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Oral Reply by Minister for Transport Khaw Boon Wan to Parliamentary Questions on Developments of the HSR Project

09 Jul 2018 In Parliament

Mr Sitoh Yih Pin asked the Minister for Transport

a.     whether the Malaysian Government has, through diplomatic channels, confirmed its intention to terminate its bilateral agreement with Singapore to build the High Speed Rail;

b.     if so, what are the expenses and losses likely to be incurred by Singapore as a result of the termination; and

c.     what are Singapore's contractual rights to seek compensation for these expenses and losses in accordance with the terms of the agreement.

Miss Cheng Li Hui asked the Minister for Transport

a.     what are the costs incurred for the High Speed Rail (HSR) as of June 2018;

b.     what other costs does Singapore continue to incur should a decision be not made by the end of 2018; and

c.     should Malaysia decide to call off the HSR, what are the existing compensation clauses to safeguard Singapore's interest. 

Mr Ang Wei Neng
asked the Minister for Transport whether he can provide an update on

i.     the Kuala Lumpur -Singapore High Speed Rail project, the costs incurred to date and expenses over the next six months and

ii.    the Johor Baru-Singapore Rapid Transit System.

Reply by Minister for Transport Khaw Boon Wan:

1.     Mr Sitoh Yih Pin, Ms Cheng Li Hui and Mr Ang Wei Neng have asked about the status of the Kuala Lumpur – Singapore High Speed Rail Project, or HSR in short. Many Singaporeans are asking the same question following numerous statements by Malaysian leaders on the HSR Project over the past two months. These statements suggest that Malaysia no longer intends to continue with the Project in accordance with what both countries agreed under the HSR Bilateral Agreement or “BA” in short. Let me briefly recap what they have said.

2.     On 28 May, Malaysian Prime Minister, Dr Mahathir, announced in an interview with the Financial Times that the HSR Project would be “dropped”, and that it was “a final decision” but that this would take time because Malaysia had an agreement with Singapore. Dr Mahathir was also quoted as saying that “it’s [the HSR Project] not beneficial. It’s going to cost us a huge sum of money, we’ll make no money at all from this operation”.  He also said that Malaysia may have to pay “almost 500 million” as a “penalty” though he was unsure of the currency. On 1 June, Dr Mahathir reiterated that the decision to cancel the HSR Project was done by the Pakatan Harapan government, because from “the very beginning…we campaigned on that issue and we won’t go away from the decision of the party”. On 3 June, Johor Menteri Besar, Dato’ Osman Sapian, was quoted in the Malaysian media as saying that “short-term losses of RM500 million” from terminating the HSR Project were better than for the Malaysian Government to “bear the debt burden of more than RM100 billion” if it continued the HSR Project.

3.     On 11 June, in an interview with the Nikkei Asian Review in Tokyo, Dr Mahathir then said that the HSR Project was “postponed”. Malaysian Transport Minister, Mr Anthony Loke and Finance Minister Mr Lim Guan Eng later told the press on separate occasions that they, together with Economic Affairs Minister Dato’ Seri Mohd Azmin bin Ali, would visit Singapore to discuss the HSR Project. Various other reports then appeared in the Malaysian media citing an “alternative” proposal to the Malaysian Council of Eminent Persons to utilise the existing double-track of KTMB to run trains at 200km/h, which would take 130 minutes to travel from Kuala Lumpur to Singapore. According to these media reports, the “alternative” plan would purportedly mean that Malaysia would “not need to renegotiate with Singapore”. Malaysian social media also carried articles stating that Singapore has a “moral responsibility” not to “bully” Malaysia, and to cancel the HSR Project with minimum penalty.

4.     Mr Speaker, when Malaysia proposed the HSR Project to Singapore in 2013, Singapore agreed because we were convinced of the benefits of the Project to Singapore. After several years of discussion, Singapore and Malaysia signed the HSR BA in December 2016. This BA is an international treaty that is binding on the countries that signed it. In other words, both Singapore and Malaysia are legally bound to perform our obligations under the BA, regardless of any changes in the Government.

