High speed rail to be dropped to cut debt, says Mahathir

Malaysia's Prime Minister Mahathir Mohamad said there could be a penalty of 500 million for cancelling the project, but he was unsure if this was in ringgit or Singapore dollars.
Malaysia's Prime Minister Mahathir Mohamad said there could be a penalty of 500 million for cancelling the project, but he was unsure if this was in ringgit or Singapore dollars.PHOTO: BLOOMBERG

All mega projects being reviewed as former BN govt racked up $371b in debt, he says

Malaysia wants to scrap the Kuala Lumpur-to-Singapore high-speed rail (HSR) but will consult with Singapore about the move, Prime Minister Mahathir Mohamad said yesterday.

He said there could be a penalty of 500 million for cancelling the project, but he was unsure if this was in ringgit or Singapore dollars.

"It is a final decision (to scrap it) but it will take time because we have an agreement with Singapore. We have to manage it at the least cost possible," Tun Dr Mahathir said at a press conference, when asked about the project. He said he had not seen the agreement but was told "the compensation may be as much as 500 million".

The Pakatan Harapan (PH) government which won the May 9 general election said it is reviewing all mega projects after discovering that the ousted Barisan Nasional (BN) had racked up debts of RM1.1 trillion (S$371 billion).

Asked for a response, a spokesman for Singapore's Ministry of Transport said: "Singapore has not yet received any official notification from Malaysia.

"We had agreed to proceed with the HSR project based on mutual benefits and obligations set out in the HSR bilateral agreement. We will wait for official communication from Malaysia."

One Malaysian official told The Straits Times that the HSR is "95 per cent dead" but implications of dumping the project could be prohibitive.

Inked by the previous Najib Razak administration, the 350km line is estimated to cost upwards of RM50 billion, and will slash the travelling time between Singapore and Kuala Lumpur to 90 minutes when completed in 2026.

Most of the line - 335km of it - will be in Malaysia, with the remaining 15km in Singapore.

A top Malaysian government source told The Straits Times that exact legal details of the project need to be examined by PH leaders, who moved into government offices only a week ago.

"Economic Affairs Minister Azmin Ali will be tasked to negotiate with Singaporean counterparts," the source said, referring to the role played by the previous administration's economic planning minister Abdul Rahman Dahlan, who was lead minister for the HSR.

Finance Ministry officers have scheduled meetings to find out the full extent of the HSR agreement inked with Singapore in December 2016, and it is likely that compensation will surge once major tenders are awarded.

Another rail project on the chopping block is the East Coast Rail Link (ECRL) financed by a RM55 billion loan from China's Exim Bank, with a reported RM13 billion already drawn down. It is unclear at this stage how much can be recouped as the funds have gone directly to China Communications Construction, which was appointed the contractor without any open tender. However, Malaysia Rail Link, which owns the project, already has RM14.5 billion of government-guaranteed debt on its books.

Dr Mahathir told the Financial Times in an interview published yesterday: "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 and will not earn us a single cent. That will be dropped."

Datuk Seri Azmin told reporters on Sunday that "Letters of Acceptance for some parts of this project have not been issued... but if there is a contractual agreement then of course there will be financial implications".

He added: "That is why we must discuss with Singapore on how to review this project."

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A version of this article appeared in the print edition of The Straits Times on May 29, 2018, with the headline 'High speed rail to be dropped to cut debt, says Mahathir'. Print Edition | Subscribe