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Oral Reply by Minister for Transport Khaw Boon Wan to Parliamentary Questions on High-Speed Rail (HSR) Project

01 Oct 2018 In Parliament

Mr Ang Hin Kee asked the Minister for Transport

a.     what are the considerations that led to Singapore agreeing to Malaysia’s request to postpone construction works of the High-Speed Rail (HSR) project;

b.     whether Singapore is obligated to accept changes, if any, proposed by Malaysia to the HSR project; and

c.     what is to be expected of Malaysia at the end of the suspension period if the project does not proceed eventually.

Mr Dennis Tan Lip Fong asked the Minister for Transport

a.     what was the basis for the agreed reimbursement of S$15 million by Malaysia to Singapore for abortive costs arising from the two-year suspension of works for the Kuala Lumpur-Singapore High Speed Rail (HSR);

b.     what are the major works which will be suspended during the same period; and

c.     whether there are any ancillary works or projects relating to or incidental to the HSR which will still continue in the next two years.

Reply by Minister for Transport Khaw Boon Wan:

1.     The Kuala Lumpur-Singapore High Speed Rail (HSR) Bilateral Agreement (BA) commits the Government of Malaysia and the Government of Singapore to build the HSR Project and to start the Express Service linking both cities by end-2026. Since the BA was signed in December 2016, both Governments have expended significant resources to implement the Project according to the prescribed timeline. As I explained in this House on 9 July 2018, Singapore, on its part, had already spent more than S$250 million by the end of May 2018 in implementing the Project. These are costs for consultancies to design the civil infrastructure, costs for manpower to oversee and deliver the Project, and costs for land acquisition. I added that Singapore would continue to incur costs, more than S$6 million in June, another more than S$6 million in July, and at least S$40 million from August to the end of this year. We expected Malaysia to also fulfil its BA obligations, as the BA is a legally binding treaty between two countries.

2.     However, on 11 August 2018, the new Malaysian Government, through its Minister of Economic Affairs Mohamed Azmin bin Ali, made an official request to Singapore to defer the HSR Project by 3 or 4 years. Malaysia acknowledged that it would require Singapore’s consent for such a deferment.

3.     The HSR is a major long term bilateral project. It requires close cooperation between both Governments to succeed. The BA makes no provision for project deferment. When either party is unable or unwilling to continue with the Project, it can terminate the Project and compensate the other party for costs incurred, in accordance with the terms of the BA.

4.     Minister Azmin Ali explained that Malaysia did not want to terminate the Project but needed to suspend construction for a specified period, with the intention to resume the Project thereafter. He sought Singapore’s understanding for Malaysia’s predicament. He asked us to give the Malaysian request serious consideration, which we did.

5.     We could have turned down the request to defer the project, enforced our legal rights on termination and sought compensation from Malaysia. This would have been fully in accordance with the BA. After that, if and when Malaysia was again ready to pursue such a project, we could discuss a new BA for it.

6.     However, in the spirit of bilateral cooperation, we decided to work out an alternative resolution to the problem, especially since Malaysia reassured us that it did want to resume the HSR Project, albeit after a delay. After several rounds of discussions, both sides reached agreement to suspend the construction of the HSR Project up to 31 May 2020. This will be two years from the formation of the new Malaysian Government. Beyond two years the current cost estimates would likely be no longer valid, which would affect the viability of the project and its business case. A longer suspension period would also impact our development plans for the Jurong Lake District, which will host the Singapore HSR Terminus and many transport, commercial, residential and recreational developments. As it is, with the two-year suspension, the projected commencement date for the HSR Express Service will be pushed back by 4 years to 1 January 2031, as both countries will need additional time to call fresh tenders if and when the project resumes. 

7.     Project suspension is not without costs to Singapore. We have to pay contract breakage costs to contractors for terminating ongoing contracts and to safely wind down operations for the duration of the suspension period. For example, ongoing excavation works cannot simply be abandoned; they need to be safely wound down. The excavation must be backfilled to render the site safe, and re-excavated once the project resumes, increasing costs. These are abortive costs, which cannot be used for the HSR Project after it resumes. They are separate from the project implementation costs which we have already incurred for work done which will still be useful if and when the Project resumes. Malaysia has agreed to reimburse Singapore for the abortive costs of S$15 million, to be paid by end-January 2019. After the ongoing works have been wound down, no new HSR works will be undertaken during the period of suspension.

8.     Malaysia also requested that during the suspension period, both sides discuss the way forward for the HSR Project, with the aim of reducing costs. Singapore is open to such discussions. We are not obliged to accept automatically any proposals offered, but we will assess any proposals from Malaysia carefully and objectively.

9.     By 31 May 2020, we expect Malaysia to resume constructing the HSR Project, either as specified in the HSR BA, or as amended if there is mutual agreement to do so. There will be no further suspension beyond 31 May 2020. If Malaysia does not proceed with the HSR Project by then, the Project will be deemed to have been terminated by Malaysia, which will reimburse Singapore for the project implementation costs incurred by us up to the point of suspension. These were the terms of the legally binding documents which Minister Azmin Ali and I signed on 5 September 2018 in Putrajaya.

10.    This is a fair arrangement for both countries. It protects Singapore’s interests, while reasonably accommodating Malaysia’s request. It also shows that we can manage our bilateral ties on the basis of mutual respect, and resolve issues amicably in accordance with binding agreements and international law. Singapore looks forward to continue working with Malaysia to see through the HSR Project. Both sides recognise the mutual benefits of the HSR Project, which will bring both countries closer together by improving connectivity, deepening people-to-people ties, and catalysing further economic cooperation.

11.    Meanwhile, the suspension affects many stakeholders. SG HSR, Singapore’s Infrastructure Company (InfraCo) which is a wholly-owned subsidiary of LTA, has hired many staff who have worked hard on the project. During the suspension period, they will be offered alternative job roles in LTA. I thank them for their good work and dedication to this project. I am confident that they will continue to contribute in the LTA family, and to the HSR Project if and when it resumes.

12.    The two HSR InfraCos, SG HSR Pte Ltd, and MyHSR Corp, have jointly notified registered bidders for the AssetsCo tender that the AssetsCo tender has been aborted as of 5 September 2018. SG HSR and LTA have also informed all their contractors of the Project suspension, and are engaging them to discuss further details.