Malaysia's proposal to change a fundamental feature of the Kuala Lumpur-Singapore high-speed rail (HSR) agreement, which Singapore could not accept, has led to the termination of the project. This is an unfortunate outcome because the rail link would have benefited both countries and contributed to the infrastructural connectivity that would have added to Asean's integration as a single economic region. The episode provides a salutary lesson in the vagaries of international commercial dealings when fundamental contractual commitments are sought to be altered unilaterally. In the aftermath of a highly anticipated rail link that has now come to nought, Malaysia will need to compensate Singapore in full for the costs that the Republic has already incurred. This is the least that can be done and is in keeping with the terms of the agreement between the two neighbours, whose mutual interests must now also transcend the aborted HSR project - important though it could have been in bringing their peoples and economies closer.
The fundamental difference had to do with Malaysia's proposal to remove the project's systems supplier and network operator. The Assets Company (AssetsCo) was crucial in protecting the interests of both countries because neither of them had the expertise and experience necessary to operate the HSR. Hence the need to appoint a credible player that would supply the train system and operate the network while remaining accountable to both nations. That dual accountability would have minimised the chances of disputes breaking out during the duration of a project spanning decades. Malaysia's argument now, that it would save 30 per cent of costs by not using AssetsCo's services, clearly did not feature in the original HSR agreement. In the event, Singapore had no option but to reject the Malaysian proposal, which marked a fundamental departure from what had been agreed upon. Malaysia thus caused the agreement to lapse on the Dec 31 deadline last year. That marked the end of the journey for an agreement signed in 2016 after three years of negotiations and of hopes on both sides since then that the project would proceed in spite of interruptions.