The original terms of the Kuala Lumpur - Singapore High Speed Rail (KL-SG HSR) project which were inked in 2016 are not longer viable in light of Malaysia's post-Covid-19 economic situation, said Mustapa Mohamed, Minister in the Prime Minister Department (Economy).

Malaysian government proposed multiple changes

The Malaysian politician said in a statement on January 1, 2021 that the Malaysian government had "explored a number of alternatives to reduce the cost of the Kuala Lumpur-Singapore HSR project", a task which gained urgency with the onset of the pandemic.

Since 2019, Putrajaya — the seat of Malaysia's federal government — had proposed changes to the alignment and station design, reported The Malaysian Insight.

Another change mooted by Putrajaya concerned the HSR project structure.

The original structure of the HSR project was a private-public partnership with three main components.

The first component consists of government subsidiaries who build, finance, and maintain the civil infrastructure in their respective countries.

The second component is a privately-financed Assets Company, appointed by both governments to design, finance, and maintain all rail assets and rolling stock (trains) for the HSR, and oversee the network.

Lastly, operators will be appointed to lease the rail assets and provide the actual HSR service.

Malaysian government wanted flexibility in financing options

This structure, reported The Malaysian Insight, would require substantial and long-term government guarantees.

Putrajaya proposed changes to the structure to gain flexibility in its financing options, including deferring payments and accessing financing at more favourable rates.

Mustapa also said in his statement that the proposed changes would allow Malaysia to bring forward the construction phase by two years, and boost the country's construction sector.

Considering viability of making HSR a domestic project

However, now that the HSR project has been scrapped, Malaysia will honour its obligations under the HSR Bilateral Agreement, said Mustapa, adding that both countries will decide on an appropriate compensation amount.

He also said that the Malaysian government is considering the viability of making the HSR a domestic project.

Top image via Mustapa Mohamed/Facebook.