STATEMENT BY MINISTER FOR FOREIGN AFFAIRS, PROF S JAYAKUMAR, IN PARLIAMENT, 25TH JAN 2003

[Main Text |  Annex | Written Reply | Documents Attached | Supplementary Q & A ]

Dr Ong Chit Chung: To ask the Minister for Foreign Affairs for his views and comments on the recent statements and accusations made by Malaysian leaders on bilateral issues between Singapore and Malaysia.

Mr Steve Chia Kiah Hong: To ask the Minister for Foreign Affairs in view of the constant remarks of war by Malaysian Ministers (a) what is the likelihood and possibility of Singapore going into a stage of heightened tension or war with Malaysia over the unresolved bilateral issues and (b) what can Singapore and Singaporeans do to help reduce the tension.

Ms Irene Ng: To ask the Minister for Foreign Affairs to give Singapore's position on comments by Malaysian Prime Minister and other Malaysian leaders that (i) Singapore failed to keep to an undertaking to let Malaysia continue to maintain its naval base facilities in Singapore after the Separation; and (ii) Singapore deliberately increased the rate for the lease of those facilities in Woodlands, thereby forcing Malaysia to vacate them.

Mr R Ravindran: To ask the Minister for Foreign Affairs; Minister for Law (a) whether it is true that Singapore is reluctant to submit the dispute on Pedra Branca to the International Court of Justice and (b) when will the Special Agreement be signed.

Mr Sin Boon Ann: To ask the Minister for Foreign Affairs if he will comment on the Malaysian allegations that Singapore always opposes proposals from Malaysia such as the ASEAN+3 Secretariat and the East Asian Economic Caucus (EAEC).

Mr Ahmad Khalis Bin Abdul Ghani: To ask the Minister for Foreign Affairs if he will give the status of the bilateral negotiations with Malaysia on the water issue and whether he sees any progress on this issue.

Introduction

1. Madam Deputy Speaker, Members have asked many questions on the state of our bilateral relations with Malaysia. They have also asked questions on a number of allegations made against Singapore on a wide range of current and 'old' issues, from water, Pedra Branca, the ASEAN+3 Secretariat to KD Malaya, the former Malaysian naval training base in Woodlands.
   
   
2. These allegations paint Singapore as "insensitive", "arrogant" and "unneighbourly" in the conduct of our bilateral relations with Malaysia. We are also said to be "selfish", "profiteering" and "legalistic". They now even talk of war, using as a peg a book that spoke favourably about the SAF. The author, Tim Huxley, is a British who has no connections with us.
   
   
3. These allegations have no basis whatsoever. KD Malaya was an old issue. The Malaysians left their naval training base in Woodlands on their own accord in 1997. When we revised the rent in 1991, far from forcing them out, we offered them several options to maintain their base and stay on in Woodlands. However they chose not to take up our offers and decided in 1992 to relocate their base to Malaysia.
   
   
4. On Pedra Branca, it is not true that we were reluctant to sign the Special Agreement (SA) to refer the matter to the International Court of Justice (ICJ). In fact, it was Singapore which proposed referring the issue to the ICJ. Nor have we carried out construction activities recently. The last structures were built well over 10 years ago.
   
   
5. Likewise, it is untrue that Singapore was the only ASEAN country which had problems with the proposal for a separate ASEAN+3 Secretariat in Kuala Lumpur. Indonesia, among others, also did not support it. And as for the East Asia Economic Caucus (EAEC) proposal, it is completely false that Singapore opposed it. In fact, we were one of the first countries to come out in support of it.
   
   
6. Madam Deputy Speaker, I shall circulate fuller details on these issues as an Annex to my Statement.
   
   
7. But for this afternoon, I wish to focus on water, which is the core problem underlying all this endless, vitriolic barrage. I have to state the facts on this central issue to show what is the true position. The water issue is critical to Singapore because it has grave implications for our survival.
   
   
8. In setting out the facts, I shall be releasing the correspondence between the leaders of both countries and the diplomatic exchanges. I will also circulate copies of the two Water Agreements of 1961 and 1962, plus a supplementary water agreement in 1990 relating to the building of the Linggiu dam on the Johor River and the purchase by Singapore of treated water in excess of the 250 million gallons per day (mgd) from this river. These are all documents for the record. I have been reluctant to release these documents despite misrepresentation of facts from the other side because we hoped for a win-win outcome. But I have to release them now because this hope is no longer realistic and so much misinformation on the water issue has been put out by Malaysia that needs to be rebutted by conclusive evidence. Despite repeated attempts to clear the air through various MFA Spokesman’s comments and Parliamentary statements by me in this House, Malaysian misrepresentations have not ceased. Recently, there has even been loose talk of war in some Malaysian circles. We therefore have no choice but to set the record straight by releasing these documents for people to judge for themselves the truth of the matter. These documents will clear the air for everyone, especially Singaporeans who travel to Malaysia, read their media and talk to their Malaysian friends. These documents are in two volumes which will be given to Members. Madam Deputy Speaker, I request that they be part of the official records of the House.
   
   
9. My statement has three parts. First, it is to make clear that the fundamental issue for us is not the price of water as such. The vital issue is not how much we pay, but how any price revision is decided upon. Malaysia wants Singapore to pay more for water. But the price cannot be revised at the will or dictate of Malaysia. The 1961 and 1962 Water Agreements were enshrined in the Separation Agreement which was registered at the United Nations. They are fundamental to our very existence as an independent nation. Neither Singapore nor Malaysia can unilaterally change them. This is the root of the dispute between us.
   
   
10. During the negotiations on the package of issues, both sides asked for and offered various concessions. Singapore agreed to pay more for existing water, but only as part of a package deal that included the future supply of water. Malaysia agreed to settle several outstanding bilateral issues as a package. The documents demonstrate this clearly. However, in October last year, Malaysia unilaterally decided to take the water price revision out of the package, to be discussed and decided on its own.
    
