Singapore is Malaysia's second largest trading partner after the US and its largest trade partner within the Association of South East Asian Nations (ASEAN), accounting for 54.4% of total trade within ASEAN, according to the Malaysian Industrial Development Authority (MIDA).
The project will enable to cut the 350 km journey to just 90 minutes compared to the seven-hour journey on the current rail service, with each train expected to carry 500 to 600 passengers.
Construction is expected to start before the end of the year and should be completed by 2009.
Malaysia's largest construction and power company, YTL, is spearheading the project, which should receive formal approval from the Malaysian government within the next two months. In the meantime, YTL has already started work on the Design and Track Laying (DTL) plan.
While bullet trains operate regionally in both Japan and Taiwan, the KL-Singapore route will be the first inter-country bullet train outside of Europe. There has also been talk of extending the link to Bangkok, but no action has been taken in this direction.
Siemens, which already has a strong presence in Malaysia, having worked on the high speed train linking Kuala Lumpur's main train station to the international airport, openly expressed its interest in becoming the project's technology contractor.
Tim Hunter, Siemens' new head of rail for Malaysia, spoke of the project in the local press last week, stating, "We're certainly well qualified for the job."
The company, which is also behind the Barcelona /Madrid bullet train that will begin operating next month, is expected to face competition for the project from France's Alstom, Japanese contractor Kawasaki Heavy Industries and Canada's Bombardier.
The new rail link will significant boost the Iskandar Development Region (IDR) in south Johor, the Malaysian state which lies closest to the Singapore border. IDR, one of the key growth areas under the Ninth Malaysia Plan, will offer a range of incentives to attract manufacturing and service activities, giving Singapore-based companies a chance to exploit low-cost advantages while remaining close to their headquarters. The increased interconnection the train will offer should make foreign investment from Singapore into the IDR more attractive. According to MIDA, Singapore was the 5th largest source of foreign investments in Malaysia in 2006, contributing $500m.
Another area in which the project will benefit the Johar region will be tourism. With two major resorts expected for completion by 2009, the IDR is looking to develop into a major international tourism centre. According to the Malaysian Immigrant Department, visitors from Singapore account for half the monthly arrivals in Malaysia.
One issue of interest is the impact the new train will have on local flight operators. There are approximately 30 daily flights between the two hubs, with 1.7m passengers reported to have flown between the two destinations in 2005. Some argue that as train journeys are cheaper and more convenient, market share for local airlines could significantly decline.