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Mr Zainudin Nordin: To ask Minister for Foreign Affairs what is his Ministry’s response to the Malaysian Foreign Minister’s remarks that during the economic crisis when Malaysia was looking for a loan from Singapore, the latter had agreed but made it "very onerous".

1. At the height of the Asian financial crisis in early 1998, the ringgit was under speculative attack, and confidence in the Malaysian stock market had fallen. At that time, the Singapore Government was holding substantial funds in ringgit as part of our reserves. We also had investments in Malaysian stocks. Other investors were selling their ringgit and Malaysian stocks, but we held on to ours despite the risk of currency and capital losses. We did not want the ringgit and Malaysian stock market to further weaken.
   
   
2. Furthermore, the Malaysian banking system was experiencing a credit crunch. Deposits were being withdrawn from Malaysian banks, to be placed instead in foreign banks. We did the opposite to help Malaysia. At the request of Malaysia, we transferred 2 billion ringgit of our deposits from banks in Singapore, to Malaysian banks in Kuala Lumpur.
   
   
3. Malaysia also requested a package of financial assistance from Singapore amounting to 15 billion ringgit (US$ 4 billion). This was to consist of additional ringgit deposits with Malaysian banks in Kuala Lumpur, purchase of the ringgit, and purchase of Malaysian stocks. As these actions involved considerable financial risks for Singapore, we proposed to provide the financial assistance within a framework of wider co-operation between the two countries, which would include the supply of water to Singapore after the expiry of the 1962 Water Agreement.
   
   
4. Later, Malaysia requested the 15 billion ringgit package to be converted into a US dollar loan. We offered a medium-term US$4 billion loan at an interest rate which was significantly lower (about 4 percentage points lower) than what Malaysia would have had to pay in the market.
   

   Eventually, however, we did not proceed with this financial assistance package. At a bilateral meeting in Hanoi during the ASEAN Summit in December 1998, Prime Minister Mahathir informed Prime Minister Goh that Malaysia no longer needed it.
   

5. As you can see, Singapore had tried to be helpful to Malaysia during the financial crisis. The terms of our proposed assistance were far from "very onerous", as alleged by Malaysian Foreign Minister Syed Hamid.
   

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