    
11. Second, I will give a full chronology of the talks on water. This will show that Singapore has been consistent and forthcoming in the negotiations. The difficulties arose because Malaysia repeatedly changed its position, and shifted their goal posts each time we neared an agreement. No sooner had we agreed to a price for water when they changed their minds and upped the price. After the two countries had discussed all the issues as one package for several years at Malaysia’s request, Malaysia unilaterally and without prior notice abandoned the package approach, saying that they only wanted to discuss the current price of water.
    
    
12. Despite all the sudden twists and turns, we accommodated and persevered, never closing the door on negotiations, in order to reach a mutually beneficial agreement. The Malaysian allegations against us are totally unjustified when we were trying to find an amicable way forward.
    
    
13. Third, I want to stress that it is in the overwhelming interest of both countries to settle our differences in accordance with international law, either through the ICJ or the Permanent Court of Arbitration (PCA), or in the case of the water price revision through the method provided for in the Water Agreements themselves, i.e. arbitration according to the laws of Johor. This process of arbitration can determine what we have not been able to agree on, namely whether Malaysia has the right to revise the price after a lapse of 16/17 years, and if so by how much.

Sanctity of the Water Agreements and the Separation Agreements

14. Some Singaporeans and foreign observers have asked why the two Governments are quarrelling over what appears to be a small and simple issue of the price of water. Why cannot Singapore be more accommodating, and pay a little more for the sake of neighbourliness and good bilateral relations? If only the matter were that straightforward.
    
    
15. Let me be clear. It is not a matter of money.
    
    
16. The issue goes well beyond whether we have to pay 45 sen or 60 sen or stick to 3 sen. Of course, Singapore will not be impoverished by an increase from 3 to 45 sen. Neither will Malaysia be enriched. PM Mahathir himself has said that "We don't depend on them to bring us revenue to finance the government as income from selling water is a small fraction (of our revenue). It's not a major source of income for the government." (Bernama, 6 August 2002)
    
    
17. The significance of the water price, to both countries, is Singapore’s existence as a sovereign nation separate from Malaysia, and the sanctity of the most solemn agreements which Singapore and Malaysia have entered into.
    
    
18. The two Water Agreements are no ordinary agreements. They are so vital that they were confirmed and guaranteed by both Governments in the 1965 Separation Agreement, also known as the Independence of Singapore Agreement. This was registered at the United Nations. Both countries have to honour the terms of the agreements and the guarantee in the Separation Agreement. Any breach of the Water Agreements must call into question the Separation Agreement and can undermine our very existence.

    [The Separation Agreement is flagged at F in Vol II of the compilation of documents]

19. Not many people know that Malaysia also gave effect to the Separation Agreement by an amendment to the Malaysian Constitution on 9 August 1965 through an Act of the Malaysian Parliament, no 53 of 1965. Section 14 states:

"The Government of Singapore shall guarantee that the Public Utilities Board of Singapore shall on and after Singapore Day abide by the terms and conditions of the two Water Agreements dated 1st September, 1961, and 29th September, 1962, entered into between the City Council of Singapore and the Government of the State of Johore."

"The Government of Malaysia shall guarantee that the Government of the State of Johore will on and after Singapore Day also abide by the terms and conditions of the said two Water Agreements."

[The Malaysia Act No 53 of 1965 is flagged at G in Vol II of the compilation of documents]

20. In other words, the guarantees are an inherent part of an international agreement solemnly entered into, adopted by a constitutional amendment in Malaysia and later registered with the UN. In international law, both parties must ensure that the Water Agreements are observed and neither side can unilaterally vary their terms and conditions. If Malaysia can unilaterally revise the price of raw water from 3 sen to 60 sen, and then from 60 sen to RM 3 then they can eventually fix it at RM 8 which Malaysia has said is the price since that is what Hong Kong pays to China, or any other price. The sanctity of the Separation Agreement would have been breached. All other agreements we have signed with Malaysia will become meaningless. Nor will any new agreement we conclude with Malaysia be worth anything. In such a world there would be no basis for international relations. There would be no foundation for international law, which all UN member countries have a duty to uphold, in order to maintain a stable and peaceful international order.

    [The 1961 and 1962 Agreements are in Vol II of the compilation of documents flagged at B and C respectively.]

21. Malaysia has acknowledged the importance of the Water Agreements for a long time. For example, in 1968, three years after our independence, the Malaysian representative to the UN Conference on the Law of Treaties, Mr M. O. Ariff said,

    "Some treaties might be so fundamental to the very existence of States that they simply could not be dispensed with, whatever political differences might arise. For example, the new island State of Singapore was dependent on Malaysia for its water supply; the treaty under which Malaysia had to supply a certain quantity of water daily to Singapore could not be terminated or suspended between the two states for any political reason." (UN Conference on the Law of Treaties, First Session, Vienna 26 March – 24 May 1968, Official Records, pp 382, 385.)

22. However, in early 2002, PM Mahathir began to criticise the water agreements as allegedly unequal treaties foisted on Malaysia by the British. PM Mahathir said that the price for water under the agreements was too low and that as such "practically, they (Singapore) get their water free". (New Straits Times, 22 January 2002). He said that "also, the agreement was drawn up by the British which of course favoured Singapore." (New Straits Times, 23 January 2002). Later he said "what we know is that we have been charging them [Singapore] 3 sen per thousand gallons of raw water and we know also that countries like Hong Kong buy their raw water from mainland China at RM 8 per thousand gallons". Other Malaysian leaders took up the refrain and stoked a frenzy of media criticism against Singapore. For example Johor Menteri Besar Ghani said "all this while, we have been supplying Singapore with free water..." (Star, 2 February 2002)
    
    
23. This deliberate raising of Malaysian ground sentiments seriously alarmed Singapore. It could easily have spiralled out of control and led to grave consequences.
    
