Expenses Incurred to-date by Singapore on High Speed Rail Project

16 Mr Chua Kheng Wee Louis asked the Minister for Transport what has been the total amount of expenditure incurred to date by Singapore on the High Speed Rail project and what are the terms specified in the bilateral agreement in relation to compensation claims upon termination of the agreement by either party.

The Minister for Transport (Mr Ong Ye Kung): Singapore has incurred more than S$270 million for the Kuala Lumpur – Singapore High Speed Rail, or HSR Project. Some of these costs, such as for consultancy services, design of infrastructure and manpower to deliver the HSR Project, are abortive costs if the HSR Project does not proceed.

To date, Singapore has already received about S$15 million from Malaysia, arising from Malaysia’s request to suspend the construction of the HSR Project back in 2018 and up to May 2020. Subsequent to that, at the request of Malaysia, the HSR Project was further suspended until 31 December 2020. Malaysia has now decided not to proceed with the HSR Project. According to the terms of the Parties' agreement, Malaysia is obliged to pay termination compensation to Singapore. This will include various abortive costs but not land acquisition costs since the value of the land can be recovered.

The compensation amount for the termination and schedule for payment are specified in our agreement. In addition, there is a small component of miscellaneous abortive costs for the suspension of the Project requested by Malaysia that Singapore is currently verifying, before we send to Malaysia.

Due to Singapore’s confidentiality obligations under the HSR Bilateral Agreement, we are unable to reveal the exact terms in relation to the compensation for the termination of the HSR Project.

We look forward to continue to build good relations and work closely with Malaysia to improve connectivity in other ways, and in many other fields, for the mutual benefit of the people of both countries.

Mr Speaker: Mr Louis Chua.

Mr Chua Kheng Wee Louis (Sengkang): I thank the Minister for his response to the question. I have got two supplementary questions. The first is, now that we know that the high speed rail has officially been cancelled, if the Minister can share with the Members of the House what were some of the substantive points of differences that cannot be breached that led to the cancellation?

And in relation to compensation, I note earlier in July 2018 that former Transport Minister Mr Khaw Boon Wan said that the total cost incurred back then was exceeding $250 million which is expected to exceed $300 million by the end of 2018. So, in relation to the expenditure already incurred, if Minister could share the details on what is the difference and whether or not we will be able to recover the full amount of the expenditure, excluding land acquisition costs, as the Minister had mentioned, and if so, when should we expect some form of conclusion on this?

Mr Ong Ye Kung: Let me answer the Member's second question first. Then-Minister Khaw Boon Wan did mention the figure of S$250 million. He also mentioned that costs continue to be incurred and, therefore, it may reach S$300 million or so later.

Today, our expenditure is roughly S$270 million, less than what he had indicated earlier, because when the Project was suspended and we agreed to the suspension, we wound down the contracts and we maintained activity at a low level, which is why we did not incur as much as it was indicated earlier.

Will we be able to claim the full amount? The amount to be compensated, as I have mentioned, and the schedule for payment, these are specified in the agreements. So, it is a fixed amount specified in the agreements. Unfortunately, due to confidentiality obligations, I cannot disclose the amount. But we have started the process of compensation.

As for the first question, it is an important one – the substantive point of difference. Let me go back a little bit.

Singapore and Malaysia signed the HSR Bilateral Agreement – we call it HSR BA – in 2016. And that is after three years of negotiations to implement the HSR Project. Subsequently, both Parties signed two supplementary agreements relating to the suspension of the construction of the HSR Project. Both suspensions were at Malaysia's requests. So, the first supplementary agreement was signed in 2018, to suspend the construction of the HSR Project. The second, in 2020, extended the suspension period to 31 December 2020, with the explicit understanding that it would be the final extension. By then, it would have been extended by two and a half years.

I will refer to the HSR BA, subsequently amended by the supplementary agreements, generically as the "HSR Agreements" as a short form. So, the HSR Agreements are legally binding international agreements. Parties come to the table as equals, discuss the various terms, such as how to structure and implement the cross-border HSR Project, and the rights and obligations placed on both Parties. As Members know, this process involves understanding each other's concerns, addressing them, striking compromises and finding mutually acceptable common ground.

