Cover Story: HSR, AssetsCo and the issue of sovereignty

This article first appeared in The Edge Malaysia Weekly, on January 11, 2021 - January 17, 2021.
Cover Story: HSR, AssetsCo and the issue of sovereignty
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IN his memoir, From Third World to First, The Singapore Story 1965-2000, Lee Kuan Yew said that before he retired in 1990, he wanted to clear the decks for his successor Goh Chok Tong. One sticky matter was the KTM railway line and land in Singapore.

Singapore wanted to move the joint Customs, Immigration and Quarantine (CIQ) checkpoint from where the KTM railway line ended in Tanjong Pagar at the southern tip of the island to Woodlands in the north and close to the Johor-Singapore Causeway.

Singapore’s rationale for wanting to move the CIQ to Woodlands was for security reasons, it said, claiming that drugs and smuggled goods were being thrown out of KTM coaches along the route to Tanjong Pagar. But observers have long said that the reason was much bigger than that — it was a question of sovereignty.

The KTM railway line in Singapore and the Tanjong Pagar station, which sat on 217ha of land, is a legacy of British colonial times. This resulted in Malaysian state-owned company KTM having a 999-year lease dating from 1918. This means the lease would have only ended in 2917 — some 897 years from today!

Academic Rusdi Omar wrote in his 2014 doctoral thesis on Malaysia-Singapore relations when Tun Dr Mahathir Mohamad was prime minister that the CIQ issue, tied as it is to Malaysian ownership of railway land in Singapore, touches on the core issue of national sovereignty, especially for the island republic.

In short, Singapore could no longer accept that the 30km KTM railway track, which essentially splits Singapore into two, was in effect “owned and operated” by another country. It had no sovereignty over the land — at least until 2917.

This was one of the issues Lee wanted to resolve for his successor. Mahathir appointed then finance minister Tun Daim Zainuddin to negotiate with Lee and the two men quickly agreed to the so-called points of agreement (POA) in 1990 — coincidentally, one year before Daim himself retired as finance minister.

So, a retiring Singaporean prime minister and a retiring Malaysian finance minister worked out the POA. But it could not be executed as Mahathir said later that he wanted to revise the POA.

After much squabbling, the two sides came to an agreement 20 years later. In 2010, Singapore Premier Lee Hsien Loong (Kuan Yew’s son) and Datuk Seri Najib Razak, who had just become prime minister a year earlier, negotiated for Malaysia to be given parcels of land in Marina Bay and Ophir-Rochor in return for giving up tracts of land in Tanjong Pagar, Bukit Timah and Kranji. “It [land in Marina Bay and Ophir-Rochor] is far more valuable than the land in Bukit Timah and Kranji,” Najib said in 2010.

The agreement was seen as a major initiative of Najib to improve the country’s relationship with the city state, which was often frosty under Mahathir. In December 2016, he further cemented ties with Singapore by signing an agreement to jointly build a high-speed rail (HSR) line that connected Kuala Lumpur to Singapore at an estimated cost of RM60 billion.

The plan involved a three-tier approach. The first was at the infrastructure level, where both governments would acquire land and appoint contractors (InfraCos) to conduct civil works in their respective territories.

Second, a jointly appointed privately financed asset company (AssetsCo) would own, operate and maintain the HSR assets such as rolling stock, signalling systems, coaches and tracks. And third, two operators would be appointed to provide HSR services (one domestic Malaysia and the other Express KL-Singapore) by leasing trains from the AssetsCo and paying track access charges and concession fees to the InfraCos.

In December 2017, SG HSR — a wholly-owned subsidiary of Singapore’s Land Transport Authority — and MyHSR Corp Sdn Bhd called for a joint tender of the AssetsCo portion. Six consortia were reported to have expressed interest. They were supposed to make a formal bid in June 2018, with the winning bid announced in December that year.

However, in May 2018, Pakatan Harapan won the 14th general election in Malaysia and Najib was replaced by Mahathir as head of government. In September 2018, the tender for AssetsCo was put on hold as Mahathir wanted to review the whole project.

Malaysia had to pay Singapore US$15 million in compensation for the delay.

Last week, the two countries issued a joint statement to announce that the agreement had been terminated because Singapore could not agree to the changes requested by Malaysia. Details were sketchy from the Malaysian side on what those changes were, but Singapore mentioned two.

