Mahathir, the 92-year-old who triumphed in a general election this month, 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.
The decision to drop plans to build the high-speed rail link between Kuala Lumpur and Singapore is final, Prime Minister Tun Dr Mahathir Mohamad said, adding that it could see Malaysia facing up to RM500 million in penalty.
The surprising decision arrived not long after the newly elected Malaysian prime minister raised the possibility of dropping the project with Singapore.
SINGAPORE'S Ministry of Transport (MOT) issued a statement late on Monday that the Republic has yet to receive any official notification from Malaysia regarding the supposed cancellation of the Kuala Lumpur-Singapore High Speed Rail (HSR). "It is not beneficial to Malaysia because it is going to cost us a huge sum of money and we will make no money at all from it because it is a short track", he said.More news: Russia's Mr Novak says oil production curbs could be eased 'softly'
The project, valued by analysts at about $17 billion, is now out for tender and is scheduled to be completed by 2026.
In a weekend interview he said his government was renegotiating the terms of a Chinese-funded US$14 billion rail link traversing peninsular Malaysia.
The scrapping of the plan will take time as it requires negotiation with Singapore, Mr Mahathir told reporters in Kuala Lumpur on Monday.
Rail firms from China, Japan and South Korea had expressed interest in bidding for the project.More news: Roman Abramovich immigrates to Israel
The Singapore government has also invested a fair bit in planning and early projections for the project, said Azman Jaafar, deputy managing partner of RHTLaw Taylor Wessing and chairman of Asean Plus Group. Operations of the KL-Singapore HSR service was targeted for commencement by Dec 31, 2026.
Mr Mahathir's government is faced with liabilities that exceed 1 trillion ringgit due to state guarantees on borrowing by an investment company that's at the centre of a multibillion-dollar corruption scandal.
"We have an agreement with Singapore".
Singapore's government did not immediately have any comment on Dr Mahathir's reported vow to scrap the project.More news: Warriors work 2nd half magic, advance to 4th straight NBA Finals
He estimates that Malaysia could cut nearly a fifth of its $250 billion national debt and liabilities by scrapping such big projects.