PUTRAJAYA • • The agreement to defer the Kuala Lumpur-Singapore High-Speed Rail project safeguards Singapore's financial interests as it deals with abortive costs as well as compensation should the project not proceed after 2020, Foreign Minister Vivian Balakrishnan said in an interview with Singapore media.
He also noted yesterday that the deal was a positive development: It showed both sides were able to respect the sanctity of agreements, and also gave Malaysia up to two years to consider how to proceed on the project if it wishes to.
Dr Balakrishnan pointed out that the deal Singapore and Malaysia inked yesterday stated that if Malaysia did not resume the HSR before May 31, 2020, the project would be considered terminated.
In this scenario, Malaysia would be liable for full compensation as specified by the agreement, he said.
"So, our financial interests are also absolutely safeguarded," he said.
"The abortive cost and the compensation cost will all be dealt with at the appropriate times specified in the agreements, which are legally binding," he added.
Deputy Prime Minister Teo Chee Hean, in an interview with Singapore media yesterday, also stressed the distinction between abortive costs of $15 million as a result of suspending the HSR for two years, and compensation costs to be paid if the HSR does not resume.
Singapore has spent about $250 million implementing the HSR project to date, some of which are recoverable costs like land acquisition, said Mr Teo.
"We still kept the land, so it is not reasonable to put that on Malaysia. But there are costs which we have spent which will need to be recovered if the HSR does not proceed after the deferment period," he said.
"Subsequently, if for whatever reason the project does not resume, then there are agreed upon compensation costs that come into effect," he said.
Transport Minister Khaw Boon Wan elaborated on abortive costs at an earlier press conference, citing how work was already under way to divert utilities such as gas and water pipes and electricity cables for the HSR, which would run mostly underground in Singapore.
These projects could not simply be dropped when the project was suspended, he noted.
Singapore will incur $15 million in abortive costs to pay contractors to terminate ongoing contracts, and to wind down operations during the suspension period, the Ministry of Transport (MOT) said in response to media queries.
For example, some contracts include contract breakage costs, which need to be paid as a result of this suspension. MOT said: "These are 'abortive' costs, as they are not useful for the HSR project after it resumes."
These costs are different from the $250 million Singapore has incurred so far on the HSR, as that can still be used for the HSR after the project resumes, it added.
If the project did not proceed and is terminated at the end of May 2020, there will again be reimbursements "for the cost incurred by Singapore fulfilling our obligations for the bilateral agreement up to today's suspension", added Mr Khaw.
This potential future reimbursement would be a larger sum, he said, without specifying an amount.