    
24. Therefore, on 5 February 2002 we sent Malaysia a diplomatic note (TPN) in which we pointed out that "pending a binding agreement on the overall package of issues, all legal obligations of the existing Water Agreements and the Points of Agreement (POA) remain in force and are binding on both Governments".
    
    
25. We reminded them that the Water Agreements are binding legal arrangements duly confirmed and guaranteed by the Governments of Malaysia and Singapore in the Separation Agreement.
    
    
26. We said that the Separation Agreement "is the fundamental basis of Singapore's existence as an independent sovereign nation" and that "any variation of the Water Agreements without the consent of both Governments will be a breach of the Separation Agreement that cannot be accepted".
27. 
    
    We also pointed out that "further negotiations on new agreements pertaining to the long term supply of water to Singapore can only proceed on the basis that the agreements already concluded cannot be altered without the explicit consent of both parties. Otherwise any new agreements on water can similarly be altered without consent. This will have grave implications for bilateral relations [emphasis added]".

    [Singapore’s TPN dated 5 February 2002 is flagged at I in Vol I of the compilation of documents.]

28. On 14 March 2002, the Malaysian Government replied to Singapore’s demarche. Malaysia’s TPN conveyed its "commitment to resolving the issue of water with Singapore in the context of an agreement on the overall package of issues", and that "at no time was there a suggestion that the Government of Malaysia would depart from such a commitment." They said that any suggestion to the contrary is "misleading and constitutes a gross misinterpretation of the well known position of the Malaysia Government."

    [Malaysia’s TPN dated 14 March 2002 is flagged at L in Vol I of the compilation of documents.]

29. We replied through a TPN on 25 March 2002 taking note of their commitment and assurances. We also reiterated our own commitment to reaching a mutually beneficial agreement on the package of outstanding issues.

    [Singapore’s TPN dated 25 March 2002 is flagged at M in Vol I of the compilation of documents.]

30. FM Syed Hamid himself noted at the First Ministerial Meeting at Putrajaya on 1 July 2002 that:

    "Malaysia has repeatedly said that it will honour the 1961 and 1962 Agreements until their expiry in 2011 and 2061 respectively…."

    "…During the Separation of Singapore, Malaysia did not propose for the Agreements to be reviewed. It continues to honour the Agreements and such commitment is further reinforced when Malaysia signed the Separation Agreement in 1965."

31. We were thus flabbergasted when Malaysian Minister in the PM’s Department Rais Yatim publicly declared on 24 October 2002, that as Malaysia’s solution, Malaysia could enact domestic legislation to render the Water Agreements null and void. As I had said at the 31 October 2002 sitting, no country can evade its international treaty obligations by enacting any domestic law. This is a very well established principle of international law. Should any country choose to violate this principle, it would signal to the world that it can and will do likewise for any other international agreements.
    
    
32. Let me also add that contrary to what Malaysia has alleged, these Water Agreements of 1961 and 1962 were not fixed by the British in Singapore’s favour. These Agreements were signed by the Johore State Government and the Singapore City Council in 1961 and 1962 respectively. By then, Malaya was already an independent and sovereign nation, and Singapore had achieved self-government. It is absurd to suggest that the Federal Government of an independent and sovereign Malaya would allow the Johore State Government to be manipulated by the British to sign an agreement that was against Malaysia’s national interests.
    
    Chronology of the Package and Water Agreements
    
33. Now let me address the allegations that Singapore has been the unreasonable party in the negotiations. To do so, let me recount in some detail how the matters unfolded over the last few years.
    
    
34. When Malaysia experienced problems in the Asian Financial crisis in 1997-98, at Malaysia’s request, Singapore began to discuss a financial assistance package for Malaysia in the context of a framework for wider cooperation. The framework included the supply of water to Singapore after the expiry of the current Water Agreements. Singapore's assistance entailed significant market risks and potential financial losses for Singapore. This framework would make it politically possible for Singapore to carry these financial risks. The price review of water under the current Water Agreements was never raised then by PM Mahathir and was not part of the framework.
    
    
35. At the ASEAN Summit in Hanoi in December 1998, PM Mahathir informed PM Goh that Malaysia no longer needed financial assistance from Singapore. PM Mahathir proposed that the outstanding bilateral issues be resolved together as a package. In the interest of clearing the decks of bilateral issues, PM Goh agreed to this.
    
    
36. What were the items in the final package as from August 2000? The key items in the package were:

37. Later, as I will elaborate, two more items were added to the package by PM Mahathir:

1. In August 2000, with PM Goh’s approval, SM Lee visited Kuala Lumpur to try to make progress on the package . He worked through Tun Daim Zainuddin, then the Finance Minister. After first meeting Tun Daim, SM had a four-eye meeting with PM Mahathir on 15 August 2000. PM Mahathir brought into the package two new issues: the price of current water, and the replacement of the Causeway by a new bridge. SM Lee agreed to these inclusions. The two leaders reached agreement on a list of items, including a new price of raw water of 45 sen per 1,000 gallons for both current and future water. This was the first time the current water agreements featured in the bilateral package.

   [List of agreed items on 15 August 2000 is flagged at A in Vol I of the compilation of documents.

2. Following the meeting, SM Lee wrote to Tun Daim on 24 August 2000 to confirm the list of items which he and PM Mahathir had agreed to.

   [SM’s Letter to Zainuddin dated 24 August 2000 is flagged at B in Vol I of the compilation of documents.]

3. On 21 February 2001, 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". What PM Mahathir meant was "60 sen per thousand gallons".

   [PM Mahathir’s Letter to SM dated 21 Feb 2001 is flagged at C in Vol I of the compilation of documents.]

4. On 23 April 2001, SM Lee replied to PM Mahathir pointing out that this was a variation from their oral understanding of 15 August 2000 which was 45 sen for current and future water. Now PM Mahathir was proposing a higher price of 60 sen.

   [SM’s Letter to PM Mahathir dated 23 Apr 2001 is flagged at D in Vol I of the compilation of documents.]

