Singapore to seek compensation from Malaysia if rail project cancelled

SINGAPORE, July 9 (Reuters) - Singapore will try to recover costs incurred for a rail project with Malaysia, which have exceeded S$250 million ($184 million) and are still growing, if the new government in Kuala Lumpur confirms it has cancelled the project, officials said on Monday.

Malaysian Prime Minister Mahathir Mohamad has said he was cancelling the high speed rail (HSR) project to link Kuala Lumpur with Singapore. He said Malaysia would talk to its southern neighbour about any compensation it had to pay.

Singapore’s Foreign Minister Vivian Balakrishnan and Transport Minister Khaw Boon Wan said Malaysia had yet to officially inform Singapore of the decision.

“Should Malaysia cause the HSR project to be terminated, we will deal with the question of compensation from Malaysia for costs incurred in accordance with the bilateral agreement and with international law,” Balakrishnan told parliament.

“The Singapore government has a duty to safeguard public funds by recovering these costs,” he said.

Transport minister Khaw said the total cost for Singapore had exceeded S$250 million as of the end of May and would grow rapidly with time.

Khaw said the costs incurred included land acquired for the project, setting up a government agency to handle the work and for the employment of officials there.

The project, valued by analysts at about $17 billion and set to have been completed by 2026, would have cut travel time between Kuala Lumpur and Singapore to about 90 minutes from four or five hours by road now.

Mahathir, who led an opposition coalition to victory on the May 9 election, has made it a priority to cut the national debt and pledged to review big projects agreed by his predecessor that he says are expensive and have no financial benefit.

He has estimated Malaysia could cut almost a fifth of its $250-billion national debt and liabilities by scrapping such big projects. ($1 = 1.3566 Singapore dollars) (Reporting by Jack Kim Editing by Robert Birsel)