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Malaysia must make clear its plan for KL-S’pore high-speed rail, further delay could hurt both sides: Analysts

SINGAPORE — Postponing the Kuala Lumpur-Singapore high-speed rail project will not only rack up huge costs for both sides the longer it drags out, but it will also delay the intended economic benefits, such as the development of regional areas in Malaysia, analysts said.

Former Malaysian prime minister Najib Razak visiting the Kuala Lumpur-Singapore High Speed Rail gallery at the Malaysia International Trade and Exhibition Centre in Kuala Lumpur.

Former Malaysian prime minister Najib Razak visiting the Kuala Lumpur-Singapore High Speed Rail gallery at the Malaysia International Trade and Exhibition Centre in Kuala Lumpur.

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SINGAPORE — Postponing the Kuala Lumpur-Singapore high-speed rail project will not only rack up huge costs for both sides the longer it drags out, but it will also delay the intended economic benefits, such as the development of regional areas in Malaysia, analysts said.

It is critical for Malaysia to make clear its position on the multi-billion-dollar project, the experts added, and while it is possible to renegotiate the terms of the bilateral deal — a prospect raised by Malaysian government leaders on Thursday (July 19) — it is not ideal.

Earlier in the day, Malaysian Prime Minister Mahathir Mohamad said that his country would seek to defer the project, in an about-turn from his earlier position to scrap the construction of the 350km rail link.

"The problem is that if we just unilaterally discard the agreement, we have to pay… very high compensation,” Dr Mahathir said. Having studied the contract, the Malaysian government decided that it “will have to do it at a later date or we may have to reduce the price… (which) is very difficult as far as we can make out”, he added. “So it will have to be deferred.”

Transport economist Walter Theseira from the Singapore University of Social Sciences said that if the project were postponed, there would be hefty opportunity cost on the investments pumped into developing “the infrastructure and right of way for the project”.

Land acquired for the rail link, for instance, will lay unused. “Since some of that land is prime land, there is a large opportunity cost,” he added.

In recent years, the Government has acquired large tracts of land to develop the high-speed rail, which was to have been up and running by 2026. Two recreational spaces — the Jurong and Raffles country clubs — are making way for the project, for example.

Dr Theseira said: “Although there haven’t been sizeable infrastructure investments yet, once those start to occur, the depreciation of those investments would be another cost that increases with each delay… Any delay will involve some costs, and obviously, longer delays would tend to incur more costs.”

Earlier this month, Transport Minister Khaw Boon Wan disclosed in Parliament that Singapore could incur about S$300 million on the project by year’s end, with the Government having spent more than S$250 million on the project by the end of May.

RISK FACTORS, UNCERTAINTY INCREASE

Associate Professor Lawrence Loh, from the National University of Singapore Business School, said that a postponement would be challenging, as the project’s “benefit streams will be delayed while the outlays will continue to set in for the interim”.

The overall risk factor will be greater as well, he said, noting that the political climates in countries can change, and a delay of more than five years, for instance, would present even greater uncertainty.

Transport specialist Terence Fan from the Singapore Management University (SMU) said that the longer the project is put off, the longer it will take for Malaysia to see the benefits of development across the regional areas through which the rail line is expected to pass. It will also be unfair to Singapore, which could otherwise benefit from the greater movement of people between the two sides.

There is also the question of the work already done so far.

Mr Phillip Peachey, engineering director with rail solutions provider Asia Rail Engineering, said that the feasibility studies for the project, for instance, may have to be redone or revalidated to bring things up to speed. Doing the feasibility studies over again could take “a year or two”, he reckoned.

Land acquisition prices will also change and the growth of the areas near the proposed stations will also be stunted, he said.

The rail link was to have slashed travel time between the two cities to 90 minutes. Seven stations were planned in Malaysia — including Melaka, and Muar and Batu Pahat in Johor — with trains terminating at Jurong East in Singapore.

Last December, both sides called a joint tender for the company that will design, build, finance and maintain the trains and rail assets of the project, a year after the bilateral agreement was inked in 2016.

FUTURE PROJECTS AT STAKE

Mr Peachey said that the contractors who have already invested time and financial resources into the tender and preparatory work would be “annoyed” in the face of “too much political uncertainty”. This could affect future projects between Singapore and Malaysia, as contractors may become very hesitant about placing bids.

Hours after Dr Mahathir made his comments on Thursday, Malaysia’s economic affairs minister Mohamed Azmin Ali said that when he visits Singapore later this month, he will renegotiate all the components that bloated the project’s cost. The Malaysian authorities will “revisit all the terms and conditions in the agreement — everything,” he added.

TODAY has reached out to Singapore’s Transport Ministry for its response to Dr Mahathir and Mr Azmin’s comments.

SMU law lecturer Eugene Tan said that even if there were no provisions in the bilateral agreement for renegotiating the terms, this “would not stop both countries from renegotiating”, as long as the two sides agree to do so. In the interest of good ties, Associate Professor Tan believes that Singapore will “see what it could do to accommodate” Malaysia’s request.

SINGAPORE HAS TO PROTECT ITS INTERESTS

Dr Mustafa Izzuddin, a fellow with the Iseas-Yusof Ishak Institute, said that while revisiting the terms of such agreements is not ideal, it is always a possibility with a change of government. On May 9, Dr Mahathir led the opposition coalition Pakatan Harapan to a historic victory at the country’s general election.

While the primary focus of the new government is to settle matters on the domestic front, including reining in the country’s spiralling debt, it is “critical” for Malaysia to inform Singapore of its position on the rail link, Dr Mustafa said, so that both sides can move on to other aspects of the bilateral relationship, such as strengthening economic integration.

Mr Khaw had said earlier this month that Singapore sent a diplomatic note to Malaysia on June 1 seeking clarification on its position about the rail project, but has yet to receive a reply.

Assoc Prof Tan cautioned that there is a need for Singapore to protect its own interests and sovereignty: “If we’re seen as pushovers such that people can renege on their original agreement, then in future, other countries will not take us seriously on the world stage.”

He added that Singapore is unlikely to accommodate any attempt to change the agreement fundamentally, which would put it in a bad light and raise questions over whether the agreement was fair in the first place.

“We would also want to promote the sanctity of these agreements, because our position is, of course, that the agreements were properly entered into and both countries had the benefit of advice, ranging from legal to non-legal,” Assoc Prof Tan said.

“Ultimately, a lot depends on the Malaysians providing further and better particulars as to what it is that they want.”

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