KUALA LUMPUR (Sept 1): The Kuala Lumpur-Singapore high-speed rail (HSR) mega project will be deferred for two years without penalty to either nation, The Edge weekly reported in its Sept 3 issue.

According to the report using sources, the agreement was reached “in a spirit of good neighbourliness” as Singapore recognises the strain the construction would place on Malaysia’s financial health.

The agreement will be in effect until May 31, 2020

Putrajaya could have ended up paying RM500 million in penalties to the Lion City if the RM110 billion KL-Spore HSR project was scrapped.

“It is worth noting that the legally binding agreement between the two nations for the project, signed in 2016, contains no provisions for such a postponement,” wrote The Edge.

Talking to the business weekly in May during his first press interview after he was appointed prime minister for the second time, Tun Dr Mahathir Mohamad said: “The terms of agreement (for the HSR) are such that if we decide to drop the project, it will cost us a lot of money. We have entered into an agreement with Singapore.

“If we break the agreement, we have to pay a very large sum of money. So, we are going to find out how we can reduce the amount of money we have to pay for breaking the agreement.”

Economic Affairs Minister Datuk Seri Azmin Ali led a Malaysian a team to negotiate the agreement a few days ago.

He held meetings with Singapore Transport Minister Khaw Boon Wan and the republic’s Foreign Minister Dr Vivian Balakrishnan.

“We are inching closer towards a win-win deal on HSR, thanks to the hardwork (sic) of officials from both sides,” Azmin said in a tweet on Aug 30.

Earlier last month, Azmin also said that privatisation of the HSR project is not among the options presented to the Singapore government.

"What I did was to explain the current economic situation and condition prevailing in Malaysia," Azmin said.

"Our priority is to reduce the government's expenditure, not increase our borrowings. The (Singapore) transport minister expressed appreciation over our predicament (which is) to cancel the project or defer it. Privatisation is not an offer."

Even Deputy Defence Minister Liew Chin Tong commented on the issue about a week ago, saying both the HSR and the East Coast Rail Link (ECRL) projects cost too much and mean very little to Malaysia in terms of connectivity and regional strategy.

Liew expressed doubts about the HSR’s viability, noting that the passenger-only link between Kuala Lumpur and Singapore would never generate the sort of traffic enjoyed between Beijing and Shanghai.

"I have doubts if HSR can even generate income to pay for operations, not to mention to have returns on investments."