KUALA LUMPUR -- Malaysia and Singapore agreed on Wednesday to resume the construction of a 350 km high-speed rail on May 31, 2020 on the basis that the city state is compensated 15 million Singapore dollars ($11 million).
Singapore had already started work on the 110 billion ringgit ($27 billion) project that was supposed to cut travel time between the two cities to just 90 minutes. But the new government led by Prime Minister Mahathir Mohamad was reluctant to proceed after it discovered that national debt had ballooned to over a trillion ringgit under the previous administration.
The figure for the compensation, negotiated over several ministerial meetings, took into consideration the costs already incurred by Singapore that included diversion of underground utility pipes to facilitate the construction of an underground terminus, according to Khaw Boon Wan, Singapore's transport minister.
Khaw said his negotiating team produced invoices to Malaysia as proof of the costs committed by Singapore because both governments would have to be accountable to their taxpayers.
"Even though the HSR [high-speed rail] bilateral agreement has no provisions for such project suspension, but in the spirit of bilateral cooperation, Singapore has given Malaysia's request serious considerations," said Khaw. He added that the suspension deal signed with his counterpart on Wednesday was a "fair arrangement for the way going forward."
Mahathir and Singapore Deputy Prime Minister Teo Chee Hean witnessed the signing. Malaysia said the deal reflected its commitment to continue with the project, which was supposed to call for an open tender by the end of this year.
Citing high costs, Mahathir said in the aftermath of the May election that Malaysia would cancel the project as his new government tried to manage an unexpectedly huge national debt inherited from former Prime Minister Najib Razak's administration.
But as there is no room for either party to withdraw in the legally binding deal originally signed in December 2016, Malaysia has now decided to delay the project to avoid paying Singapore a bigger penalty. With the new project resumption date, the express service of the rail link is expected to begin by Jan. 1, 2031, four years later than initially projected.
Wednesday's breakthrough reflects a new era in the relationship of the two neighbors, although there is another sticking point between the two countries -- water supply, for which resource-scarce Singapore depends on Malaysia. Mahathir has said that the price of untreated water that Malaysia sells to Singapore, based on an agreement signed in 1962, should be 10 times higher.
Researcher Ying Xian Wong contributed to this article.