(Bloomberg) -- Malaysia’s Prime Minister Mahathir Mohamad said he will cancel a proposed multibillion-dollar high-speed railway link to Singapore, scrapping a signature project of his predecessor Najib Razak in what he called a move to cut costs.
Mahathir, who returned to power in a surprise election win this month, said Monday that ending the project will take time as it requires negotiation with Singapore. The city-state’s transport ministry said later Monday that it hadn’t received any official notification from Malaysia, adding that both sides had agreed to proceed with the high-speed rail link “based on mutual benefits.”
The decision would deal a setback to construction and rail companies in Asia, including those from China and Japan that are keen to gain a slice of orders. The 350-kilometer (220-mile) line, with trains moving at a top speed of more than 300 kilometers an hour, was targeted to begin operating in 2026. It would’ve trimmed the land journey between Kuala Lumpur and Singapore to 90 minutes, from about five hours now.
“It’s going to cost us a huge sum of money -- we’ll make no money at all from this operation,” Mahathir told reporters in Kuala Lumpur. “It’s only a short track. It is going to save you only one hour by taking the HSR.”
The move also signals a return to rocky ties between Malaysia and Singapore that characterized Mahathir’s first stint in power from 1981 to 2003. Relations had improved under Najib, who in 2013 had agreed with his Singaporean counterpart Lee Hsien Loong to build the rail link.
“I think the people of Singapore, like the people in Malaysia, must be tired of having the same government, the same party since independence,” Mahathir told the Financial Times.
In that interview, Mahathir said the decision to scrap the rail link was to “avoid being declared bankrupt.” Construction would have cost Malaysia 110 billion ringgit ($28 billion), Mahathir told FT.
The project has attracted interest from many companies in Asia and Europe. While Korea Rail Network Authority and a group of South Korean companies won the reference design consultant contract, Chinese firms led by China Railway Signal & Communication Corp. and CRRC Corp., Siemens AG, Alstom SA and some Japanese conglomerates are among those in the race for the project.
The prime minister also said Malaysia would talk to the Chinese government about renegotiating what he called “unequal treaties,” including a Chinese company-led $14 billion East Coast rail project in peninsular Malaysia, according to the FT.
Mahathir’s government is faced with liabilities that exceed 1 trillion ringgit due to state guarantees on borrowing by 1MDB, an investment company that’s at the center of a multibillion-dollar corruption scandal. That’s nearly double the 687 billion ringgit federal government debt number disclosed by the former administration.
Malaysian police last week seized about $29 million in cash, hundreds of handbags, as well as jewelry and watches in raids on premises linked to Najib and the investigation into 1MDB. Najib has denied wrongdoing in the 1MDB case and taken to social media to defend his economic record, saying his government complied with public debt reporting guidelines as defined by the International Monetary Fund and World Bank.
Malaysia has also decided to end the search for the missing MH370 jet by U.S. exploration company Ocean Infinity. The firm had won many extensions after the original three-month contract signed in January. No further time will be granted after May 29, Transport Minister Anthony Loke Siew Fook told reporters separately on Monday.
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