Singapore was fully committed to carry out our obligations under the HSR BA. But Malaysia felt that circumstances had changed, including due to COVID-19, and proposed several changes to the HSR Project.

Be clear about this, which is, Singapore was not obligated to agree to any of such changes because we had signed an agreement in 2016 already. But, notwithstanding, we considered them in good faith. But we were unable to agree to one particularly significant change proposed by Malaysia. This involved the removal of the Assets Company – in short form, we call it "AssetsCo" – which is the systems supplier and network operator of the HSR service between Singapore and Kuala Lumpur (KL).

Let me explain why. As the HSR is a cross-border service, it must be a single train system operating between Singapore and Kuala Lumpur in Malaysia. Because neither country has the expertise and experience in operating an HSR, we agreed, under the HSR BA, to appoint a best-in-class industry player through an open and transparent international tender to assume the role of the AssetsCo. Once appointed, the AssetsCo would supply the train system, operate the network, ensure that appropriate priority is given to cross-border HSR service vis-a-vis Malaysia's domestic service, and AssetsCo would be accountable to both countries, that is, Singapore and Malaysia.

To Singapore, AssetsCo is the centrepiece of the HSR Project. It is necessary to ensure that the interests of both countries are protected. This will minimise the possibility of future disagreements and disputes over the long duration of the Project, lasting decades. Singapore, therefore, informed Malaysia that the removal of the AssetsCo constituted a fundamental departure from the HSR BA and could not be accepted.

Malaysia has since decided to allow the HSR BA to be terminated. In these circumstances, it has to compensate Singapore, in accordance with the HSR Agreements. Now that the HSR BA has been terminated, Singapore is willing to discuss any new proposal on a KL-Singapore HSR from Malaysia in good faith, but starting from a clean slate.

Mr Speaker: Mr Saktiandi Supaat.

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Speaker, I thank the Minister for the answer to Mr Louis Chua's question earlier.

First of all, I would like to thank the MOT team for putting in a lot of good work done that led to an agreement after four years of negotiations. But, alas, Malaysia proposed changes to the agreement and it did not go through. But following up on the Minister's answer just now, also for the sake of transparency, can the Minister share why another extension of the bilateral agreement would not have been possible and whether a further extension would have allowed some room for further discussions to be made to reach an agreement?

Another question is whether Singapore is open to HSR-like projects in the future.

Mr Ong Ye Kung: Thank you. As I have mentioned in my earlier clarifications, at the request of Malaysia, we suspended the Project for two years up to May 2020. And then, there was a second request from Malaysia to extend it until 31 December 2020, that is, another six months, which we were not obligated to agree, but we agreed to it. So, there were two extensions, at the Malaysians' requests and we agreed to it in good faith and in the spirit of good bilateral relations. But we cannot extend indefinitely and, so, for the second extension to 31 December 2020, both sides agreed that it shall be the final extension, and it is part of the agreements. So, I think there will have to be a finality to the suspension and extension of the Project. Having said that, there is a fundamental difference which I have explained earlier with regard to the removal of the AssetsCo.

Whether we are open to future discussions, of course, we are. But it should be on a clean slate, after we have settled the current HSR BA.

Mr Speaker: Mr Ang Wei Neng.

Mr Ang Wei Neng (West Coast): Thank you, Speaker. I thank the Minister for the comprehensive reply. I have two supplementary questions.

First, is there any impact of the cancellation of HSR on the Johor Bahru-Singapore Rapid Transit System (RTS)?

Second, what would be the impact of the HSR cancellation on the development of the Jurong Regional Centre? Although I have moved from Jurong GRC to West Coast GRC, but many of the West Coast GRC divisions are very close to the Jurong Regional Centre. I hope the Minister can give a good reply.

Mr Ong Ye Kung: Thank you. The short answer to the first question is no. RTS is progressing well so far. The Johor Bahru side has broken ground; on our side, we will break ground soon and we hope the Project and the service can commence in 2026 as scheduled.

