17 Dec 98

PM Goh agreed with PM Mahathir's proposal to resolve the outstanding bilateral issues, including long-term supply of water to Singapore, together as a package.

Mar - May 99

Three rounds of negotiations on the package of issues were held at the officials level. However, not much progress was made.

15 Aug 00

At a four-eye meeting in Putrajaya, SM Lee and PM Mahathir reached an agreement on a list of items including the price of 45 sen per 1,000 gallons for current and future water. This was the first time the issue of current water was discussed as part of the package. Singapore also agreed to discuss Malaysia's proposal to build a new bridge to replace the Causeway as part of the package.

24 Aug 00

SM Lee wrote to then Malaysian Finance Minister Tun Daim Zainuddin confirming the list of items which he and PM Mahathir had agreed to.

21 Feb 01

PM Mahathir replied to SM Lee that "Johore believes that a fair price would be 60 cents (sic) per mgd (sic) of raw water" and that this "should be reviewed every five years".

23 Apr 01

SM Lee noted in his reply to PM Mahathir that there were two main variations from their oral understanding reached on 15 Aug 00. These were PM Mahathir's proposal of 60 sen for raw water and the mix of raw and treated water to be supplied.

4 Sep 01

SM Lee met with PM Mahathir for a second time in Putrajaya followed by a joint press conference. Both leaders announced that they had agreed on a basic skeleton of an agreement on the package of issues. SM Lee explained that Singapore had offered to pay 45 sen for current raw water in return for assured raw water supply from Malaysia, beyond 2061, at 60 sen.

8 Sep 01

SM Lee wrote to PM Mahathir to follow-up on their 4 Sep 01 discussion on Malaysia's proposal to build a bridge to replace the Causeway.

21 Sep 01

SM Lee wrote again to PM Mahathir to convey Singapore's counter-proposals on some of the bilateral issues and to confirm other issues which had earlier been agreed. Singapore proposed to revise the price of current water from 3 sen to 45 sen per 1,000 gallons, with no further price reviews. For additional raw water to be supplied from 2011-2061 and 2061-2161, Singapore agreed to PM Mahathir's proposed price of 60 sen per 1,000 gallons, to be reviewed every five years for inflation from 2011.

18 Oct 01

PM Mahathir conveyed to SM Lee a new proposal to review the price of treated and raw water based on a common formula, for instance, compound rate as the basis. PM Mahathir also raised the issue of compensation for additional railway land should the KTM rail service end in Johore Baru.

10 Dec 01

SM Lee replied to PM Mahathir to clarify Singapore's proposal on the bilateral issues including the price of water and sought clarification on the additional railway lands referred to by PM Mahathir. SM Lee expressed the hope that PM Mahathir would consider the long-term significance and value of retaining the railway link between Malaysia and Singapore. He requested PM Mahathir to set out Malaysia's position on the package issues so as to establish a clear framework for the officials to work on.

5 Feb 02

Singapore conveyed a TPN to register "deep concern" over Malaysian statements on the Water Agreements which had grave implications. Singapore reminded Malaysia that the 1961 and 1962 Water Agreements are binding legal arrangements duly confirmed and guaranteed by both Governments in the Separation Agreement.

4 Mar 02

PM Mahathir conveyed completely new proposals on the package issues in his letter to SM Lee. Malaysia proposed an immediate increase in the price of current raw water to 60 sen for the first five years, and to RM3 from 2007 to 2011. Subsequently, the price would be revised annually based on inflation. Malaysia also proposed that current treated water be revised from the current 50 sen to RM1 with no price reviews. As for future water after 2061, Malaysia proposed that negotiations begin only in 2058.

11 Mar 02

SM Lee noted that Malaysia's latest proposals had completely changed from what both leaders had discussed at their meetings and in subsequent correspondences. Singapore would therefore have to study the implications of Malaysia's new offers before responding.

14 Mar 02

Malaysia replied to Singapore's TPN of 5 Feb 02 reiterating that it was committed to resolving the water issue in the context of an agreement on the overall package of issues as agreed by the two PMs in Dec 98. Malaysia pointed out that at no time was there a suggestion that the Malaysian Government would depart from such a commitment.

