The twice-delayed high-speed rail (HSR) project between Singapore and Malaysia will no longer go ahead, after both countries were unable to reach an agreement on changes proposed by Malaysia.
The termination of the agreement was announced by Prime Minister Lee Hsien Loong and his Malaysian counterpart, Tan Sri Muhyiddin Yassin, yesterday, and came amid recent rumours that Malaysia had decided to build the line alone.
Negotiations hit an impasse after Malaysia proposed changes due to the economic impact of the Covid-19 pandemic.
In their joint statement, the prime ministers, who had spoken via videoconference on Dec 2, said: "Both governments had conducted several discussions with regard to these changes and had not been able to reach an agreement. Therefore, the HSR agreement had lapsed on Dec 31."
Malaysian Minister in the Prime Minister's Department Mustapa Mohamed said yesterday that his government had wanted to bring forward the construction phase and also proposed a new project structure which would have provided more financing options.
He added that Malaysia will honour its obligations and both countries will initiate the necessary procedures to determine the amount of compensation.
PM Lee and Mr Muhyiddin also said: "Both countries remain committed to maintain good bilateral relations, and cooperate closely in various fields, including strengthening the connectivity between the two countries."
The writing was on the wall after Malaysian news reports in recent months suggested that the Malaysian Cabinet was planning to continue on its own and end the line in Johor instead of Jurong.
Yesterday's statements did not detail the compensation amount that Malaysia has to pay Singapore.
Singapore's Transport Ministry said that as Malaysia allowed the agreement to lapse, it will have to compensate Singapore for costs already incurred.
Based on earlier estimates, Singapore had already spent more than $250 million for design, manpower and land acquisitions by the end of May 2018, then Transport Minister Khaw Boon Wan told Parliament in July that year.
He also said Singapore would continue to incur costs - over $6 million each month in June and July, and at least $40 million from August to the end of 2018.
When Singapore agreed to Malaysia's request for a suspension in August that year, more costs were incurred to compensate contractors for breaking contracts, and to fill back sites already excavated, for instance. Malaysia had agreed to reimburse Singapore $15 million for these abortive costs.
The 350km rail line, which Malaysia mooted and both sides agreed to build in 2013, was to have run from Bandar Malaysia in downtown Kuala Lumpur to Jurong East.
It would have had seven stations, and would have cut travel time between Kuala Lumpur and Singapore, one of the busiest air routes.
The trip would have taken 90 minutes on the HSR, compared with over four hours by car and about five hours end to end by air.
Singapore commenced work on the project, appointing a firm to design infrastructure and calling an international joint tender with Malaysia for an assets company, after both countries signed a legally-binding bilateral agreement in December 2016.
The project was put on hold following a change in the Malaysian government in May 2018. The two-year suspension was set to expire in May last year and extended for a second and final time till Dec 31.
The latest development has come under criticism by some in Malaysia, among them former prime minister Najib Razak, who said yesterday that a domestic line was not economically viable.
Meanwhile, observers do not expect a significant impact on bilateral ties, saying that the joint statement indicates a mutual agreement was reached on the termination.