High-speed rail loss 'a setback, not knockout blow to Jurong'

Singapore

THE Ministry of Transport (MOT) issued a statement late on Monday to say that Singapore has yet to receive official word from Malaysia regarding the supposed cancellation of the Kuala Lumpur-Singapore high-speed rail (HSR).

The MOT, indicating that it would wait for official word from Malaysia before proceeding, said in its statement: "We had agreed to proceed with the HSR project based on mutual benefits and obligations set out in the HSR bilateral agreement."

Meanwhile, property analysts have said that although the cancellation of the project - which is to have its terminus in Jurong - will put a dampener on the area's aspirations to be Singapore's second central business district (CBD), it is unlikely to deal a knockout blow to the area's prospects.

The MOT's statement followed earlier remarks by Malaysia's Prime Minister Tun Dr Mahathir Mohamad that he is intending to pull Malaysia out of the rail project, which would have connected the two capital cities in 1 1/2 hours. Singapore and Kuala Lumpur are five hours apart by road.

Dr Mahathir had said at a press conference: "It is a final decision, but it will take time because we have an agreement with Singapore. We have to manage it at the least cost possible."

The Business Times understands that he was referring to the liquidated damages clause in the agreements signed.

Azman Jaafar, deputy managing Partner of RHTLaw Taylor Wessing LLP and chairman of the Asean Plus Group, said: "Given the huge amount of resources that both sides will undertake to mobilise once the project is signed off, which it has, I suspect that there will be very substantial liquidated damages clauses built into the contract, which will allow parties to claim from the other side in the event that one party withdraws or cancels the contract."

Dr Mahathir said that he had not seen the agreement, but was told "the compensation may be as much as 500 million". However, he said he was unsure if the sum was in ringgit or dollars.

Planning work has already started on Singapore's end. The Land Transport Authority called for tenders for the design and construction of tunnels and associated facilities for the HSR last month, and construction is expected to start next year.

Singapore has also taken steps to acquire land, such as that occupied by the Jurong Country Club and the Raffles Country Club, for the project.

Property analysts who say that the canning of the project is unlikely to be a knockout blow point to the plans, amenities and infrastructure already put in place to develop Jurong - plans that precede the HSR.

JLL's head of research and consultancy Tay Huey Ying said there is "already a lot going for Jurong" since the government unveiled a masterplan back in 2008 to develop the area. This was way before the announcement of the HSR, she added.

"The HSR was the icing on the cake. But even without it, the cake is still intact as the key ingredients are there," she said.

"There's a sizeable population, access to talent, business parks, amenities like hospitals and shopping centres... The area on its own is already very well-supported."

In Case You Missed It: Malaysia drops high-speed rail project

Similarly, Alice Tan, Knight Frank director and head of consultancy and research, described the HSR as a "bonus" for the Jurong area, and that the project being dropped is not a deal-breaker.

However, despite the positive sentiment, analysts say more must now be done by the government to keep Jurong on track as the second CBD in Singapore.

JLL's Ms Tay said the government needs to find "more anchors for the locality" - the HSR was one - so that businesses would be convinced to locate in Jurong.

Ms Tan said: "To advance this goal, enhancing productivity of Jurong to other parts of Singapore through the Jurong Region Line, the Cross Island Line, and possibly other new infrastructural works, would need to be expedited."

She also suggested that the government look at other trade routes, such as aviation.

Separately, a report by Crucial Perspective's transport equities analyst Corrine Png said the termination of the project would be beneficial to the airlines of Malaysia and Singapore, as well as airports and service providers. With traffic no longer diverted from air to rail, parties such as Changi Airport, Singapore Airlines and SATS are among firms that will benefit, the report said.

As for price movements of property in Jurong, Ms Tan said that there could be "some hold-back" in terms of bullishness of home prices growth in the area.

"But Jurong home prices will still be supported by the island-wide price recovery and not be affected by the HSR abandonment," she said.

Home prices have been on the rise due to an improving economy and the release of the pent-up demand from local buyers after several years of softness in the property market.

Desmond Sim, CBRE's head of research, Singapore and South-east Asia, said: "Most of the real estate in Jurong has already seen benefits in terms of value, in line with the Jurong story."

He added that there would be a bigger impact on the real estate value in Malaysia along the length of the rail than on Jurong, given that several stops have been planned along the rail route.

With no official word from Malaysia yet, analysts are adopting a wait-and-see approach.

Mr Sim believes that "something amicable" could still come out of talks: "Hopefully, it will be a delay and not a cancellation."