Malaysia signed an agreement Wednesday to pay Singapore U.S. $10.9 million to postpone for two years a high-speed railway linking Kuala Lumpur to the Lion City, after Malaysian Prime Minister Mahathir Mohamad had said he wanted to scrap the project.
Since his Pakatan Harapan alliance defeated the ruling Barisan Nasional coalition in the May general election, Mahathir’s new government has grappled with a national debt of 1 trillion ringgit (U.S. $241 billion) by curtailing projects started by his predecessor, Najib Razak.
In August, Mahathir canceled another rail project and two pipeline projects that were backed by China and valued at billions of dollars.
“I am happy to say, and I believe Minister Khaw (Boon Wan) too, that today we have finally sealed the deal, witnessed by both Prime Minister Mahathir Mohammad and the deputy prime minister of Singapore,” said Economic Affairs Minister Azmin Ali who signed on behalf of Malaysia.
Under the new agreement with Singapore, the $12.3 billion High-Speed Rail (HSR) project, which consists of about 217 miles (350 km) of rail between Kuala Lumpur and Singapore, will be postponed until May 31, 2020, effectively slowing the project’s completion date by four years, to Jan. 1, 2031.
Transport Minister Khaw Boon Wan, who signed for Singapore, said his government remained committed to the project.
“But of course we understand why Malaysia needs to temporarily suspend the construction of the HSR project,” Khaw said.
He said the deal was made after serious consideration by Singaporean officials because it did not match the original agreement signed with Najib’s government in February 2013.
Azmin traveled to Singapore three times in August to negotiate the deal. In a tweet posted on Aug. 30, the final day of negotiations, he announced that both governments were “inching closer toward a win-win deal on HSR.”
The agreement stipulates that if the project fails to proceed after the agreed 2020 date, it will be considered cancelled and Malaysia could face a penalty of about $120 million, according to a source close to the minister who asked to not be identified.
A government critic who challenged the deal said construction and material costs likely would be higher in two years.
Abdul Rahman Dahlan, who served as minister in charge of the Najib administration’s economic planning unit, said the millions paid to Singapore for the delay could be put to better use.
“The cost of the postponement is enough to build five schools in rural areas or 643 low-cost housing units for the poor,” Abdul Rahman said.
“Pakatan Harapan needs to reconsider its priorities,” he said Wednesday in a Twitter post.
Meanwhile, Oh Ei Sun, a senior adviser for international affairs at the Asian Strategy and Leadership Institute, said the government made the right move.
“Hopefully in two years it will be better,” Oh said, dismissing the possibility of Malaysia scrapping the project.
“If they wanted to cancel it they should just cancel it now and save the trouble of negotiating,” Oh said.
In 2013, officials announced that the proposed rail line would reduce travel time between Singapore and Kuala Lumpur to around 90 minutes by train from the current 11 hours on existing services.
In addition, the officials predicted it would contribute $5 billion (20.7 billion ringgit) in gross domestic product to Malaysia and Singapore while creating 111,000 jobs by 2060.
Mahathir on water deal: ‘Manifestly ridiculous’
The city-state of Singapore used to be part of Malaysia until it quit the Malaysian Federation in 1965. Since then, relations between the next-door neighbors have been tense at times.
And as the two countries were closing in on the deal on postponing the rail project, Daim Zainuddin, chairman of the new Malaysian prime minister’s influential Council of Eminent Persons, said Mahathir was turning his attention to negotiating a review of prices as stipulated in a 1962 bilateral water agreement, the South China Morning Post reported on Sunday.
Under the 56-year-old water deal, Malaysia sells Singapore water from the Johor River at less than one U.S. penny per 1,000 gallons, the Post reported, noting that 60 percent of the city-state’s water needs are supplied under the agreement.
In late June, Mahathir indicated in an interview with Singapore-based Channel News Asia that he was not happy with this and that his government planned to renegotiate the agreement.
“I think it is manifestly ridiculous that we should sell water at 3 cents per thousand gallons. That was OK way back in the 1990s or 1930s. But now what can you buy with 3 cents? Nothing,” the prime minister told the news outlet.