The first was that Malaysia wanted the HSR to be connected to the Kuala Lumpur International Airport (KLIA), which was not part of Najib’s agreement with Singapore. The second was over AssetsCo, which Singapore said was the more important reason as to why it did not agree.

Najib has been one of the harshest critics of the termination of the HSR project, claiming that Malaysia stands to lose billions of ringgit. “The cost for the HSR KL-Singapore originally was RM60 billion. We must also realise that in the first half of 2019, tourists from Singapore spent RM11.56 billion in Malaysia, or an estimated RM25 billion a year. If the HSR project can increase tourism from Singapore by 50%, the total amount that Singaporeans tourists will end up spending in Malaysia will increase to RM12.5 billion a year.”

Others, such as Datuk Seri Anwar Ibrahim, have joined in the criticism, saying that the move was to facilitate the award of contracts to cronies should Malaysia still proceed with the HSR project from KL to Johor Baru.

The HSR will undoubtedly bring economic benefits, although the cost is substantial and some say not justifiable. And the jostling for contracts will be intense for sure with politically linked entities making their bids.

But a more, and perhaps the most, important issue that has been overlooked by many, especially critics of the decision to terminate the agreement with Singapore, is the issue of sovereignty.

Yes, the very same issue that Lee felt he had to settle before he retired. He wanted the CIQ in Tanjong Pagar, in the heart of its central business district, to be moved close to the border with Johor.

Under the agreement that Najib made for the HSR, there was to be three joint CIQ points — Kuala Lumpur, Iskandar Puteri in Johor and Jurong in Singapore. This meant that Singapore customs and immigration officers would be located on Malaysian territory at two locations. True, Malaysian officers would also be on Singapore land, but only at one location. Furthermore, Jurong is only 15km from the Johor border, whereas Kuala Lumpur (Bandar Malaysia to be precise) is 300km into Malaysian territory.

The other critical matter is AssetsCo, which would be jointly controlled by Malaysia and Singapore. This is very significant because it must be noted that while the HSR line would be 350km, only 15km of that would be in Singapore. Joint control of AssetsCo meant that Singapore would have equal say in everything, current and future, regarding the management of the HSR — 96% of which would be in Malaysian territory.

If in the future, Malaysia seeks to extend the HSR line to Penang, it would have to consult Singapore — or even need its agreement. It is also noteworthy that the AssetsCo model would incur additional costs as there would be another layer above the operating company, incurring significant costs.         

Interestingly, this project would have been the maiden use of an AssetsCo model, as other high-speed rail operators merely assign portions of a track’s operations to the respective countries for them to handle, but via shared standards.

Another point of contention is Singapore’s refusal for the HSR to be linked to KLIA, which would make sense for Malaysia but could adversely impact Changi Airport in the city state.

If Malaysia were to proceed on the project with Singapore, the HSR can never be connected to KLIA without Singapore agreeing to it. Malaysia would be indirectly giving up its sovereignty to develop its aviation industry and KLIA would not be able to grow. On the other hand, an HSR that takes people from Singapore to KL in 90 minutes would benefit Changi Airport at the expense of KLIA.

There was an alternative option proposed to Putrajaya in 2016, and that was to build the HSR on our own to Johor Baru without having to have AssetsCo, which gives Singapore equal say. But the government opted to go with the AssetsCo structure.

The bottom line is that the agreement via the AssetsCo structure would give Singapore a strategic role in Malaysia’s railway development because both countries would have equal say under the structure. It then begs the question — why did Najib agree to it? Were there other considerations?

To shed more light on what happened, The Edge spoke with MyHSR chairman Tan Sri Esa Mohamed. Here are excerpts from the interview.

AssetsCo an insurmountable barrier

The Edge: What were the changes Malaysia was trying to make to the HSR agreement?

Tan Sri Esa Mohamed: I think as what minister Tok Pa [Minister in the Prime Minister’s Department for Economic Affairs Datuk Seri Mustapa Mohamad] mentioned, there were three parameters, predicated on how Malaysia could maximise the benefit of this project.

From the experiences of other countries, projects of this nature, particularly in high-speed rail, infuse a lot of other external benefits in terms of economic development. We see this [HSR] as a very good opportunity, not just to spur development but also to ensure local participation is maximised.

Of the 350km of the HSR, we account for more than 90%. Singapore’s section was about 15km. So, imagine the amount of benefits that we could create along this alignment — the transport-oriented development opportunities for all the stations, and these stations are located in all the states that the high-speed rail goes through.