5.     The HSR Project agreed under the BA is a high speed rail that would allow travellers to commute from Jurong Lake District in Singapore to the Bandar Malaysia development in Kuala Lumpur in 90 minutes. The key success factor of this Project is the 90-minute travel time, that provides greater convenience for travellers. 90 minutes is significantly less than the travel time by road or by the existing railway, and is competitive with the 50-minute flight time between Changi Airport and Kuala Lumpur International Airport, plus airport transfers. To achieve the 90-minute travel time, trains operating the HSR’s international Express Service between Singapore and Kuala Lumpur have to run at speeds of 300km/h or more on a dual track line designed for a top speed of 350km/h. This requirement is essential, as otherwise it would make less sense for a traveller to make a day trip from Singapore to Kuala Lumpur, or vice-versa, using the HSR rather than by air.

6.     After signing the BA, Singapore acquired land to facilitate the construction of the HSR, passed legislation in Parliament, and set up an Infrastructure Company, SG HSR Pte Ltd under LTA. We have formed a team of more than 100 specialists in the company, to build, own, fund and maintain the HSR civil infrastructure in Singapore. These staff have worked hard to fulfil our obligations to meet a challenging implementation timeline. The tenders for the HSR civil infrastructure in Singapore, as well as the joint tender with Malaysia to appoint an Assets Company (or AssetsCo) are underway. By May this year, SG HSR had called five tenders to construct the HSR civil infrastructure within Singapore. We have also started engaging potential bidders for the remaining major tenders.

7.     All these works cost money, including costs for consultancies to design the civil infrastructure, costs for dedicating manpower to oversee and deliver the Project, and costs for land acquisition. Based on preliminary estimates, the total cost incurred by the Singapore Government for the HSR Project has already exceeded S$ 250 million by the end of May 2018. This is actual money that has already been spent, our taxpayers’ money. We can recover value for some of the expenditure, even if the HSR Project does not proceed. But a significant amount which has been spent, will be completely wasted expenditure, if the project does not proceed. The BA provides for how compensation is to be dealt with.

8.     This is why we sent a diplomatic note to Malaysia on 1 Jun 2018 to seek immediate clarification on Malaysia’s position. To date, Singapore has still not received a reply from the Malaysian Government. The public statements made by the Malaysian Ministers, and Prime Minister Dr Mahathir himself, on the termination of the Project have not been followed through with any official communication to us. At this point therefore, we have been left with no choice but to continue performing in accordance with the BA, and thus continue to incur more costs. In the month of June, we incurred more than S$ 6 million. For the month of July, we expect to also incur more than S$ 6 million. These costs will increase rapidly with time. From August to end of this year, we will need to spend at least S$ 40 million more. These include our ongoing manpower costs, operating expenses and contract costs. It will be most unfortunate, if Malaysia has in fact decided to terminate, but delays in notifying us, because there will be further wasted expenditure.

9.     The HSR BA is a fair treaty, with equal rights and obligations on both sides. It is worth noting again that it was Malaysia which had suggested the HSR and Singapore agreed to the joint project. If the HSR Project is terminated because of the actions of country A, then country A should compensate country B for expenses that have already been incurred by country B, in accordance with the BA. It would not be fair for the taxpayers of one country to bear the cost of another country’s actions. Compensation is not a penalty imposed on the other country. Thus, should Malaysia cause the HSR Project to be terminated, we will deal with the question of compensation from Malaysia for costs incurred by Singapore in accordance with the BA and international law. The Singapore Government has a duty to all Singaporeans to be accountable for the substantial public funds spent on the HSR Project.

10.    Because the costs that we have incurred will add to the total amount of compensation, it is in Malaysia’s own interest to officially inform us of its position on the HSR Project early, to minimise the amounts involved. I highlighted this consideration to Economic Affairs Minister Dato’ Seri Mohd Azmin bin Ali when he called me on 6 Jun 2018. Dato’ Seri Azmin Ali suggested that both countries’ officials meet to discuss the HSR Project. I welcomed the suggestion. I asked him for details on the scope of the discussion so that the meeting could be productive. He agreed and promised to send me a letter on the details. Our High Commissioner in KL has also conveyed the same points to Malaysian Transport Minister Mr Anthony Loke and Finance Minister Mr Lim Guan Eng. However, we have yet to receive the details from Malaysia.

