When asked by a Malaysian journalist yesterday on reports that the tunnel project has been shelved, Dr Mahathir said: 'Well, that is speculation. We have not really decided what form it will take. We will have to talk to Singapore about that, because it involves them. It's not a decision we can make ourselves.'

As part of the new bilateral agreement last month, Dr Mahathir and Singapore Senior Minister Lee Kuan Yew had agreed to Malaysia's proposal to demolish the 77-year-old Causeway, which carries rail and road links, by around 2007.

The two countries have agreed to jointly build a suspension bridge for vehicles crossing the narrow straits. And Mr Lee had no objection to Malaysia's proposal to build on its own an undersea tunnel for fast trains from JB to Kranji.

The Far Eastern Economic Review reported recently that Dr Mahathir had shelved the tunnel project due to its high cost. But the Malaysian premier last week denied this, saying he was still mulling over the plan. It is not known if Malaysia is still interested in extending a rail link to Singapore or halting it in JB if the tunnel idea is scrapped.

An executive said that if a rail track is to extend to Singapore, the proposed bridge will have to be redesigned to carry the extra weight. But it is not known if Singapore would still be willing to build half of the redesigned bridge.

Stopping the railway track in JB and leaving the earlier bridge blueprint intact could also complicate the bilateral pact, sources said.

This is because Malaysia may want to make changes to certain terms in the in-principle pact for giving up its railway land in Singapore.

Apart from the bridge-cum-tunnel project and joint redevelopment of Malaysian railway land in Singapore, the two leaders reached an understanding on issues such as the supply of water to Singapore, the siting of Malaysia's immigration and quarantine checkpoint, the use of Malaysian air space by the Singapore air force and the release of savings in the Central Provident Fund to West Malaysians who no longer work in Singapore.

Officials of the two governments are still fine-tuning details of the bilateral pact despite the uncertainty over the tunnel project.

According to the earlier blueprint drawn up by Malaysian firm Gerbang Perdana, the tunnel was the most expensive component in the project to replace the Causeway. Estimated to cost over M$1.5 billion (S$702 million), the tunnel was to comprise two segments - 600m of undersea tunnel and another 8km of underground tunnel.

The long underground stretch is necessary to help achieve the proper gradient for the straits crossing, said the executive.

In contrast, the proposed 700m suspension bridge is estimated to cost over M$500 million. The price tag is lower than the M$2 billion spent by the two countries to jointly build the Second Link in 1997. The 2km Second Link connects Tuas in Singapore and Gelang Patah in Johor.