5. In September 2001, SM Lee made a second visit to Kuala Lumpur to try to close the gaps on the package of issues. After their meeting on 4 September 2001, SM Lee and PM Mahathir held a joint press conference to announce that they had agreed on a basic skeleton of an agreement on the package of bilateral issues. SM Lee told the media that Singapore had offered to pay 45 sen for raw water supplied under the current Water Agreements, although we were not legally obliged to do so. SM explained that this offer was made in return for assured water supply from Malaysia, beyond 2061, at 60 sen per 1,000 gallons for raw water.
   
   
6. On 21 September 2001, SM Lee wrote to PM Mahathir confirming and elaborating on this offer.

   [SM’s Letter to PM Mahathir dated 21 Sep 2001 is flagged at F in Vol I of the compilation of documents.]

7. The Malaysians have argued that since SM had offered 45 sen for current water, it showed that Singapore had in fact accepted that Malaysia had the right to review. PM Mahathir has said "if we don't have the legal right, then why did Lee Kuan Yew come and see me and suggested that the water price should be revised upwards to 45 sen and then we said it should be 60 (sen), 15 sen more" (Bernama, 1 November 2002). But it is clear from the documents that when SM Lee offered 45 sen for current water it was "in return for assured water supply beyond 2061" at 60 sen. SM Lee had never said that Malaysia had the right to review the price of current water outside the package, which included water beyond 2061 and airspace.
   
   
8. Between 18 October and 10 December 2001, there were further exchanges of letters between SM Lee and PM Mahathir to clarify various details of the bilateral package, including the price of water.

   [PM Mahathir's Letter to SM Lee dated 18 October 2001 and SM Lee's reply dated 10 Dec 2001 are flagged at G and H respectively in Vol I of the compilation of documents.]

9. On 4 March 2002, PM Mahathir wrote to SM Lee enclosing totally different proposals. This was after PM Mahathir’s statements to the press about RM8 being the real price of water. Under Malaysia’s new proposal, the 60 sen price would apply only for the first five years from 2002 to 2007 and from 2007 to 2011, price will be RM 3 per 1,000 gallons. From 2011 until the expiry of the 1962 Water Agreement in 2061, the price of water would be revised annually from RM 3 based on the average inflation rate of Malaysia and Singapore.
   
   
10. As for future water after 2061, Malaysia proposed that negotiations begin only in 2058 (i.e. just 3 years before the expiry of the 1962 Agreement). Malaysia also proposed that the new water agreement would be valid for 100 years from 2002. In effect, this would mean that the new agreement would only last for 40 years after the expiry of the 1962 Water Agreement.

    [PM Mahathir's Letter to SM Lee dated 4 March 2002 is flagged at J in Vol I of the compilation of documents.]

11. SM Lee replied on 11 March 2002 that this had completely changed from what they had discussed before and in their subsequent exchange of notes and letters. He said that Singapore would study the implications of Malaysia’s new offers and would respond in due course.

    [SM Lee's Letter to PM Mahathir dated 11 March 2002 is flagged at K in Vol I of the compilation of documents.]

12. On 11 April 2002, PM Goh wrote to PM Mahathir to give Singapore's response to PM Mahathir's letter of 4 March 2002. PM Goh stressed that he did not want bilateral relations to be always strained by the issue of water. Hence, for the sake of good long-term relations, Singapore would produce as much water as it could to supplement the existing Water Agreements. Singapore would ramp up our NEWater programme to replace the supply of water under the 1961 Water Agreement when it expires in 2011.

    [PM's Letter to PM Mahathir dated 11 April 2002 is flagged at N in Vol I of the compilation of documents.]

13. As for water after 2061, PM accepted Malaysia’s offer of 100 mgd of raw water and 150 mgd of treated water. On price, as Malaysia had withdrawn its offer of 60 sen for current water and future water, PM Goh proposed to peg the price of future water to an agreed percentage of the cost of the alternative source of water, i.e. NEWater. This was to provide a definite basis for future price revisions. PM Goh reminded PM Mahathir that this agreement should be valid for 100 years from 2061 as this had been the basis for negotiations, and not 100 years from 2002. PM Goh did not offer revision of the current water price.
    
    
14. PM Mahathir’s letter of 4 March 2002 and PM Goh’s reply of 11 April 2002 then formed the basis for further discussions between the respective Foreign Ministers and officials on the package of issues. Two Ministerial Meetings were held, the first in Putrajaya, Malaysia, from 1-2 July 2002 and the second in Singapore from 2-3 September 2002. I updated Members on the outcome of the two meetings on 23 July 2002 and 31 October 2002 respectively and the Senior Officials Meeting in Johor Baru from 16-17 October 2002. There was no progress on the key issues.
    
    
15. Malaysia came out with another new formula under which the price of raw water in 2002 would be RM6.25 per 1,000 gallons. They did not explain how this price could be justified under the water agreements. They insisted that they had the right to review the price of current water, while we pointed out that they had lost their right of review. They also stated that they would not negotiate the terms of future water supply until 2059, i.e. two years before the expiry of the 1962 Water Agreement, instead of the three years that PM Mahathir had proposed.
    
    
16. After the Second Ministerial Meeting, as I had told the House last year, when PM Goh met PM Mahathir in Putrajaya on 8 October 2002, PM Mahathir said that Malaysia wanted to "decouple the water issue" from the other items in the package. PM Goh responded that all the issues were tied together. If the water issue was taken out of the package, Singapore would have less leeway to make concessions on other issues.
    
    
17. Members would recall the many statements in the Malaysian media and from Malaysian politicians that misrepresented what transpired at this meeting. The Malaysians alleged that Singapore had agreed to delink water from the package and had accepted Malaysia’s prerogative to review the price of current water. These statements distorted what was discussed at the meeting and impugned PM Goh’s integrity.
    