So, that is one aspect, it provides this catalytic impetus in development.

The other one is, of course, the cost itself because if we tweak, for example, by adjusting the alignment, we could make a lot of savings. This is something that we studied and, of course, the possibility for us to have different models of financing, so that the government does not have to fork out 100% (for the development of the project). As it stands now, we have to provide a tremendous amount of guarantees when part of the project itself, subject to further studies, could be self-financed.

What is the cost that we are looking at? It was reported at RM60 billion. Is that the ballpark figure?

Initially, there was a figure that was bandied around, that was RM120 billion, and we think we can save more than 30% of it ... for example, if you don’t have to ever undertake a RM60 billion guarantee over 30 years, as what Tok Pa said.

And Singapore was opposed to this?

There was a list of changes, but we got hung up on one issue, that is AssetsCo. So, we didn’t get past the AssetsCo [negotiations].

Were there a lot of changes?

There are a few key changes, and one of the major ones was the connection to KLIA. But we didn’t pass the AssetsCo [renegotiating], so the rest was not discussed. But they [Singapore] knew about it [KLIA]. This was one of the red lines.

In other countries, in Europe, most countries, there is no such thing as AssetsCo. And the reason that this AssetsCo was going to limit us was that it was supposed to be an entity where the decision-making was to be by both governments. So this means we would not have any say without the inclusion of Singapore. That’s to put it in a nutshell. I mean, in other countries, each country is governed and will take care of its own assets, infrastructure and operations. And they have a common standard of interoperability. So, if you are in France, you take the Eurostar and cross into Belgium, and it switches because the standards are the same. It is an international standard. But the maintenance and operations, everything is within your control.

So, why did we opt for AssetsCo then?

In the past, the focus was only KL-Singapore and the region covered by it. So, it was a very closed system covering those areas. But the current government is looking at cost reduction and integrating it with other national public transport infrastructure. It cannot be point to point, from KL to Singapore, because it is a huge sum of money. It has to leverage and be leveraged in the future.

The plan was to have two services — domestic and international. And then there was also talk of it ending at KLIA. Is that correct?

This one line would serve both express KL to Singapore and another service that would serve KL and all the other stations that we have identified. The issue with connecting to KLIA doesn’t mean that the train will terminate in KLIA. It will just have a stop. But if you were on the express service to Singapore direct from KL, you would bypass KLIA. It is just a spur [line]. The express KL to Singapore can still be achieved in 90 minutes.

It will make sense to have a connection to KLIA?

Of course it will make sense. It will boost the function of KLIA as an international hub. So, I don’t know why that was an issue.

So, you didn’t get to discuss this KLIA spur line as negotiations got stuck at the AssetsCo stage?

At that point, yes, but we submitted [our plans to them] and they know about it. But we didn’t get past AssetsCo.

What was the argument for Assets Co?

They claim that by using AssetsCo, they want to have commonality in terms of management of the line and to appoint AssetsCo via an international tender. It doesn’t stop us from calling for an international tender of our own. But the point is that we want to structure it according to Malaysian requirements. We want to show and share as much as possible so that the understanding is there because we have been accused of not being transparent, while we were abiding by the law.

You were following the terms …


Compensation is part of the agreement, it cannot be disclosed. They didn’t say what the compensation is, but the amount incurred, which was S$270 million (RM822 million), this gives the wrong connotation.

What Tok Pa said is correct, it is so much less, but we cannot disclose the number. However, it is clear that land is not included in the compensation.

Do you have any idea what we are compensating them for?

Things that they cannot reuse. Things like consulting services, opex … In a sense, that it is a fair thing to do because let’s say we agree to do something and you spend money, I spend money. And then all of a sudden, I decided not to do this anymore. So, I need to take note of what you spent that you cannot use anymore.

S$270 million is not the compensation, it is what they have incurred. This is where the confusion is, the S$270 million includes land, but land is not compensable. So, what is compensable is a subset of that S$270 million, which we can’t disclose. Suffice it to say it is much less than that — like what Tok Pa said.

[It is public knowledge that Singapore bought the Jurong Country Club for S$89.8 million. No information is available on how much was paid for the nearby Raffles

Country Club, which is twice the size of Jurong Country Club, but The Edge estimates that both acquisitions would have cost S$250 million.]

Do you know the total they spent on land?