As for Jurong Regional Centre, let me assure the House that MND had started planning to transform Jurong as early as 2008. So, the Jurong Lake District is part of a broader effort to develop urban centres outside of our CBD and our city centre. The plans for Jurong Lake District, or JLD were, therefore, developed well before Malaysia proposed the current HSR Project in 2012. It was only much later, in 2015, that we decided to locate the Singapore terminus of the HSR in Jurong. The termination of the HSR Project, therefore, does not affect the overall impetus and vision for JLD, although some details may need to be adjusted along the way. When completed, this will be the largest commercial and regional centre outside of our city centre, bringing many jobs, business and recreation opportunities for Singaporeans and Singapore companies.

The land parcels that the Government has acquired are still needed to realise these plans. For example, the Jurong Country Club site will provide for new mixed-use developments and community facilities. The Raffles Country Club site is also still needed for the Cross Island Line's western depot and the Integrated Train Testing Centre. We will be able to realise the full potential of the land to benefit Singaporeans.

Mr Speaker: Mr Melvin Yong.

Mr Melvin Yong Yik Chye (Radin Mas): Thank you, Mr Speaker. I thank the Minister for his reply. I have two supplementary questions.

Prior to COVID-19, the Singapore-Kuala Lumpur air route was one of the busiest in the world, with more than four million passengers flying this route every year. The HSR Project was meant to shorten the travel time between Singapore and Kuala Lumpur from about five hours by air to just 90 minutes, and provide greater access to both cities.

My first question is, what is the impact of the HSR's cancellation on the attractiveness of Singapore as the region's premier air hub and on the SIA Group as a whole?

My second question is, how many staff at SG HSR Pte Ltd have been impacted by the project's cancellation and how many have already been redeployed to other job roles? Will these be made permanent? And what are the manpower plans for the remaining staff that have yet to be redeployed?

Mr Ong Ye Kung: I think the Member just now meant five hours by car, not five hours by air.

Mr Melvin Yong Yik Chye: Yes, not by air.

Mr Ong Ye Kung: What is the impact of HSR termination by Malaysia on our aviation air hub? As I have mentioned earlier, there are some reasons given as to why the Project was terminated and the impact on air hub was cited in some media reports. But as mentioned, our main concern was the removal of the AssetsCo.

Having said that, Malaysia's new proposal to connect the HSR to Kuala Lumpur International Airport or KLIA means that HSR will share tracks with the express rail link to KLIA. The Express Rail Link is an existing train system, not an HSR, and runs at half the full speed of HSR. So, should we have proceeded, there would have been many technical issues to resolve. But having said that, the main concern for us was the removal of the AssetsCo.

Since the Member has asked about the impact on aviation, actually, without the HSR, the Singapore-KL aviation route will continue to ferry and transport many passengers, in fact, closer to five million than the four million number stated by the Member. But throughout this whole discussion, the status of our aviation hub due to the HSR Project has not been the key consideration. We knew that this Singapore-KL air corridor is the busiest in the world – 46 flights a day, almost five million passengers a year – a number that is almost equivalent to Singapore's residential population. But it is precisely because of this heavy air traffic between Singapore and KL that we believe that the HSR Project was viable, mutually beneficial and strategic for the long term. So, Singapore will always assess the cost benefit of such major infrastructure projects from a national and long-term perspective, and not just from the perspective of one company or one industry.

As for the Member's second question about manpower, 80 staff are affected. Out of the 80, 70 or so have been redeployed to LTA and the other 10, we are looking them. We are confident we can redeploy all of them in LTA or within the larger transport eco-system. There are many important projects that are happening, and there will always be a need for good people, such as those 80 people working on the HSR Project.

Mr Speaker: Mr Dennis Tan.

Mr Dennis Tan Lip Fong (Hougang): I thank the Minister for the response so far. I just have one question. What is the reasoning behind the Malaysian government's reason for the change on their position on the AssetsCo?

Mr Ong Ye Kung: I thank the Member for the question, but I really cannot speak for the Malaysian government.