Singapore could not accept Malaysia's proposal to remove the systems supplier and network operator of the high-speed rail (HSR) project as it constituted a "fundamental departure" from the original agreement, said Transport Minister Ong Ye Kung yesterday.
This "particularly significant change" to remove the Assets Company (AssetsCo) - which was necessary to protect the interests of both countries - had led to the termination of the Kuala Lumpur-Singapore HSR project, he said.
Malaysia had allowed the bilateral agreement to lapse on the deadline of Dec 31 last year, after both countries could not agree to changes it had proposed.
Responding to Workers' Party's Mr Louis Chua (Sengkang GRC) on the substantive differences that both sides could not agree on, Mr Ong noted that the cross-border HSR service, had it gone ahead, would have been a single train system operating between Singapore and KL.
"Because neither country has the expertise and experience in operating the HSR, we agreed under the HSR bilateral agreement to appoint a best-in-class industry player through an open and transparent international tender to assume the role of the AssetsCo," he said.
"Once appointed, the AssetsCo will supply the train system, operate the network, ensure that appropriate priority is given to cross-border HSR service vis-a-vis Malaysia's domestic service, and be accountable to both Singapore and Malaysia."
To Singapore, the AssetsCo is the "centrepiece" of the HSR project and is necessary to ensure that the interests of both Singapore and Malaysia are protected, he added.
"This will minimise the possibility of future disagreements and disputes over the long duration of the project, lasting decades," he said.
"Singapore, therefore, informed Malaysia that the removal of the AssetsCo constituted a fundamental departure from the HSR bilateral agreement, and could not be accepted."
With the project's termination, Malaysia has to compensate Singapore in accordance with the HSR agreements, Mr Ong noted.
He revealed that Singapore has spent about $270 million on the HSR project to date.
Asked by WP's Mr Dennis Tan (Hougang) for the reasoning behind Malaysia's change in position on the AssetsCo, Mr Ong said he could not speak for the Malaysian government.
In response to Mr Melvin Yong (Radin Mas), Mr Ong said another proposed change by Malaysia - to connect the HSR to the Kuala Lumpur International Airport (KLIA) - would have led to the high-speed line sharing tracks with an existing rail line to the airport.
"The Express Rail Link is an existing train system model (that) runs at half the full speed of HSR, so should we have proceeded, there would have been many technical issues to resolve," he said.
"But having said that, the main concern for us was the removal of the AssetsCo."
He noted that some media reports had suggested Singapore was concerned that the proposal to reroute the HSR to KLIA would impact its air hub.
The issue has not been the key consideration during discussions, he said.
He added that the heavy air traffic between the two cities - which amounts to almost five million passengers a year - was why Singapore believed the HSR was "viable, mutually beneficial and strategic for the long term".
Both countries had inked the legally binding bilateral agreement in 2016 after three years of negotiations. At Malaysia's request, both sides signed a supplemental agreement in May 2018 to suspend construction of the project.
A second agreement was signed to extend the suspension to Dec 31, 2020, "with the explicit understanding that it would be the final extension", Mr Ong said.
The $270 million spent on the HSR is lower than an earlier estimate of about $300 million provided by previous transport minister Khaw Boon Wan in 2018, as Singapore had managed to wind down contracts and maintain activity at a low level, he said.
The compensation to be paid by Malaysia will include various abortive costs such as for consultancy services, design of infrastructure, and manpower to deliver the HSR project.
It will not include land acquisition costs, as the value of the land can be recovered, Mr Ong added.
Singapore is also verifying a "small component" of miscellaneous abortive costs" for the suspension of the project requested by Malaysia, he said.
The amount and schedule of payment is specified in the agreements, Mr Ong said, adding that he could not disclose the figure due to confidentiality reasons.
Malaysia's Minister in the Prime Minister's Department Mustapa Mohamed has said that Malaysia will honour its obligations, and both countries will initiate the necessary procedures to determine the amount of compensation.
Malaysia had in 2019 remitted $15 million to Singapore as payment for abortive costs the Republic incurred as a result of the initial suspension of the HSR project. This amount covered costs linked to the suspension, such as contract breakage and manpower, and is not part of the compensation.
In response to Mr Saktiandi Supaat (Bishan-Toa Payoh GRC), Mr Ong said Singapore remains willing to discuss any new proposal on the KL-Singapore HSR or similar projects in the future.
"Whether we are open to future discussions - of course, we are. But it should be on a clean slate after we settle the current HSR bilateral agreement," he said.