Malaysia expects compensation for HSR project's termination to be below S$270 million: Mustapa Mohamed
KUALA LUMPUR: Malaysia holds the view that the amount of compensation needed to be paid to Singapore for the termination of the Kuala Lumpur-Singapore High Speed Rail (HSR) project is much lower than S$270 million, said Minister in the Prime Minister’s Department (Economy) Mustapa Mohamed on Monday (Jan 4).
Mr Mustapa was speaking in reference to remarks by Singapore's Transport Minister Ong Ye Kung, who had said in Parliament that Singapore had spent more than S$270 million on the project, including the costs for consultancy services and manpower.
“The transport minister also said the compensation would not include land costs and we are made to understand that the Singapore government has acquired several pieces of land to implement the project,” Mr Mustapa said in an airing of the Malaysian programme Agenda AWANI.
“Therefore, we are confident that the compensation cost will be much lower than S$270 million. Anyway, the matter has not been finalised and will be discussed soon," he added.
In a Facebook post earlier on Monday, Mr Mustapa said that the compensation is "not punitive in nature" and is an amount Malaysia will reimburse for specific costs of the project that Singapore has already spent money on. He also said that the compensation amount would not be disclosed.
"We are waiting for the cost details from Singapore and once received, it will be scrutinised before we confirm them. The types of claims made have already been agreed upon," said Mr Mustapa.
"However, the amount of compensation cannot be disclosed because under the bilateral agreement, both countries are bound by a confidentiality clause.
"Yet, my team and I will discuss with Singapore to share information on the amount of compensation after it is finalised. Therefore, any figures on compensation mentioned by any party are merely speculation."
Nonetheless, during the live broadcast in the evening, he gave assurance that the government would announce the compensation amount as soon as it had been finalised.
READ: Malaysia will honour KL-Singapore HSR obligations following project's cancellation, says minister
On Jan 1, Malaysia and Singapore jointly announced the cancellation of the 350km rail line project after failing to reach an agreement on proposed changes by the Dec 31, 2020, deadline.
The bilateral agreement for the project’s development, signed with Singapore on Dec 13, 2016, was based on the aspiration for a closer economic integration between the two countries.
The construction of the HSR, proposed in 2010 as one of the Economic Transformation Programme’s initiatives, was deferred until May 2020 after Malaysia’s 14th general election, following a review of several of the government’s investment commitments.
The two governments later postponed the project for a second time to Dec 31, 2020.
REMOVAL OF ASSETS COMPANY A “FUNDAMENTAL DEPARTURE” FROM AGREEMENT
Mr Mustapa said the Malaysian government would be able to save 30 per cent if it did not use the services of the assets company, AssetCo.
It was announced previously that AssetCo was to be responsible for designing, building, financing and maintaining all rolling stock, as well as designing, building, financing, operating and maintaining all rail assets such as track work, power, signalling and telecommunications for the HSR project.
“The Malaysian government had given a 30-year guarantee to AssetCo amounting to RM60 billion (S$19.7 billion), or about RM2 billion annually,” he said.
READ: Assets company removal 'main concern' that led to HSR termination, project has cost Singapore more than S$270 million: Ong Ye Kung
“The guarantee would mean that if the payments to AssetCo were less than RM60 billion, the government must pay by using other revenue to cover the gap. This is also a form of savings.”
Mr Mustapa said taking into account the design, stations and other aspects of the project without AssetCo, the overall estimated cost savings was 30 per cent, a large number by any account.
In Parliament on Monday, Mr Ong said that Malaysia’s suggested removal of AssetCo was the "main concern" that led to the termination of the HSR project.
A joint tender for an assets company for the HSR project was called by Malaysia's MyHSR and Singapore's SG HSR in December 2017.
The assets company would have been necessary to ensure the interests of both countries were protected and minimise the possibility of future disputes over the HSR, Mr Ong told Parliament.
He noted that neither Malaysia nor Singapore had experience in running a high-speed rail line and so it had been agreed that a "best-in-class industry player" would be appointed to act as an assets company through an "open and transparent international tender".
The removal of the assets company represented a "fundamental departure" from the bilateral agreement and could not be accepted, said Mr Ong.
Mr Mustapa said that Malaysia was still interested to continue the HSR project, which was seen as beneficial to the economy, but the current economic situation due to COVID-19 forced it to review the implementation model.
“According to a study, the benefits to the economy over 50 years would total about RM300 billion. The benefits are great, which is why we are still keen to implement the project,” he said.
“It’s only the model, or method, that we felt may not be appropriate amid the COVID-19 situation. So we took another look.”