    
18. Two days after his meeting with PM Mahathir, PM Goh received a letter from PM Mahathir dated 7 October 2002, that is, one day before their meeting. In his letter, PM Mahathir informed PM Goh 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". In other words, even before PM Goh had met PM Mahathir Malaysia had unilaterally discontinued the package approach, which had been agreed to by both PMs, and reaffirmed in Malaysia’s TPN of 14 March 2002.

    [PM Mahathir's Letter to PM dated 7 October 2002 is flagged at Q in Vol I of the compilation of documents.]

19. On 14 October 2002, PM Goh replied to PM Mahathir reminding him that they had both agreed on the package approach in December 1998 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 against 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.

    [PM's Letter to PM Mahathir dated 14 October 2002 is flagged at S in Vol I of the compilation of documents.]

20. On this basis, the Singapore officials attended the meeting in Johor Baru to discuss the water issue from 16-17 October 2002. At that meeting, it was clear that Malaysia had no intention of striking a deal on future water. This left only the current water price on the agenda. Now we could no longer trade off a current water price revision against the supply of future water. Therefore we have no choice but to rely on the express provisions of the Water Agreements and that any variation has to be within its terms.
    
    
21. From this chronology of events members can see how Malaysia had repeatedly changed its position, not only on the water issue but also on the entire package negotiations.

• First, having agreed to 45 sen for current and future water in 2000, they then raised their demand to 60 sen. When we counter-offered 45 sen for current water and 60 sen for future water, they raised their demand further – an immediate increase to 60 sen for current water and then RM3 from 2007. Later, the Malaysians came up with the figure of RM6.25 for current water. Recently, PM Mahathir acknowledged that he had proposed 60 sen to SM Lee, but said that he had been later advised by Malaysian officials that the price was too low (Berita Harian Malaysia, 26 December 2002).

• Second, the starting point for the negotiations since 1998 had been the supply of water for another 100 years after 2061. But in March 2002, the Malaysians reduced this to 40 years, and only at a formula to be negotiated in 2058 and to supply treated water at a formula to be negotiated every 20 years. On 2 July 2002, the Malaysians again agreed to 100 years but with a price formula based on rates benchmarked against the China-Hong Kong model (or RM 8) and other models. Finally on 2 September 2002, Malaysia said that the negotiations on future water can only take place in 2059.

• Third, the Malaysians committed themselves to resolving the outstanding issues as a package from December 1998 to September 2002. However, PM Mahathir later unilaterally took water price revision out of the package by his letter of 7 October, without informing PM Goh when they met on 8 October in KL that he had already written to PM Goh to have the water issue dealt with separately.

60. By taking current water out of the package, the Malaysians wanted to get this price revision without any commitment to give future water supply in exchange. They have changed the package deal PM Mahathir first offered to SM Lee in KL in August 2000, and then followed up in a letter dated 21 February 2001 naming 60 sen as what Johor considered a "fair price". But the Malaysians know, as they have repeatedly acknowledged, they could not under international law unilaterally revise the price or other provisions of the Water Agreements.
    
    
61. On our part, we tried our best to accommodate Malaysia’s successive new positions. Even though Malaysia had repeatedly shifted their goalposts, Singapore has not walked away from negotiations. In fact, we attended the Johor Baru meeting in October 2002 in good faith just six days after the Malaysians had unilaterally discontinued the package approach.
    
    
62. Members would note that four out of the six items in the package – current water price, POA variation, CPF and the bridge – were to benefit Malaysia. Singapore was not legally obliged to pay more for current water, to vary the POA, or to make special arrangements for West Malaysians to withdraw their CPF monies early. We had no interest in demolishing the Causeway and building a bridge in its place. Singapore’s overriding interest in the package was future water. We were prepared to agree to the items which Malaysia wanted, including a current water price revision, only in exchange for Malaysia agreeing to provide us a long-term supply of water beyond 2061, and RSAF access to Malaysian airspace.
    
    
63. These concessions to Malaysia would have been at a considerable cost to us. They had to be seen in the context of the overall package deal being negotiated. As the MFA Spokesman commented on 2 February 2002, "the total amount of money that Malaysia will receive when other items in the package are factored in will be over 1.5 billion ringgit." This did not include the cost of over S$500 million to us of building our half of the bridge and a new Customs, Immigration and Quarantine (CIQ) complex. But we thought all this would be justified if we could secure future water. This was why when PM Mahathir proposed the package approach in 1998, PM Goh agreed.
    
    
64. We tried to meet their demands as long as future water supply was on offer as the quid pro quo. As negotiations went on we became aware that they did not want to sign any agreement on future water supplies. All they promised at the final meeting in Johor Baru was to discuss the matter in 2059, two years before the 1962 Water Agreement ends. This has pushed us to prepare for a negative outcome, one that requires us to develop our capability for NEWater and desalination . These are no light tasks to undertake. We will need many years to build up the know-how, keep abreast with technological advances. Just as important, we must psychologically prepare our people for it.

    The Way Forward

65. Notwithstanding our efforts to reach an agreement, we find ourselves at this impasse. Members will naturally ask, what next?
    
    
66. PM Mahathir and FM Syed Hamid had spoken about referring the water issue to international arbitration by the PCA¹. On 28 December 2002, when our media asked me about this, I said that it was a great pity that both sides have not reached agreement on the water issue. Singapore obviously could not force Malaysia to come to the negotiating table if it chooses not to do so. Hence, I said that if Malaysia proposes to submit the water issue to PCA arbitration, Singapore would have to agree, albeit reluctantly, in the interest of overcoming the impasse.
    
    
67. To my surprise, their Berita Harian (30 December 2002) reported FM Syed Hamid as responding that the option of referring the water issue to PCA for arbitration did not arise!
    
    
68. If Malaysia does not wish to send the matter for arbitration to the PCA, a world organisation renowned for its impartiality, then what is the next best solution?
    
