What’s Next for the Malaysia-Singapore High Speed Rail Link?

Since Malaysia’s opposition won a shock victory in the country’s general elections in May, there have been concerns about the extent of change that could occur in the country’s politics, economics, and society. One of the key areas in the headlines is infrastructure, and no project has been in focus more than the high-speed rail (HSR) link between Malaysia and Singapore, which has implications for the bilateral relationship and the country’s approach to the world more generally.

The HSR, a $17 billion, 350-kilometer railroad project that would link Kuala Lumpur and Singapore set to come online in 2026, had initially been agreed on by then-Malaysian Prime Minister Najib Razak and Singaporean Prime Minister Lee Hsien Loong in February 2013. In addition to reducing the time to travel between the two countries’ capitals from four hours by car to just 90 minutes, it had come to epitomize a more stable era of relations between Malaysia and Singapore under Najib and Lee, in contrast to the prickly period when Mahathir Mohamad was in charge for over two decades until he stepped down in 2002. Now Mahathir, Malaysia’s longest serving premier, has returned to office, sparking questions about the bilateral relationship.

Despite the significance the HSR held for the advancement of people-to-people ties and the wider Malaysia-Singapore relationship, the project had become caught up in a wider political debate. A whole series of infrastructure projects conceived under Najib’s tenure has come under scrutiny domestically in Malaysia. Indeed, in the run-up to the general elections in May, one of the opposition’s pledges had been to cut back on big-ticket infrastructure projects that were conceived under Najib in a bid to decrease the country’s ballooning debt, which it had valued at around 1 trillion ringgit ($251 billion) or 80 percent of the country’s GDP.

So with the opposition defeating Najib in the historic election and Mahathir coming back to power, there were understandably concerns that the HSR project could be under threat or even canceled altogether. On May 28, those fears seemed to be realized when Mahathir announced that the project would be dropped, telling reporters in Kuala Lumpur that it was an “unnecessary project” that would cost Malaysia too much. Despite some pushback thereafter, including a Facebook post by Najib recalling estimates had shown that it would create 650 billion ringgit in gross national income and 110,000 job opportunities, Mahathir refused to relent, noting that spending billions of dollars to create thousands of jobs was “not very efficient.”

Yet even as those remarks were uttered, it was unclear how that rhetoric would really translate into reality. The first and most obvious point is that this would require exiting an agreement Malaysia has already made with Singapore. That would not be without cost for Malaysia – financially, one estimate had the cost as being $500 million in compensation to Singapore. That was perhaps the primary reason why even Mahathir had conceded in his initial remarks that it would likely take some time to enact any changes.

A second, more general point is that this risked sending the wrong signals to investors about how Malaysia was keeping to agreements under the new government, after the first transfer of power between parties in the country’s independent history. The change of tune on the HSR is part of a broader commitment by the new government led by Mahathir to review all mega projects sanctioned under Najib, which includes not just the HSR but also the East Coast Rail Link. So it was not surprising that Mahathir’s announcement on the HSR led to sensationalist headlines about what this said about not only Malaysia-Singapore relations, but its approach to investment and bigger Asian powers involved in projects like the HSR such as China and Japan.

Given those realities, it appeared unlikely, as some media accounts seemed to indicate, that Mahathir’s comments would be followed by Malaysia’s quick exit from the agreement. Rather, it seemed more likely that the project would be placed on hold while Singapore and Malaysia discussed future options regarding the HSR, including on managing costs and assessing its feasibility, before any decision is finalized, including a possible nixing.

Several Malaysian government officials, including Economic Affairs Minister Azmin Ali, have said that the government needs to consider all factors involved before canceling the project, and that agreements need to be worked out with Singapore. Comments offered by Finance Minister Lim Guan Eng have been the most concrete, with Lim suggesting to the Singapore news agency Channel News Asia on June 15 that there may be some renegotiation of terms and a restarting of the project a year or two from now.

Most recently, when pressed on the subject in an interview with Nikkei Asian Review while on his first overseas visit to Japan, Mahathir also reiterated a more moderate line. While Malaysia would re-evaluate its options at the present time, he did, it did not mean that the HSR would be off the table in perpetuity. “There will be a need for high-speed rail in the future, probably right through the peninsula. But we cannot afford it at this moment. So we actually postponed the implementation of that project,” Mahathir clarified when asked what Malaysia’s response would be if Singapore were willing to negotiate for a scaled-down version of the HSR.

The future prospects of the HSR remain to be seen. The general sense seems to be that there may be a way to salvage the project and continue on if both sides can find a way to rework some terms. But the ability to do so will depend on specifics. Both sides do not have the benefit of time, with Singapore officials already gently indicating to Malaysia that the city-state is still incurring ongoing expenses tied to the project as it awaits clarity from its neighbor. And despite some estimates and indications that the cost of the project can be reduced, it seems that doing so would require a substantial revision in order to meet the Malaysian government’s concerns.

Irrespective of what exactly occurs in the coming months, the HSR project will continue to be interesting to watch for what it says about how the new Malaysian government handles infrastructure projects within the context of economic development as well as the country’s relations with its neighbors abroad.