will be able to proceed with the project and reap the benefits. But I think that remains to be seen, and we have two years to review it and to think about it."

While the HSR comes with a hefty price tag, it is expected to bring substantial economic benefits and will strengthen people-to-people ties.

In deciding whether to put the high-speed line back on track, Malaysia should carefully consider its potential upside.

* Parliament: Agreement to suspend KL-Singapore high-speed rail project a fair arrangement, says Khaw Boon Wan
By Adrian Lim, Transport Correspondent, The Straits Times, 2 Oct 2018

The agreement signed between Singapore and Malaysia to suspend the High-Speed Rail (HSR) project for about two years is a "fair arrangement" for both countries, Transport Minister Khaw Boon Wan said yesterday in Parliament.

He said the deal signed last month "protects Singapore's interests, while reasonably accommodating Malaysia's request".

"It also shows that we can manage our bilateral ties on the basis of mutual respect, and resolve issues amicably in accordance with binding agreements and international law," he added.

Mr Khaw was replying to questions from Mr Ang Hin Kee (Ang Mo Kio GRC) and Non-Constituency MP Dennis Tan on the considerations which led to Singapore agreeing to Malaysia's request to postpone the HSR project, and the details surrounding the deferment.

On Sept 5, the two sides inked a deal to suspend the HSR project up to May 31, 2020, with Malaysia agreeing to reimburse Singapore $15 million for the deferment. With the delay, trains will start running only on Jan 1, 2031, instead of Dec 31, 2026, as planned originally.

Mr Khaw, who is also Coordinating Minister for Infrastructure, told the House that there was no provision in the bilateral agreement - signed in December 2016 to build the 350km line - for a deferment of the project. "We could have turned down the request to defer the project, enforced our legal rights on termination and sought compensation from Malaysia," Mr Khaw said.

"This would have been fully in accordance with the bilateral agreement. After that, if and when Malaysia was again ready to pursue such a project, we could discuss a new bilateral agreement for it."

But in the "spirit of bilateral cooperation", both sides decided to work out an alternative resolution, and agreed to delay the project for about two years. Malaysia had in August asked for a deferment of three to four years.

"Beyond two years, the current cost estimates would likely be no longer valid, which would affect the viability of the project and its business case," he said. "A longer suspension period would also impact our development plans for the Jurong Lake District, which will host the Singapore HSR Terminus and many transport, commercial, residential and recreational developments."

He also said Singapore is open as well to having discussions with Malaysia - during the suspension period - on the way forward for the HSR project, with the aim of reducing costs. "We are not obliged to accept automatically any proposals offered, but we will assess any proposals from Malaysia carefully and objectively," he added.

He also explained the abortive costs of $15 million which Malaysia has agreed to reimburse Singapore by the end of January next year. These include contract breakage costs, which Singapore has to pay to contractors for terminating ongoing projects, and to wind down operations. For ongoing excavation works, for example, the excavations must be back-filled for the site to be safe, and re-excavated when the project resumes, thus increasing costs.

Singapore spent more than $250 million by end-May to implement the HSR project, which includes costs for consultancies to design the civil infrastructure, costs for manpower and costs for land acquisition, he said. More than $6 million in costs was incurred in June, another sum of more than $6 million in July, and at least $40 million would have been spent from August to the end of this year.

Mr Khaw said there will be no further postponement beyond May 31, 2020. "If Malaysia does not proceed with the HSR project by then, the project will be deemed to have been terminated by Malaysia, which will reimburse Singapore for the project implementation costs incurred by us up to the point of suspension," he said.

Joint Statement by Singapore and Malaysia on Kuala Lumpur-Singapore High Speed Rail Project -5 Sep 2018

Kuala Lumpur-Singapore High Speed Rail scrapped, says Malaysia PM Mahathir Mohamad

Parliament: Singapore responds to Mahathir's articulation on the High Speed Rail and Water Agreements

KL-Singapore High Speed Rail (HSR) Agreement signed; service targeted to start by Dec 31, 2026

Oral Reply by Minister for Transport Khaw Boon Wan to Parliamentary Questions on High-Speed Rail (HSR) Project -1 Oct 2018

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