    
69. It is to have recourse to arbitration in accordance with the provisions of the Water Agreements. The provisions in Clauses 21 and 19 of the 1961 and 1962 Water Agreements respectively provide for the settlement of disputes arising under the Agreements. Those provisions stipulate that where disputes cannot be resolved, the matter shall be referred to arbitration "in accordance with and subject to the provisions of the arbitration law at the time of such dispute existing in the State of Johore".
    
    
70. Indeed, the Johor State Secretary had sent letters to the PUB dated 14 August 2002 seeking to give Notice of price review under Clause 17 and Clause 14 of the 1961 and 1962 Water Agreements respectively. As Singapore’s position was that Malaysia had lost its right of review, the PUB replied on 9 October 2002 that it did not accept that the Johor State Government was still entitled to serve notice to seek a review of the charge of raw water under the two Water Agreements.

    [The Johore State Secretary’s two letters are flagged at P and PUB’s reply is flagged at R in Vol I of the compilation of documents.]

71. On this issue of price review, Members would recall that I had mentioned at the 31 October 2002 sitting that Malaysian leaders had publicly said that it was not an oversight or mistake that Malaysia did not review the price of current water in 1986/87, but a deliberate move. Dr Mahathir said Malaysia did not revise the water pricing when it was due because they thought Singapore would also revise the price of treated water supplied to Malaysia. (Bernama, 11 October 2002). Johor State Assembly Speaker Zainalabidin Mohd Zain also said that the Johor Government had not made a mistake in not pressing for a review in 1986 and said "there was no point in doing so because Johor was dependent on Singapore for its treated water supply, and Singapore would have also increased its price of treated water sold to Johor" (New Straits Times, 3 July 2002).
    
    
72. At the Second Ministerial Meeting in September 2002 in Singapore, FM Syed Hamid pointed out that the Notice of price review which Johor sent to PUB "made references to Clauses 17 and 14 of the 1961 and 1962 Water Agreements respectively as well as to arbitration in the event that both countries fail to reach agreement." These Clauses 17 and 14, the price review clauses, provide that "in the event of any dispute or differences arising under the provisions of this clause the same shall be referred to arbitration as hereinafter provided."
    
    
73. Malaysia through these formal notices has effectively taken steps towards referring its water dispute with Singapore to arbitration. At that time we were reluctant to go along this arbitration route because we still hoped for an agreement on a package deal including future water. However, now it has become clear that we cannot expect renewal of water supply. As this removes the basis for further negotiations, we are ready to have the dispute resolved through arbitration according to the laws of Johor.
    
    
74. The question of whether there is still a right of review as well as the quantum of the price revision can both be resolved through the legal process as provided for in the two Water Agreements. This is like the way we are resolving Malaysia’s claim over Pedra Branca. If in fact Johor has not lost its right to revision by not exercising it in 1986/87, then the arbitrators’ award on the price revision will take effect from the date when Johor gave its Notice to PUB as provided for in the two Agreements. As Malaysia has commenced this process, let the matter be settled through arbitration.

    Resolving Disputes Amicably

75. Indeed, peaceful and amicable settlement of disputes has been Singapore’s consistent approach. For the Pedra Branca issue, we had proposed and they have agreed, to refer it to the ICJ.
    
    
76. I am as concerned as Mr Steve Chia about the loose talk by the Malaysian leaders in the Malaysia media about "war". Bernama reported FM Syed Hamid on 31 December 2002 "…. Singapore has two choices. If it refuses to compromise…go to war". In his New Year message, PM Mahathir said "we promise that if anyone violates our freedom, they will get what they call a ‘bloody nose’" (New Straits Times, 1 January 2003). Asked by reporters the following day, PM Mahathir did not specify which country he was referring to, but neither did he categorically rule out Singapore. This further encouraged the Malaysian media to play up Singapore’s alleged forward defence strategy and link it to Singapore’s "arrogance" in the conduct of its bilateral relations with Malaysia. This was quickly followed by remarks by various Malaysian leaders publicly emphasizing the MAF’s capability in defending Malaysia from external threats. For instance, Defence Minister Najib Tun Razak said that the MAF had experience fighting in a real war and that sophisticated weaponry systems were not the yardstick to measure whether a country could win a war (Bernama, 7 January 2003).
    
    
77. Amidst all the bellicose talk about war, the Malaysian media created a furore over Tim Huxley’s book "Defending the Lion City". This book, based on academic research on the SAF’s capabilities, was published by a British academic from Hull University more than 2 years ago. Back then, the Malaysian media did not pay any attention to the book. One can only speculate why the Malaysian media have chosen to do their book reviews now.
    
    
78. In the same vein there were almost daily articles in the Malaysian Malay language press playing up Singapore’s alleged aggressive intentions. On 18 January 2003, Berita Harian (Malaysia) recklessly alleged that "Singapore has stealthily embarked on a bioterrorism defence program, that it has set aside more than RM201 million specifically to carry out R & D to build up its bioterrorism defence system. ……..History has proven that every country that undertakes R& D in biodefence will also end up by doing R&D into weapons for biological attacks. Singapore is no exception to such thinking." Without any evidence to substantiate their allegations, they accuse the Singapore Government of breaching its obligations under international conventions it has signed against the possession of WMD. Such war-mongering articles, it should noted, are found especially in the Malay language press, which can only be designed to stir up animosities in their Malay population against Singapore.
    
    
79. Loose talk of war is irresponsible and dangerous. It whips up emotions that could become difficult to control. In such an atmosphere, the Malaysian navy and marine police vessels have escalated their intrusions into Singapore territorial waters off Pedra Branca in the past one month.. Such provocative actions are not only senseless but dangerous. Senseless because both sides have agreed to refer the dispute to the ICJ and such actions cannot affect the decision of ICJ. Dangerous because of the risk of accidents that may not only cause loss of life but also cause serious damage to naval vessels with unforeseeable consequences. The Malaysian Government would have to bear responsibility for the consequences caused by the aggressive and repeated intrusions of its vessels.
    
