Looking Beyond the HSR: Considering Contractual Damages, a Potential Diplomatic Pivot, and GST

The Mahathir Government’s decision to scrap the High-Speed Rail (HSR) with Singapore is disappointing, but hardly unexpected.

It was never clear how the economics of the HSR were supposed to make sense: the construction cost of the HSR was estimated at USD$14 – 16 billion, while the benefits said to accrue to both countries’ Gross Domestic Product (GDP) was projected to contribute a mere RM21 billion (S$6.7 billion) by the year 2060.

The symbolic power of a modern umbilical cord connecting two countries separated at birth cannot be gainsaid, but it would be difficult to fault the Malaysian Government for prioritizing present economic imperatives before sentimentality. The imperative to cut costs and raise revenue is particularly acute given Pakatan Harapan (PH)’s commitment to zero-rating Goods & Service Tax (GST).

What next? Teams of lawyers will be poring over the 13 December 2016 bilateral HSR agreement to review the dispute mechanism clause as well as the liquidated damages clause to try to ascertain how much in damages Malaysia will have to pay for the termination of the HSR agreement (preliminary figures suggest RM500 million).

Subject to issues of mitigation of damages, Singapore would likely be well within its strict legal rights to insist on the highest quantum of damages ascertainable. Singapore has stood firm on our strict legal rights internationally especially when these concern matters implicating our sovereignty, be it on Pedra Branca or wrt our water agreement with Malaysia.

However, in addition to working out the cost of Malaysia’s HSR agreement breach, it is worthwhile giving equal weight to the diplomatic value of working out an exit to the HSR that could be a win-win for both countries, one that isn’t solely wedded to strictly insisting on the full measure of damages under the HSR agreement.

There is room to think creatively about how Malaysia can work with Singapore in lieu of the HSR to develop infrastructure in Jurong where the 12 ha HSR terminus was supposed to be.

The shorter Rapid Transport System (RTS) Link between JB and Singapore is still in force and is likely to go ahead and launch in 2024. Could a creative re-negotiation of the terms of the RTS Link be worked out in a quid pro quo for Malaysia’s breach of the HSR agreement?

There are many positive structural examples of Singapore-Malaysia co-operation. The Duo Singapore, built on prime land in our CBD, stands physical testament to what a win-win project looks like.

While holding the line on our strict legal rights is important, it’s sometimes more meaningful to consider legal rights against the broader backdrop of relationships: how they work, and how they break down.

Finally, on the domestic front, a possible silver lining. About S$3 billion has been set aside for the RTS Link and the HSR project in the Ministry of Transport’s FY18 budget, and significant amounts would have been earmarked for projected future spending until the HSR’s projected completion in 2026. A significant part of those costs now no longer need to be incurred.

This might be an appropriate juncture to ask: to what extent can costs savings on the HSR obviate the need for the 2% GST hike which was planned to take place sometime in 2021?

While the new Malaysian Government looks to cut costs to, in part, finance a reduction of the tax burden on its citizenry, how should Singapore re-deploy our costs savings from the scrapped HSR?

 

by Remy Choo Zheng Xi

* This article was first published on Remy Choo’s Facebook page.

 

 

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16 Responses to “Looking Beyond the HSR: Considering Contractual Damages, a Potential Diplomatic Pivot, and GST”

  • LIONS:

    If we let OPPO take over,Dr M will go ahead with HSR.

    Dr M does not wanna support lee ah long.

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  • Thinkforothers:

    A “BALLS LICKER always a BALLS LICKER” as simple as that!!!

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  • opposition dude:

    It’s nice to speculate and offer suggestions but for me I will just sit back and watch how this soap opera unfolds.

    I want to see just how tough or meek PAP will be against Mahathir and how he will respond in kind. PAP must be hoping for Anwar to take over asap and be more chin chye rather than cowboy Mahathir.