11.    Besides costs incurred by Singapore, rail consortia from China, Japan, Europe and other interested parties such as international financial institutions, have also been incurring costs preparing their bids for the HSR Assets Company or “AssetsCo” tender, which was jointly launched by Singapore and Malaysia last December. These companies have taken the HSR Project very seriously including working with their governments to seek clarification on the requirements of the HSR AssetsCo tender over the past 7 months. Following the recent statements by Malaysian leaders, the bidders have sought urgent clarification from Singapore and Malaysia on the status of the HSR Project. I understand their deep concern. It is not tenable for them to proceed with their bids without knowing if the project is off, or to put their consortia and resources on hold indefinitely with the attendant opportunity and financing costs.

12.    The Singapore Government will continue to press for official clarification from the Malaysian Government. There are appropriate processes at law in case Malaysia should wish to propose changes to the BA, or to terminate it. These due processes should be followed. If the Malaysian Government fails to provide an official response, then we cannot ignore the public statements made by the Malaysian Ministers, and Prime Minister Dr Mahathir himself, on the termination of the Project, and Singapore will act according to its rights.

13.    Let me now update Members on the Johor Bahru (JB) – Singapore Rapid Transit System Link, or RTS Link for short. Every day, several hundred thousand commuter trips are made between Singapore and Malaysia through our land checkpoints. When completed, the RTS Link will ease congestion significantly at our land checkpoints and make it much more convenient for people to travel between Singapore and JB. On 30 May, Malaysian Transport Minister Mr Anthony Loke told Channel NewsAsia that “the RTS will proceed”, although Malaysia would “have to re-study the project in terms of cost and so on”. The following day, he also told our Shin Min newspaper that he hoped the project could be accelerated. However, we have not heard anything officially from the Malaysians on their intentions on the RTS Link.

14.    To proceed or indeed speed up the project, many implementation issues have to be sorted out. As with the HSR, we also have an RTS Link Bilateral Agreement with the Malaysians. It was signed just in January this year. Under the terms of that agreement, Singapore’s SMRT and Malaysia’s Prasarana Malaysia Berhad needed to incorporate a Joint-Venture Company to become the RTS Link operator by 30 June 2018. That did not happen as Prasarana had suspended discussions with SMRT after Malaysia’s General Elections. This means that both countries should now proceed to call an open, international tender to appoint the RTS Link operator, unless we mutually agree on a postponement of the deadline. 

15.    In the meantime, we will continue to work with Malaysia to reduce congestion through other means. Earlier this year, both Singapore and Malaysia lowered the tolls during off-peak hours at Tuas Checkpoint, to encourage motorists to travel outside the peak periods. We also agreed to Malaysia’s suggestion to increase the number of KTMB Tebrau Shuttle services from 26 to 31 daily, which has been implemented since mid-February. These measures have helped to alleviate the congestion but are not the complete solution. We look forward to the completion and operation of the RTS Link, which will be able to transport 10,000 travellers per direction per hour between Singapore and JB. 

16.    Mr Speaker, cooperation between Singapore and Malaysia is mutually beneficial for our peoples. But it has to be based on the cardinal principle of respecting the sanctity of international law and international agreements. For Singapore, we also need to safeguard Singapore’s hard-earned reputation as a credible and consistent partner, and a country that abides fully by our international obligations. Both Malaysia and Singapore urgently need to answer the questions from interested bidders for the HSR AssetsCo tender, and we await Malaysia’s clarification so that as responsible partners who have called the tender, we can do so.

17.    Meanwhile, we continue to incur costs on the HSR Project as we conscientiously fulfil our obligations under the HSR BA. These costs will add to the compensation which Malaysia would have to pay, should it cause the project to be terminated. It is therefore in Malaysia’s own interest to clarify its position early.

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