25 Mar 02

Singapore took note of Malaysia's commitment as conveyed in its 14 Mar 02 TPN.

11 Apr 02

PM Goh conveyed Singapore's response to Malaysia's latest proposals as contained in PM Mahathir's 4 Mar 02 letter. For the sake of good long-term relations, Singapore would produce as much water as it could to supplement the existing Water Agreements by producing NEWater. Since Malaysia did not accept Singapore's earlier offer of 45 sen for current water and 60 sen for future water, Singapore proposed to peg the price of future water to an agreed percentage of the cost of alternative source of water which was NEWater. PM Mahathir's letter of 4 Mar 02 and PM Goh's reply of 11 Apr 02 would form the basis for further discussions between the respective Foreign Ministers and officials on the package of issues.

1 - 2 Jul 02

The First Ministerial Meeting on the Package of Issues was held in Putrajaya, Malaysia. On 2 Jul, Malaysia suddenly revised its package proposal. Malaysia agreed that the price review of current water should be in accordance with the provisions of Clause 17 and Clause 14 of the 1961 and 1962 Water Agreements respectively. Malaysia proposed that the pricing formula for future water should be based on "competitive rates" and Malaysia may consider "benchmarking against, amongst others, the China-Hong Kong model and other relevant models". Singapore responded that it was willing to discuss the price review provided it was part of the package, although the review should have been undertaken in 1986/87. Singapore explained why the China-Hong Kong price model was not relevant to the current Water Agreements as it was Singapore which has borne all the infrastructual and maintenance costs.

2 - 3 Sep 02

At the Second Ministerial Meeting held in Singapore, Malaysia reaffirmed that the price revision of current water "shall be in accordance with the provisions of the 1961 and 1962 Water Agreements". However, Malaysia proposed a formula pegged to the average cost of NEWater and desalination. This resulted in a price of RM6.25 per 1,000 gallons for current raw water. Malaysia also proposed that discussions on future water take place only in 2059. Singapore requested Malaysia to explain the rationale of its pricing formula based on the provisions of the Water Agreements. Singapore also stressed that discussions on future water must be undertaken now and not in 2059 as the issue of future water had always been part of the package under negotiations. Malaysia agreed to host the next Ministerial Meeting.

8 Oct 02

PM Mahathir told PM Goh at a meeting in Putrajaya that Malaysia wanted to "decouple the water issue" from the other items in the package. PM Goh responded that if the water issue was taken out of the package, then Singapore would have less leeway to make concessions on other issues.

10 Oct 02

PM Goh received a letter from PM Mahathir dated 7 Oct 02 stating that Malaysia had decided to "discontinue the package approach and give the highest priority to first resolving the water issue, particularly the price review of raw water". This letter was not mentioned at the 8 Oct 02 meeting between the two PMs.

14 Oct 02

PM Goh reminded PM Mahathir that they had both agreed on the package approach in Dec 98 and that was why Singapore had been prepared to make concessions. But now that Malaysia wanted to deal with the water issue separately and discontinue the package approach, trade-offs on other issues in the package were no longer possible. Henceforth, Singapore would have to deal with water and the other issues on their stand-alone merits and no longer as a package.

16 - 17 Oct 02

The senior officials met in JB to discuss the water issue. However, Malaysia was only prepared to engage in discussions on the price review of current raw water while future water was to be discussed only in 2059. Singapore responded that although our legal position was that Malaysia had lost its right to the review, Singapore was still prepared to discuss the review as part of an overall agreement on the water issue including future water. Singapore again sought clarification for the basis of Malaysia's proposal to review the price of current water from 3 sen to RM6.25. According to the provisions of the Water Agreements, the review of the price of raw water must be based on the rise or fall in the purchasing power of money. Singapore noted that this would result in the price of not more than 12 sen for raw water in 2002. However, Malaysia could not provide a satisfactory explanation of its pricing formula.

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