    I hope Mahathir gives more problems for goondu Loong and his worse than useless team of 4G to solve. Now would be a good time for greenhorn keechiu to show some leadership mettle. That is, if he even has any of it in him in the first place ha ha ha!

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  • never voted pap:

    LIONS:
    If we let OPPO take over,Dr M will go ahead with HSR.

    Dr M does not wanna support lee ah long.

    very well said, bro. agree.

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  • PAP bloated arrogance 2:

    gratifying and self glorifying nepotism is voted out, that will be the pinnacle of SIN uniqueness as the past can be re examined for the international self acclaimed squeaky clean if ministers r paid multimillions a year.

    tion is important. Is PAP really is what they claim they r? Most citizens will like to see they r to sustain our national pride.

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  • Tan Ku Ku:

    daft sinkies will soon hear the Emperor said “hsr or no hsr, we still need to increase GST to 9%, maybe more. We need more $$$$ for my court jesters”

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  • Thinkforothers:

    A “BALL’S LICKER IS ALWAYS A BALL’S LICKER” as simple as that RIGHT???

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  • Great Asia:

    Great news for Thailand, ASEAN 2nd largest economy.

    https://www.youtube.com/watch?v=QlEHdC4WWVU&t=101s

    Ha ha ha!

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  • Perspective:

    The HSR would actually benefit Malaysians who commute daily to SG for work, more than it does SGs who may visit occasionally on weekends for shopping and sight-seeing. Mahatir wants to kill whatever plan Lee has on the Tuas and Jurong development. He will find reasons to void the contract and avoid paying the penalty.

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  • Python 5:

    Mahathir should openly say so. Anwar also.

    Make those who want the HSR to vote against PAP.

    LIONS:
    If we let OPPO take over,Dr M will go ahead with HSR.

    Dr M does not wanna support lee ah long.

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  • @ Python 5:

    Contradiction ?

    U said like that.

    And Perspective said like that.

    HSR, we can have or we can don’t have.
    It ain’t one of the deciding factor.

    Malaysia has reasons to walk away from ECRL
    Read more at https://www.thestar.com.my/business/business-news/2018/06/02/malaysia-has-reasons-to-walk-away-from-ecrl/#Ho0s8MjLW0Q8WvWv.99

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  • N.Jungne:

    LIONS:
    If we let OPPO take over,Dr M will go ahead with HSR.

    Dr M does not wanna support lee ah long.

    Response: The CAT to be skinned.

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  • rukidding:

    Dr M is no fool !

    Why pay stupid $$$ to invest in an infrastructure where you may “lose more talent” to Sinkapore ?

    He is RIGHT to CANCEL it , to “PROTECT” his Country “from hollowing of talents” !!!

    Unlike the SHAMELESS “Pimps and prostitutes, P.a.p. )….hoping to “exploit” your neighbor and “gain” by simply “construct the last last leg of the journey which is probably less than One tenth of the whole project cost !

    This kind of “thinking”…..only Pimps and prostitute (P.a.p.) will do !

    Always “exploiting” on others for own gain !

    Those in that 70% are probably the same “behaviour” too !

    GOD HAVE EYES !

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  • @rukidding:

    In that case scrap ECRL as well.

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  • Bad Boy:

    http://m.ftchinese.com/story/001077873?archive
    缅甸重新评估皎漂港项目

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  • MarBowling:

    Both $8Cow aka Fart Hou Seah Sump and his Big Boss Mai Hum were 101% sure the HSR would shoot ahead like a rocket when they inked the Agreement. And both Abang and Adick were grinning side to side while looking over the shoulder of their MOTs signing the Agreement to the Historical Project. And both NEVER expect that Heaven open up and mete out Justice esp for the Malaysia….Dr M winning GE14, sending Mai Hum’s best buddy Ahjib to go fly kite and fiack spider. Mai Hum and his FAMILEE and Gang should also ask when is their turn to face due justice and music!

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