Malaysian minister expects HSR compensation to be less than $270m

Malaysia had allowed the bilateral agreement to lapse on the deadline of Dec 31, 2020.
Malaysia had allowed the bilateral agreement to lapse on the deadline of Dec 31, 2020.PHOTO: EDELMAN

KUALA LUMPUR • Malaysia expects to pay less than $270 million to Singapore for the termination of the high-speed rail (HSR) project, said a Cabinet minister who was deeply involved in discussions on the project.

Datuk Seri Mustapa Mohamed, Minister in the Prime Minister's Department (Economy), was referring to remarks in the Singapore Parliament on Monday by Transport Minister Ong Ye Kung that the Republic has spent about $270 million on the project.

"The Transport Minister also said the compensation would not include land costs and we are made to understand that the Singapore Government has acquired several pieces of land to implement the project.

"Therefore, we are confident that the compensation cost will be much lower than $270 million. Anyway, the matter has not been finalised and will be discussed soon," Mr Mustapa said in an interview on Astro Awani TV station on Monday evening, as quoted by Bernama news agency.

Malaysia had allowed the bilateral agreement to lapse on the deadline of Dec 31, 2020, after both sides could not agree to changes it had proposed.

Mr Ong said in Parliament that costs incurred so far included abortive costs for consultancy services, design of infrastructure and manpower required.

Singapore received some $15 million from Malaysia in 2019, arising from the latter's request to suspend the project in 2018.

The compensation amount and the schedule for payment are both specified in the legal agreements, said Mr Ong. But due to confidentiality obligations, Singapore cannot reveal the exact terms of compensation for the termination of the HSR project, he said.

Mr Ong said the compensation will not include land acquisition costs, since the value of the land can be recovered. There is also a small component of miscellaneous abortive costs that Singapore is currently verifying, he said.

Mr Mustapa said Malaysia will honour its obligations on the compensation, and both countries will initiate the necessary procedures to determine the amount.

Mr Mustapa wrote on Facebook on Monday that the compensation amount cannot be disclosed as both countries are bound by a confidentiality clause in the agreement. But he said in the TV interview that the government would announce the compensation amount as soon as it is finalised, Bernama reported.

REMOVING ASSETSCO

Explaining why the Malaysian government wanted to remove the services of Assets Company (AssetsCo) during the HSR discussions, Mr Mustapa said the government would have saved 30 per cent of costs by not using its services.

Mr Ong said on Monday that Singapore could not accept Malaysia's proposal to remove AssetsCo, the systems supplier and network operator of the HSR project, as it constituted a "fundamental departure" from the original agreement.

Mr Ong said this "particularly significant change" to remove AssetsCo - which was necessary to protect the interests of both countries - had led to the termination of the Kuala Lumpur-Singapore HSR project.

Said Mr Mustapa on the TV programme: "The Malaysian government had given a 30-year guarantee to AssetsCo amounting to RM60 billion (S$19.7 billion), or about RM2 billion annually.

"The guarantee would mean that if the payments to AssetsCo were less than RM60 billion, the government must pay by using other revenue to cover the gap. This is also a form of savings," he said, as quoted by Bernama.

Mr Mustapa was further quoted as saying that taking into account the design, stations and other things with the approach without AssetsCo, the overall estimated cost savings was 30 per cent.

Malaysia, the Cabinet minister said, is still interested to continue the HSR project but the Covid-19 pandemic has forced the government to review the implementation model.

"According to a study, the benefits to the economy over 50 years would total about RM300 billion. The benefits are great, which is why we are still keen to implement the project.

"It's only the model, or method, that we felt may not be appropriate amid the Covid-19 situation," he said, as quoted by the news agency.

A version of this article appeared in the print edition of The Straits Times on January 06, 2021, with the headline 'Malaysian minister expects HSR compensation to be less than $270m'. Subscribe