Malaysia and Singapore issued a joint statement on Friday announcing the termination of their delayed project to build a high-speed rail link between the two countries.
The 350-kilometer line linking Malaysia's capital Kuala Lumpur and neighboring Singapore would have cut travel time to 90 minutes.
The two sides originally aimed to have the rail line come into service in 2026, but the plan was suspended due to Malaysia's worsened finances.
They had been discussing possible changes to make the project feasible, but were unable to reach an agreement before the end of the suspension period on December 31.
The Malaysian government cites the financial impact of the coronavirus pandemic as a reason for the decision.
The Singaporean government says Malaysia must pay compensation for costs incurred. Malaysia's government has expressed its willingness to respect the prior agreement.
The project had attracted the interest of foreign companies, including those from Japan and China.