MALAYSIA will honour its obligations under the terminated high speed rail (HSR) bilateral agreement with Singapore and will determine the quantum of compensation, said Minister in the Prime Minister Department (Economy) Mustapa Mohamed.

“By virtue of the bilateral agreement and previously agreed terms, Malaysia will honour its obligations,” he said in a statement today.

“Both countries will work to determine the value of compensation,” he added.

Mustapa said the government will study its options, including the viability of making HSR a domestic project.

He added that the terms of the agreement, inked in 2016 by the Barisan Nasional administration, were no longer viable given the country’s current economic situation, as a result of Covid-19 pandemic.

“Since late 2018, the government has explored a number of alternatives to reduce the cost of the Kuala Lumpur-Singapore HSR project. This has become more urgent with the onset of the Covid-19 pandemic,” he said.

Putrajaya had proposed a number of changes since mid-2019, including the project structure, alignment and station design.

The original structure would have required substantial and long-term government guarantees, while the proposed changes would have given Putrajaya some flexibility in its financing options.

This includes deferring payments, public-private partnerships and the possibility of accessing financing at more favourable rates.

“More importantly, the proposed changes to the project structure would have allowed us to leverage the HSR project to accelerate Malaysia’s economic recovery post the Covid-19 pandemic, by bringing forward the start of the construction phase by almost two years.

“This would have provided a much-needed boost to our construction sector and its supporting ecosystem,” he said.

“Taking into account these changes, the governments had discussed our respective positions a number of times.

“However, we had not been able to come to an agreement on these changes. Therefore, the agreement lapsed on December 31, 2020,” he added.

Mustapa reiterated that the two countries will continue to strengthen their close bilateral ties, including further enhancing connectivity between our two countries for mutual benefit.

This morning, Prime Minister Muhyiddin Yassin and his Singapore counterpart Lee Hsien Long issued a joint statement announcing the end of the deal after the expiry of the project suspension period yesterday.

In a separate statement, Singapore’s Transport Ministry said Malaysia will compensate the city state for losses resulting from the termination of the agreement. – January 1, 2021.