Singapore and Malaysia abandon high-speed rail project after failing to reach agreement

Malaysia and Singapore on Friday said they would terminate a plan for a multibillion-dollar high-speed rail project after protracted talks failed to break a deadlock over Kuala Lumpur's demands for changes to a blueprint first approved in 2016.

As a result of the cancellation, the Malaysian government of Prime Minister Muhyiddin Yassin is liable to pay Singapore a hefty termination fee, reportedly more than S$100 million (US$75 million).

In a joint statement, Muhyiddin and Singaporean Prime Minister Lee Hsien Loong said they were unable to agree on Malaysia's proposed changes before the December 31 deadline.

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"Both countries will abide by their respective obligations, and will now proceed with the necessary actions, resulting from this termination of the High-Speed Rail agreement," the statement said.

The prime ministers said the neighbours remained "committed to maintain good bilateral relations and cooperate closely in various fields, including strengthening the connectivity between the two countries".

Singaporean Prime Minister Lee Hsien Loong. Photo: dpa alt=Singaporean Prime Minister Lee Hsien Loong. Photo: dpa

A bilateral agreement to proceed with the US$25 billion project was first signed in 2016, when former Malaysian prime minister Najib Razak was still in power. Najib has since been engulfed by the 1MDB corruption scandal, while Malaysia has undergone two changes of government during a messy power struggle.

The Pakatan Harapan alliance that unexpectedly won 2018's watershed election over Najib's Barisan Nasional bloc negotiated an extension for the commencement of the project, citing the need to re-evaluate costs and the project's merits.

The alliance cited the huge national debt incurred by Najib and agreed to pay Singapore S$15 million (US$10 million) for costs incurred due to the delay.

The Pakatan Harapan government was subsequently ousted last March following a political coup.

Muhyiddin's new administration sought several changes to the plan, including a realignment of the rail link to connect it to Kuala Lumpur International Airport (KLIA), but Singaporean officials did not agree, sources with knowledge of the matter previously told This Week in Asia.

Malaysian officials have been concerned that the high-speed rail link would undermine KLIA's potential status as a regional air hub, diverting traffic instead to Singapore's more established Changi Airport.

The Covid-19 pandemic was also a significant factor, given the expectation that travel volume will be significantly impacted in coming years as a result of changing work-related commuting patterns and more widespread videoconferencing.

Malaysian Prime Minister Muhyiddin Yassin. Photo: dpa alt=Malaysian Prime Minister Muhyiddin Yassin. Photo: dpa

The original plan was for the line to reduce door-to-door travel time from downtown Kuala Lumpur to Singapore's central business district to two-and-a-half hours from an average of more than four hours by air.

The actual travel time on the 350km rail link would be 90 minutes, similar to the length of a flight when take-offs, landings and taxiing are taken into account. A bus ride - the cheapest mode of travel between Kuala Lumpur and Singapore - takes an average of six-and-a-half hours.

Before the pandemic, a study by researchers at Japan's Institute of Developing Economies forecast the project would create an "annual economic benefit" of US$1.6 billion for Malaysia and US$641 million for Singapore by 2030, when the line would have been fully operational for four years under the original plan.

When the deal was first signed in December 2016, Najib said the rail link with Singapore would give both neighbours - who have a fractious history - "a big stake in keeping the relationship stable and warm" while Lee said it would be a "game-changer" for the neighbours.

This article originally appeared on the South China Morning Post (SCMP).

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