    
80. Singapore has exercised exclusive control, ownership and sovereignty of Pedra Branca since the 1840s without any protest from any country until Malaysia published a map in 1979 claiming it as part of its territory. This is the status quo. Until Malaysia’s claim is decided by the ICJ, the status quo must remain, consistent with Malaysia’s own position in the case of Sipadan/Ligitan. There, Malaysia adopted the position that as they were in possession of the islands, the status quo should prevail. For example, this is what they said in a diplomatic note to Indonesia on 3 January 1994, a note which they filed at the ICJ:

"The Government of Malaysia reiterates that since Sipadan and Ligitan are parts of Malaysia, any and all activities undertaken by Malaysia on or pertaining to those islands and their surrounding waters constitute legitimate exercise of its sovereignty and jurisdiction. The continuing acts of intrusion by Indonesian naval vessels and aircraft in Malaysia’s territorial waters and airspace around Sipadan and Ligitan similarly cannot in any way, advance Indonesia’s claim over the two islands."

[Click here for the full text of the Malaysian Diplomatic note.]

81. Malaysia now disregards the status quo in the case of Pedra Branca by intruding into Singapore waters around the island which has belonged to Singapore for more than 150 years.
    
    
82. I believe it is in the overwhelming national interest of both countries to avoid escalating tensions and conflicts, as the consequences could be costly for both.
    
    
83. PM Mahathir said that Malaysia would respect international law on territorial disputes and avoid any confrontation with Singapore on Pedra Branca. This is also Singapore’s position.

    Concluding Remarks

84. Let me assure this House that it is Singapore’s desire to have good, not strained, relations with Malaysia. There is much that both countries can gain by working together. Our common interests far exceed our bilateral differences.
    
    
85. We must ensure a firm and level basis for conducting state-to-state relations. Whenever the Malaysians run out of arguments on bilateral issues, they accuse Singapore of being unreasonable, legalistic, sticking to facts and the law. As I have said to the House before, how else can any country, especially a small country like Singapore, deal with other countries than on the basis of international law and the sanctity of agreements voluntarily entered into by Governments? If we were ever to yield on this basic position, we would suffer grave and permanent consequences. Singapore cannot afford to be intimidated into allowing this to happen.
    
    
86. Singapore’s relationship with Malaysia will be difficult from time to time. What is important is that we stay calm and rational through these periodic cycles of ups and downs. As PM said in his speech to the Singapore Institute of International Affairs on 27 November 2002, "we must manage these swings with a certain psychological equanimity; not lapsing into complacency or euphoria when things go smoothly, nor becoming unduly alarmed or despondent when things go bad"

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ANNEX TO THE MINISTERIAL STATEMENT BY MINISTER FOR FOREIGN AFFAIRS, PROF S JAYAKUMAR IN PARLIAMENT, 25 JANUARY 2003

Pedra Branca (Question asked by Mr R Ravindran)

KD Malaya (Question asked by Ms Irene Ng)

1. This was never an issue. The Malaysian Navy departed from the Woodlands Naval Base on their own accord in December 1997. In fact, then Defence Minister Syed Hamid gave a warm final address at the passing-out ceremony in August 1997, where he thanked the Singapore Government for its "help and cooperation in making it possible to have a recruit centre here for so long". He said that as Malaysia was an independent country, it was timely that its navy had its own training centre. He had also described Singapore-Malaysia relations as "good with no problems or complaints".
   
   
2. It is strange that in 1997 there were "no problem or complaints", but five years later the Malaysian leaders have turned their voluntary departure from Singapore into an issue and an example of how unneighbourly we have been. PM Mahathir said that "they (Singapore) deliberately increased the rate for the lease for the naval base in Woodlands that we were forced to vacate and we vacated without being paid even a sen" (Bernama, 30 December 2002).
   
   
3. They allege that we 'forced' the Malaysian Navy to leave the Woodlands naval base by increasing the rent.
   
   
4. What are the facts? Yes, there was a rent revision in 1991. But the truth is that the Singapore Government tried to find ways to help the Malaysians maintain their base and stay in Woodlands when the rent revision was carried out in 1991. When we increased the rental, it was part of a government revision of property rates applied to all, not targeted at KD Malaya, but in line with our market-based rental policy to maximise the use of land in land scarce Singapore. This policy applied to all, including voluntary and charitable organisations. The increase of rental from S$1.936 million to S$6.152 million reflected the difference between the rent that the Malaysian Navy was paying, and the market rental rate of the day. We understood that such a sudden and sharp increase in rental might cause the Malaysian government budgetary difficulties and we went out of our way to be as helpful as possible. So, in the spirit of goodwill and on our own volition, we offered them a 20% discount of the proposed rate of S$6.152 million, reducing the rental to S$4.8 million, with a phase-in period of five years.
   
   
5. We also offered a second option, whereby Singapore would build a camp on an alternative piece of land nearby in place of the facilities at the Woodlands base, for the Malaysian Navy to occupy at a nominal fee of about S$500,000 for as long as it needed. The new camp would have cost MINDEF about S$50 million to build.
   
   
6. During all stages of the discussions on this matter, Singapore repeatedly emphasised to the Malaysians that we welcomed their Navy to stay at the Woodlands base for as long as it wanted to. In 1981, then PM Lee Kuan Yew told PM Mahathir that Singapore would not seek the return of the land for as long as the Malaysian Navy needed to use it. PM Goh also told PM Mahathir in September 1992 that he would like KD Malaya to stay in Singapore for as long as Malaysia wished. It was our policy to continue our close defence links with Malaysia.
   
   
7. Indeed, after the Malaysians announced that they would withdraw from Woodlands in 1997, we reiterated our assurance that they were welcome to stay and that our offer of the substitute camp remained open. In December 1992, when then Malaysian Defence Minister Najib Tun Razak wrote to us formally to inform us of their decision, then Defence Minister Dr Yeo Ning Hong had replied to convey that PM Goh would like the Malaysian Navy to stay in Woodlands. It was emphasised that the Singapore offer of SAF-built facilities to be placed at the disposal of the Malaysian Navy remained open, if it wished to take it up later. But Malaysia never did.
   