We know the value of one parcel [Jurong Country Club, as it was reported in the media] but the others, we don’t know.

What’s AssetsCo all about?

AssetsCo is a private entity that is responsible for bringing all the equipment in for the HSR project. This includes the train itself, or we call it rolling stock. It also includes things like the trackworks, overhead power, catenary — these are high voltage power — as well as the communications and signalling systems. So, all this equipment is to be brought in from overseas, from either China, Japan or Europe. Some of these [works] can be done locally, especially track works, but it is up to AssetsCo to decide.

So, AssetsCo is supposed to take ownership of the equipment and install it. It is meant to be a concession. We actually did the AssetsCo tender a couple of years back. That tender was an international one, done together with Singapore. So, in that tender, we actually specified that this concession would last for up to 30 years of operations, in addition to the period of construction.

Was this one of the points of contention?

We didn’t get past that [AssetsCo].

Will AssetsCo control the HSR operation?

AssetsCo manages the entire line, from KL to Singapore. When they [AssetsCo] come on board, they will install all of the equipment onto our civil works, as well as Singapore’s. The civil work here refers to the stations, the alignments such as bridges, viaducts and tunnels. So, for civil works, we actually have clear separation at the border. myHSR is the company responsible for that, and our duty is up to the border, and Singapore will take it up from there.

The model of implementation of HSR globally, what you see in Taiwan, China and Japan, the whole thing is done by one integrated company. In Europe and South Korea, the whole thing except for the rolling stock belongs to the infra company, the trains are operated and owned by the operating company. So at max, you have two entities. And our model [AssetsCo] has three layers. It is hypothetical and has not been tested.

AssetsCo will be the owner of the assets for the period of the concession. They will lease or rent the trains out to the OpsCo (train service company) to use, so the domestic will run the trains for the domestic service, and similarly for the international, for the express and shuttle services.

For the system itself, this is where control comes in. The system itself comprises the track and network, as well as the signalling, including operation control centre. So, this control centre will be where AssetsCo manages the train movements — which gets to move first, which path should be taken, and overtake another train. All these controls will be managed by AssetsCo for the entire line. AssetsCo is a private consortium because generally, you’ll need a big consortium to bring in different components, like trains and systems, together.

AssetsCo spans across both countries and provides trains for both operators. And the responsibility to appoint AssetsCo is actually both countries’. So both countries will as equal partners jointly decide who should be AssetsCo and to manage AssetsCo on a day-to-day basis during construction and operation.

The countries’ control is more in terms of regulations. However, we understand that AssetsCo has to serve the interests of its shareholders. Ultimately, that is whom they serve [their own shareholders, not the countries in this case].

Why did we sign it?

Previously, the focus was for KL-Singapore, not the whole nation. It was about the Economic Transformation Programme for that corridor. Therefore, this can be accepted. However, Singapore has always wanted to have an AssetsCo.

This is a question of sovereignty, right?

It depends on how you look at it. It is very restrictive. You cannot change anything.

I remember when they shifted [Keretapi Tanah Melayu Bhd’s] Tanjong Pagar sometime back, the issue of sovereignty came up, saying Malaysia was holding 217ha in Singapore.

Yes. It is a pity that we lost that [Tanjong Pagar land]. So to answer your question, this was the only model available to the government at that time, and they are willing to take it for the Singapore share of the revenue.

The 71:29 split?

That is part of the things that we cannot disclose. The operator will have to pay a concession fee to run the operating concession. AssetsCo has its own concession.

It is rather messy because we have five entities. But in a nutshell, all the revenue that comes from passengers will be used by the operator to net off all the running costs of the HSR, be it for the train rental, system usage, track usage and so on. And then, the amount that they think they can have surplus will be used as an offering to the government as a concession fee, the net of all the running costs in the HSR operations.

So, this concession fee will be used to pay both governments — as a return to them. For domestic, this fee is fully transferred to the government of Malaysia. But, for the international, there is a share split, according to the agreement.

In the new proposed structure, where once we remove AssetsCo and each reassign the assets of AssetsCo to us, InfraCo for systems, similar to Europe, and then trains to OpsCo, then you can see that the flow is more straightforward. But the same concept will still apply because this concession fee is actually the main determinant of who we choose as OpsCo. The one we think can make the best money, run the best service and provide the highest return will then be used as determinant to decide who should be the OpsCo, and this is how we make sure we get the best of the competitions.

