Singapore-Malaysia relations are expected to cool in the coming years, says BMI Research. The main reason for this is the premiership of Dr Mahathir Mohamed in Malaysia.
The research firm noted, under its political risk assessment, that during Dr Mahathir’s first stint as the head of government, ties between the two countries were dogged by various issues, including the 1962 water agreement.
Dr Mahathir led the opposition coalition, Pakatan Harapan, to victory in elections in May, allowing him to once again assume the role of Prime Minister.
“This will mark a shift in relations, which had been friendly under the leadership of previous Malaysian Prime Minister (Datuk Seri) Najib Razak,” BMI said.
“[From] 1981 to 2003, when Mahathir served his first tenure as Malaysia’s prime minister, there were frequent tensions between Singapore and Malaysia, and in our view, this serves as a negative precedent for the relations of the two nations over the coming years,” BMI said in its report.
However, the research firm said that the cooler ties will not significantly alter Singapore’s political landscape.
“[We] are therefore maintaining our strong short-term and long-term political risk score for Singapore at 94.8 and 81.1 (out of 100), respectively,” BMI research said.
BMI noted that old issues of contention during Dr Mahathir’s first stint as PM from 1981 to 2003 remain or have been dug up again.
Dr Mahathir, after taking office in May, quickly said his government would cancel the High Speed Rail project with Singapore. The project had been signed and agreed to by his predecessor, Najib Razak.
The cancellation was then soon followed by Dr Mahathir raising the old issue of the price of water which Malaysia sells to Singapore.
Under the 1962 agreement between the two governments, Malaysia would sell 1,000 gallons of raw water to Singapore at about 3 sens (SG 1 cent). Singapore is entitled to draw up to 250 million gallons of water daily from the Johor River.
Dr Mahathir has said that he hopes to raise the price of raw water sold to Singapore to 50 sens per 1,000 gallons.
Singapore, in turn, now sells treated water to Malaysia for 50 sens per 1,000 gallons.
Despite these frictions, BMI said the two countries will remain dependent on each other, particularly on trade, given the high degree of geographical proximity.
“Malaysia is Singapore’s second largest export destination, even though its share has trended lower from a high of close to 20 per cent in 1994 to 10.6 per cent in 2017,” said BMI Research.
“Meanwhile, Singapore is among Malaysia’s top overseas shipment locations, accounting for 14.3 per cent of total exports in 2017, despite declining from 23.3 per cent in 1991.”
Dr Mahathir is expected to hand over the premiership to Datuk Anwar Ibrahim in a few years’ time.
Singapore’s Prime Minister, Lee Hsien Loong, is also expected to step down shortly after the next elections, due by early 2021.