Malaysian prime minister Mahathir Mohamad has confirmed that plans to build a US$400M rail tunnel between Johor Baru and Singapore are still on, apparently contradicting earlier media reports that the project had been shelved.

The rail link was included in a bilateral agreement signed between the Singapore and Malaysian governments in September to replace the existing 77-year old causeway linking the two countries, which carries road and rail connections. Under the deal, both sides agreed a suspension bridge carrying road traffic only by 2007, with Singapore sanctioning a Malaysian plan for the high-speed rail tunnel.

After the deal, Dr Mahathir was reported to have scuppered the tunnel scheme because of the high cost. But responding to questions later, the prime minister said of the rail connection: "We have not really decided what form it will take. We will have to talk to Singapore, it’s not a decision we can make ourselves."

Earlier proposals prepared showed that the rail tunnel was the most expensive element in the replacement link.

Of the overall US$550M cost of the replacement bridge and tunnel, $400M was allocated for the tunnel and just $150M for the bridge. The tunnel comprises a 600m section under the straits that separate the two countries and 8km of approach tunnels.