So, the OpsCo will manage the Malaysian side of it, and then Singapore will have a separate OpsCo?

We have two OpsCos. One domestic, managed by Malaysia, and one international, jointly managed by Malaysia and Singapore.

Are there any merits to the AssetsCo model?

In theory, the AssetsCo model could work for the project based on a dedicated line that is not connected to other rails. In practice, we don’t know how it would play out.

What is the structure like in Europe?

AssetsCo (system scope) and InfraCo is one, OpsCo is separate. Only two layers. So, it means AssetsCo and InfraCo for each country, so they own it. They have it themselves, one entity. And then OpsCo, they will have domestic and international.

If you think traditionally, they have national railways. If you look at the UK, it used to be British Rail. And then they split operating and infrastructure. Infrastructure becomes Network Rail. British Rail gets broken into many operators. So then, the operators can compete, but they share the same track. Similarly, we have KTM. So, if we split KTM and run it as two separate businesses, that structure is what we will have.

The original agreement we were negotiating with Singapore is from Bandar Malaysia to Singapore, and we never got to discuss the part about KLIA at all?


But we have plans to change the alignment, even though we have never got to that level of negotiations?

The changes in alignment were driven mainly by cost savings.

Okay, and you are not at liberty to disclose the changes to the line?

On the infrastructure side, specifically the alignment, there are three key changes that constitute a major cost reduction for us.

One is the realignment on the Johor side, where we move to Ayer Hitam. Second, we are relooking at the design of the stations to be something more pragmatic for the passenger flow; so, it was no longer iconic.

So, in that sense, the station costs were also reduced substantially. The third is the use of the ERL track to enter KL as the last mile, because KL is [highly] populated. Even the MRT struggles to find a corridor, more so for the HSR. So, having an existing corridor to be used helps us to reduce a lot of our civil costs ... Otherwise, going into KL will be through a tunnel.

So, our plan was to go to KLIA and then use the ERL track?

Yes, but not as reported that we would stop in KLIA and then switch trains to get to Bandar Malaysia. From our passengers’ perspective, there is no difference. You just sit on the same train all the way to Singapore.

In Batu Pahat, we moved it (the alignment), straightened it up to avoid the peat soil, and stop in Ayer Hitam. The realignment from Batu Pahat to Ayer Hitam reduces the length of the alignment, thus the cost is reduced as well.

Peat soil will be more costly, right?

The earthworks?

Yes. And then, after you get to Seremban, there is a spur line that connects to KLIA, and then there is also a bypass for the express service. So, if you don’t want to go to KLIA and you want to go straight to Singapore, then you just get on the international line and then bypass it.

The KLIA bypass allows us to keep to the main agreement, which is KL to Singapore in 90 minutes, that is what we are still protecting. So, we are protecting the outcome of this HSR project.

Are you going to challenge the compensation?

They haven’t even submitted. But we have to verify what they claim and make sure that it is reasonable, and something that can be seen in terms of records and all that.

Do you see the figures as feasible?

It cannot be even near S$270 million.

In regard to AssetsCo, what would be the share of cost and what is the funding like?

This is a PPP (private public partnership), they invest their own capex. They would raise the funding, they would spend the money, and they would collect in the form of availability payments as well as train lease fees.

So, the government doesn’t have to pay at all?

We have to give a guarantee if they don’t meet the target. Like Tok Pa said, it is RM60 billion over 30 years. The RM60 billion is for the availability payment that is expected to be recovered from track access charges from the OpCos.

If I am AssetsCo, I need to raise financing. If I go to the banks, the banks will ask how sure you are of getting the money. With the government guarantee, they can borrow at a favourable rate. But, it will be on the government’s contingent liabilities.

So, that means it is about RM2 billion a year, then?

Yes, for the availability payment.

And, usually, HSRs are not profitable, right?

Oh, they are — they can be, because you take the long-term view. MyHSR is part of the government. The government will have to take a bigger perspective.

Financial viability is one aspect, but [there is also] what the economic returns will be to the country. So, you have to look at both, as long as the financial viability is not too teruk [bad], it is still worth doing if the economic benefits are there. But, if you look at the LRT or MRT, the financial viability is challenging. But they still do it. Why? Because otherwise we will have gridlocks everywhere.

Can you divulge what the total cost of the HSR would have been?


But do you have any indication of what the total cost would be?

Under the original proposal, we have a cost for that scheme. Under the changes that we have put in, we have estimates for that cost.