   
8. Despite Singapore's best efforts to offer alternative options to enable the Malaysian Navy to remain in Singapore, then Defence Minister Najib had made a public announcement on 25 November 1992 that the Malaysian Navy would relocate the base from Woodlands to Malaysia after 1997. Until then, the Malaysian Navy will stay at Woodlands "at the rate rental which has been determined by the Singapore Government". Najib explained that Malaysia's decision to leave was "based on economic factors". He also said that "the Malaysian government understands the decision of the Singapore Government to increase the rate of rental on the basis of market principles", and this "will not adversely affect the good relations in the realm of defence between the two countries". It was clear that citing economic reasons, the Malaysians had left Woodlands on their own accord.
   
   
9. That was five years ago. Now in 2003, we are accused of not having displayed neighbourliness in our dealings with them. But the KD Malaya case clearly showed that we had put in tremendous effort to help them out. We did offer alternatives at our expense. We offered to fork out S$50 million to build another camp near the Woodlands site for the Malaysian Navy to use at a nominal fee. This proposal, which entailed additional capital outlay on the part of Singapore, was made in the spirit of goodwill and to show the Malaysians that we were sincere in keeping our word to them about staying on in Woodlands. It was Malaysia which chose not to take up this offer.

ASEAN+3 Secretariat and Malaysia's proposal on the East Asia Economic Caucus (Question asked by Mr Sin Boon Ann)

10. Let me now turn to some of the other absurd allegations. Mr Sin Boon Ann asked about their claim that Singapore was the country which had opposed the setting up of an ASEAN+3 Secretariat in KL; that (a) Singapore always opposes any initiative from Malaysia and (b) Singapore was the only country to do so. Related to this was the other complaint that we had opposed their EAEC proposal.
    
    
11. Commenting on Singapore's reaction to Malaysia's ASEAN+3 Secretariat proposal, PM Mahathir had said: "Singapore rejects everything that comes from Malaysia. We have problem with the EAEC (East Asia Economic Caucus) before because Singapore rejected (it)," adding that Malaysia had tried to be as friendly as possible with Singapore but that this was impossible (Bernama, 11 October 2002).
    
    
12. In more recent remarks, FM Syed Hamid had accused Singapore of influencing the other ASEAN countries to oppose the proposal. He said "sometimes we find that quietly, they (Singapore) also have given very negative signals to other countries, like in the case of the ASEAN + 3 Secretariat. Singapore has objected very strongly and yet they host the APEC Secretariat there, and they go very strongly in trying to belittle Malaysia’s efforts and yet they talk about East Asia community" (Star, 2 January 2003). In a Berita Minggu interview (5 January 2003), Syed Hamid alleged that "when Malaysia proposed the establishment of the ASEAN+3 Secretariat, Singapore was the only ASEAN country to oppose it".
    
    
13. Were we the 'only' country to oppose it? What are the facts?
    
    
14. ASEAN + 3 Secretariat: As regards the proposed ASEAN+3 Secretariat in KL, yes, Singapore had reservations about this proposal but not because it was a Malaysian proposal but because of the implications on ASEAN and the ASEAN Secretariat in Jakarta. While Singapore recognises the value of the ASEAN+3 process, we hold the view that it should be allowed to evolve gradually.
    
    
15. Is it true only Singapore had this view? Other countries such as Indonesia were also clearly uncomfortable with the proposal. In a Kompas report (14 August 2002), Indonesian FM Hassan Wirajuda was quoted as saying that "there is no consensus - if we want to speak honestly -...because most of the ASEAN members do not see the need for the formation of ASEAN+3 (secretariat) yet". More recently, former Trade Minister of Indonesia Arifin Siregar said that Indonesia is not keen on another secretariat for the ASEAN+3 grouping and he said that the Indonesian view is that the ASEAN+3 secretariat could be a unit within the existing ASEAN secretariat in Jakarta. (Straits Times, 8 January 2003)
    
    
16. On the EAEC, Singapore was one of the first countries to support, and I stress support, not oppose, Malaysia's proposal to establish the EAEC. Let me give you some examples.
    
    
17. At the dinner hosted by PM Mahathir on 11 January 1991 during PM Goh's first official visit to Malaysia as Singapore's Prime Minister, PM Goh had said

"I share your concerns about the future of the multilateral trading system. Like you, I hope the Uruguay Round will end successfully. If GATT breaks down, we will all be adversely affected. Your idea of closer economic co-operation among countries on the Asian side of the Pacific Rim has immense potential. It is far-sighted. It is imaginative. I support it. I am in favour of strengthening regional economic cooperation among the Asian countries of the Pacific Region, whatever the outcome of the Uruguay Round".

18. In a New Straits Times report filed on PM Goh's visit (12 January 1991), the newspaper said

    "Singapore has reiterated its commitment to support Malaysia's recent proposal for the establishment of an East Asian economic grouping. Visiting Singapore Prime Minister Goh Chok Tong made this "very strong and very clear" statement at a meeting with Datuk Seri Dr Mahathir Mohamad at the Prime Minister's Department today. Briefing the Press on the 90-minute discussion between the two premiers, Foreign Ministry Secretary-General Datuk Ahmad Kamil Jaafar said Mr Goh stated that Singapore would join Malaysia in explaining the concept behind the move to countries that should be invited into the grouping."

19. Further, in his Keynote Address at the CSIS-Asia Society Conference in Bali on 4 March 1991, PM Goh said

    "But even as ASEAN becomes more competitive, it may not be big enough a team to be able to insist on a level field. ASEAN may have to play within a bigger team. ASEAN can do this by linking up with other economies in the Asia-Pacific through structures like the East Asian Economic Grouping proposed by Dr Mahathir, and APEC. This way ASEAN will not be side-lined."

20. These facts speak for themselves.

. . . . .

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