A few days ago, Malaysia’s economic affairs minister Datuk Seri Azmin Ali announced the postponement of the KL-Singapore High Speed Rail (HSR) project, a deferral which will be in effect until May 31, 2020. It has now been revealed that the Pakatan Harapan government will reimburse Singapore with S$15 million (RM45.1 million) following the two-year suspension, The Star reports.

While both Malaysia and Singapore have mutually agreed to suspend the project on the reimbursement amount, Azmin Ali declined to reveal the cost the government would have to pay should the project be cancelled later on. However, early estimates pin the figure around the RM500 million mark, a sum which is to be paid to Singapore if the HSR is scrapped.

“We also discussed what would happen in the event that we cancel the project. But I don’t think I want to jump to a conclusion because the agreement signed [on the suspension] clearly states our commitment to continuing with the project after May 2020,” Azmin Ali said at a press conference with Singapore’s transport minister Khaw Boon Wan recently.

The two had agreed and signed to vary the HSR Bilateral Agreement, one which will see the HSR service begin operations by January 1, 2031 instead of December 31, 2026, as planned earlier. The S$15 million will be paid by end-January 2019.

“This agreement would not have happened if not for our strong commitment to strong bilateral cooperation between our two countries. I am confident that this spirit will see us through to the final conclusion of the HSR project,” Azmin Ali noted.

Khaw said although the HSR Bilateral Agreement had no provision for suspension, this was agreed upon in the spirit of bilateral cooperation. He also said Singapore remains committed to the project, adding that the sub 400 km distance between the two capitals were seen by industry experts as a sweet spot.

“If cities are too far away, people would rather fly; if they are too near, they just take the road. But 400 km represents a kind of sweet spot. Singaporeans are looking forward to the realisation of this project,” Khaw added.

On the reimbursement, Khaw said the suspension involved abortive costs due to contractual delays. “As almost the entire stretch of the HSR part in Singapore will be underground, utility services such as gas and water pipes as well as electricity cables have to be diverted and we have already started doing that. All those things mean cost,” he said.

However, should the project be terminated, Khaw said the payment would be for costs incurred by his government for fulfilling its obligations under the HSR Bilateral Agreement up to yesterday’s suspension.

The design concept for the Bandar Malaysia station in Kuala Lumpur

“That will be a larger quantum and again, there will be a careful, thorough exercise between the technical people from both sides, going through items and details so that the figures we reach is something that we can defend to our taxpayers,” he said.

Apparently, Azmin Ali said Malaysia initially wanted to postpone the project by up to four years based on current economic conditions, but Khaw said Singapore was only willing to consider a year. “We know that if the deferment period is beyond two years, the business model will change and the cost will continue to escalate. Based on our negotiations, we have mutually agreed on the deferment period,” Azmin Ali said.

Khaw said while Singapore und­erstood why Putrajaya needed to suspend the project, the period of how long this should be would affect the countries and the project itself.

“When you talk about a year-long deferment, it actually means several years of postponing the commencement of the project. When we studied this project, we considered the cost, how much revenue we could take in and whether the project was viable. When we talked about pushing the project into the future, the projections became more and more uncertain. But we finally came to an agreement of May 2020 and we think this is a suspension period which we can try to manage,” Khaw explained.