How much is the difference?

Like Tok Pa mentioned, it is 30% cheaper.

And the chunk of it is because of AssetsCo?

Part of it is AssetsCo, the financing costs and the risk premiums.

It is more expensive because it was not a tried-and-tested model?

Yes, they (AssetsCo) will have to protect themselves, otherwise it is not a bankable project, because the banks will be concerned with AssetsCo’s ability to repay their loan.

The bigger picture of the HSR will be for it to be connected to Penang and then all the way to Bangkok. Just for my own curiosity, that means if we did follow the AssetsCo model, Singapore would have a say to an extension to Penang, and even to Thailand?

It wasn’t discussed but you can see that it is of no interest to them. But, for us to extend, we would need AssetsCo’s permission. That is where the limitations are.

Were you surprised with how they (Singapore) reacted to the proposal?

Not totally. But they say that, by removing AssetsCo, to them it is a totally new project. Therefore, they don’t want to talk about it. It is not this project. We were hopeful that they would agree, but they didn’t.

But this is not the end of it, isn’t it?

It could be revisited on a future date?

As the (Singapore Transport) minister (Ong Ye Kung) said, if we were to revisit it, it would be a new deal. This one is over as far as they are concerned. Malaysia will study all options before charting our next course. And Malaysia remains open to future connectivity to Singapore.

Did you try to speed up the process whereby we could use it for economic benefits — we tried that as well, and they opposed that as well?

No, we didn’t get to that. This is another problem with AssetsCo, because we cannot get it done with AssetsCo in place. Because we will have to follow a common, pre-agreed timeline. So, AssetsCo will come in later; we cannot expedite and build ours first. We can build the civil, but there is no system. There is no system because you need to wait for AssetsCo two years later. Trains are also provided by them, so there will be just concrete. So, we might have all the infrastructure ready but there are no trains, because AssetsCo has yet to be appointed.

You called for the tender for AssetsCo, didn’t you? What happened to that?

We aborted the tender.

When was it aborted?

The tender was due in December; it was aborted in September 2018.

You are quite confident that it can be done without AssetsCo?

Of course, we don’t necessarily have it in the country right now, but India is doing it for the first time, Indonesia is doing it for the first time, Morocco just did it for the first time — all without the AssetsCo model. Saudi Arabia did it for the first time without AssetsCo. Expertise can be bought to assist us in building the HSR.

So, it’s right to say that maybe the whole reason for AssetsCo is for Singapore to control our railways?

There’s no reason for us to call off the project if we get the best for each of the components of the system. We even had an open tender from the beginning. Why would we be all set and want to do a domestic HSR and not do an open tender? That would be the biggest tender ever.

How do you feel about the allegations thrown against MyHSR?

Unfair, to be honest, maybe the public doesn’t know the details, what’s going on, how the whole structure is. It’s not easy for a layman to understand.

We were told that there were other options when the agreement was signed. What are the other options?

When we present to the government, we always present with options. What was clear is that one option on the table is with AssetsCo and Singapore on board. Without AssetsCo, no Singapore on board. Without Singapore, it ends in Johor.

What are the chances of that happening?

We don’t know yet because we have to do a study. But when we presented back in 2016, the government of Malaysia at that point decided that, in order to get Singapore revenue, we had to do AssetsCo.

So, the revenue from Singapore is a very important aspect?

Yes, to the (Malaysian) government then.

What was the justification to get Singapore revenue?

To have Singapore on board with the project, you have to accept the AssetsCo (model). If you don’t want AssetsCo, there is no Singapore. That was the condition put by Singapore. So, the justification for accepting AssetsCo was that share of total revenue.

And that comes back to the split — 71:29?

Yes. But if you think about it, after deducting the cost and then the split, the balance is not so huge, but still in the billions.

So, no matter whether the HSR goes up to Singapore or Johor, if it’s not through the AssetsCo model, it means the government has to come up with the money to construct the HSR?

The systems part, yes. But then we are more flexible in terms of how to raise the funds.

Take India, for instance. Japan is building the Mumbai-Ahmedabad (HSR) project. Japan is funding 80% of the cost. Why are they doing it? Because they want the Japanese system to be exported overseas.

Eighty per cent of the project at 0.1% over 50 years, with 15 years’ moratorium. So, if we have AssetsCo delivering the system, then there’s no country that wants to fund the civil portion. Civil is 80% of the cost … So, you have to fund it yourself.

