Tok Pa explains why HSR was called off. Here's what you need to know.

KUALA LUMPUR: The Malaysia-Singapore High Speed Rail (HSR) project has been terminated after both parties were unable to reach a mutual agreement on the changes proposed by Malaysia before the December 31 deadline.

In 2016, the two countries signed a bilateral agreement to facilitate the project. The rail line was originally scheduled to start operations by 2026

Minister in the Prime Minister’s Department for economic affairs, Datuk Seri Mustapa Mohamed, in a Twitter post today, explains why the HSR project was called off. Here's what you need to know:

• In May 2020, Singapore agreed to give a final postponement to implement HSR until the end of 2020. According to Mustapa, the country used this time to review the entire project structure, including its business model, infrastructure and system design.

• Following the review, Mustapa said that the government proposed a new HSR model structure which is not only neater, but widely used worldwide, among others in Europe, the United Kingdom, Japan and South Korea.

• The suggestions proposed is to reduce costs and at the same time to maintain project benefits. He said due to COVID-19, the government is forced to find ways to reduce the cost of several mega projects. The original terms of the 2016 bilateral agreement no longer viable for Malaysia.

• The Malaysian government had proposed several changes to the HSR project. The governments of both sides conducted several discussions about these changes but had not been able to reach an agreement.

• Mustapa said, the proposed new structure prevents the government from guaranteeing RM60 billion for 30 years. In addition, it also gives Malaysia a lot of flexibility in financing this project, including changes to the alignment and design of stations which will all reduce spending by about 30%.

• He said the government is considering on the possibility of starting this construction two years earlier, as it can help, especially the construction sector, to create more high value employment opportunities as well as business opportunities for small, medium and large-scale enterprises at this critical time.

• The government also proposed changes for the HSR to be connected and integrated with Malaysia's existing transport network more effectively.

• Several intensive discussions at the technical and ministerial levels were held over the past six months. Malaysia’s Prime Minister Tan Sri Muhyiddin Yassin and the Prime Minister of Singapore, Lee Hsien Loong held a video conference on 2 Dec 2020. Yet a mutual agreement was not achieved.

• Although the bilateral agreement has expired, Mustapa said Malaysia and Singapore will continue to work closely together to strengthen cross-border integration to ensure sustainable economic establishment and development.

• Mustapa also emphasized that the compensation is ‘not punitive in nature but is to reimburse certain costs of the project that Singapore has already spent’.

• Mustapa said, the types of claims allowed have already been agreed upon but he is unable to disclose the amount as both countries are bound by a confidentiality clause.

BACKGROUND ON THE HSR PROJECT

• In February 2013, the project was first announced to the public at the Singapore-Malaysia Leaders' Retreat by Lee Hsien Loong and then Malaysian prime minister Datuk Seri Najib Razak. The signing of the Memorandum of Understanding (MOU) took place in July 2016.

• Blueprints of the line included a double-track on the standard gauge that was to be powered with high-speed technologies.

• Contracts for the project attracted interest from companies in China, Japan, South Korea, and Europe to build, operate, and finance the trains and rail assets.

• The project, which was to take off on December 31, 2026, was first postponed after the fall of the Barisan Nasional government in 2018.

• In September 2018, Malaysia’s new government under Pakatan Harapan attempted to call off the project as the country was struggling with debt and liabilities. The government signed a new agreement to formally postpone the construction of the HSR project till the end of May 2020.

• The proposed 350km-long HSR line, which aimed to reduce the four-hour travel time between Singapore and Kuala Lumpur to around 90 minutes by running at a speed of 300km/h, was supposed to connect Bandar Malaysia in Kuala Lumpur with Jurong East in Singapore.

• The rail link was expected to contribute RM21 billion in gross domestic product to Malaysia and Singapore, as well as create 111,000 jobs by 2060.