Governments of Malaysia and Singapore sign agreement to defer US$10 billion high speed rail PPP

Governments of Malaysia and Singapore sign agreement to defer US$10 billion high speed rail PPP

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The governments of Malaysia and Singapore have confirmed in a joint statement that construction of the Kuala Lumpur-Singapore High Speed Rail (HSR) project is suspended for a period up to 31 May 2020. 

The 350km high speed rail link, which will reduce the travel time between Singapore and Kuala Lumpur from four hours to around 90 minutes, was scheduled to begin operations by 31 December 2026.

The suspension comes at the request of the government of Malaysia. The government signed a Memorandum of Understanding (MoU) to develop the HSR project with its counterpart in Singapore in July 2016. However, this government lost the 2018 election. A new Prime Minister was sworn in in May, and shortly afterwards announced that he did not support the project.

The design, construction, financing and maintenance of all rolling stock and rail assets (e.g. trackwork, power, signalling and telecommunications), valued at MYR43 billion (US$10.36 billion), was to be undertaken by a private partner. The joint statement does not disclose when the tender, launched in December 2017, will recommence. Submissions were due on 28 December 2018.

The statement also does not disclose the projected cost of suspending the project. It states that Malaysia will bear the agreed costs, which is significant, as the new government's key motive for pursuing the suspension was that the project was unaffordable given Malaysia's current deficit.

Despite Malaysia originally pursuing the outright cancellation of the HSR, this new agreement with Singapore sets out strong incentives to avoid cancellation at all costs. If by 31 May 2020, Malaysia does not proceed with the project, the country is bound to bear the costs incurred by Singapore since December 2016. According to the country's Transport Minister, this is over SGD250 million (US$181.6 million).

The focus on funding is clear, with the joint statement outlining that Malaysia and Singapore will continue to deliberate the best way forward for the HSR project with the aim of reducing costs.

The rail link, which is planned to have eight stations and three operating services, is now expected to open by 1 January 2031.

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