Can you tell us how much the civil cost is for Malaysia?

We can’t; it has always been in the policy, as the civil works will be open-tendered later.

Will the KL-Johor track be less attractive than KL-Singapore, in your opinion?

Well, this is subject to our study … Of course, we can say it is more attractive when it’s connected directly to Singapore. (But) now there’s also connection from JB to Singapore with the RTS. The only thing is that it’s not straightforward, not direct.

Will the new terms include Singapore paying for the use of our track?

I think it depends on the negotiation at that point (in time). If you take the Euro Channel tunnel, for example, the operator of the tunnel charges the concessioner who uses the tunnel. They pay a fee; so, they probably have to pay a fee to use our track. That’s quite common.

Simply put, AssetsCo is basically another layer of cost, right?

Yeah. Definitely, opex will be cheaper if it’s combined, most of the scope is put into that InfraCo.

Besides the compensation, do you see any kind of legal action being taken?

That should not be [the case] because both countries have been very specific at the end of the statements that bilateral ties are strong and this should not affect that. We continue to make it stronger.

After so many delays and extensions, then it (the HSR) is terminated. It’s quite an anti-climax. Why was it delayed for so long?

Because the original suspension was two years and then extended once for six months. But the key part is that we have used this time to really try our hardest to seal a deal, an agreement with Singapore. So, it’s not like we lost interest on the project. It’s not that we cincai [willy-nilly] cancelled.

When this option of requirement to have AssetsCo was presented to the government, did you raise concerns?

Of course, we advised the government with all the facts. We have highlighted that it will cost more, but what was attractive is that the government doesn’t have to pay capex upfront for the systems.

In the initial part where Malaysia and Singapore agreed to do this, there were these arguments that, when it comes to an HSR between two cities, the city with the bigger economy or the bigger hub will benefit more. Is that really the case?

I can’t see that because what we learnt is that it’s not so much mere size but it’s what you plan for your city. Studies have compared the terminating cities (where the terminals are), but even the cities in between can benefit a lot if the plan is there to develop the surrounding areas. So, take advantage of the HSR … I think that is the key point. Even if you’re in the smaller cities where the terminal is, if you plan properly, the benefits that you get might even be bigger than the bigger cities.

Is it accurate to say that the previous government made a mistake when they signed the agreement for AssetsCo?

I won’t go that far because the circumstances were different at that time. The focus was different. At that point, if you look at the trajectory of growth and our ability to raise financing, it’s not a problem. Looking now [in view of the Covid-19 pandemic], with what we have to spend on stimulus, on vaccines, it’s a completely different scenario.

I am asking this because a harsh critic has been the former PM, Najib.

We are not saying that it was wrong. It was the right answer for that point of time.

What is the appetite for this KL-Johor line?

We feel that the overall benefit is still there, but what would be the cost? The cost is the function variability.

Without Singapore, what would the costs look like, what would be the fair projection, what would be the share that’s going to be government revenue, does it justify the benefits? So, we will have to just look at the studies objectively and recommend based on the numbers.

That means the HSR in Singapore wouldn’t have been profitable?

The case is different because the cost is different. With KL-Singapore, the cost at that time was high because of iconic structures, the alignment; but, with the proposed changes, the cost is much lower. In the past, it didn’t quite cover 100% but, with the scaled-down cost, it could have covered almost 100%.

For the alignment decision, what were the considerations?

Multiple factors: Cost and constructability is one. The ability to create new growth areas is another. Population centres, of course, is one more. All this factors into between the two dots, where it should go. Not forgetting that each station has its own unique properties in terms of what could be developed, what kind of industries could be generated. In Melaka, it’s tourism; Muar-Pagoh is all industrial parks; and in Negeri Sembilan, it’s the new Vision Valley, which is being developed. Pagoh is the education hub and industry. Muar is very famous for its furniture.

Talking about high technology, you also plan for Melaka. With this fast connectivity, you could stimulate more investment, and employment and opportunities.

We see that the transportation network is a major integral part of the whole country’s economic development. So, we don’t look at the HSR as just the train that goes from KL to Singapore. We look at how it could integrate the whole country. We have the ECRL going right to the north.

As I said, I don’t discount the fact that, if it is successful here, it can go beyond to the north; it could be part of the Singapore-China network that will connect to China, which was in the pipeline as well. It makes sense because, why not? I mean, China is a very aggressive body.



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