Asia Malaysia Economy vs Sovereignty: the Singapore-Malaysia water issue

Economy vs Sovereignty: the Singapore-Malaysia water issue

What's really at stake in the neighbours' six-decades long saga.




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Singapore — Of all the pressing issues between Singapore and Malaysia, the one that is blowing hottest at the moment is the water issue — the price of raw water sold from the Malaysian state of Johor to Singapore, and back to Johor as treated water.

This price has been unchanged for nearly six decades, something that Malaysia has had problems with, claiming that Singapore is buying water for far too cheap a price—one that is no longer in keeping with inflation and today’s cost of living.

But is the price of raw water really at the heart of the issue? Or does the contention revolve around something bigger?

Historical Roots

The binding water agreement between Singapore and Malaysia is the 1962 Johor River Water Agreement that is valid until 2061. This agreement allows Singapore to get 250 million gallons of water every day from the Johor River at 3 sen per 1,000 gallons. Singapore sells treated water back to Johor at 50 sen per thousand gallons.

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Malaysia had had an opportunity to review the price of raw and treated water when the pact reached its 25-year mark in 1986 and 1987, but the country’s leaders had declined to do so.

Deeper issues than the price of water

For many Singaporeans, the water issue goes deeper than the money exchanged between the two nations. According to Singapore’s former Prime Minister Goh in April 2002, “Any breach of the Water Agreements would also call into question the Separation Agreement, and undermine our very existence.”

Goh had been referring to the Independence of Singapore Agreement (also known as the Separation Agreement) signed between Singapore and Malaysia on August 9, 1965. This guaranteed the water agreements from 1961 and 1962, and registered it with the United Nations.

Later that year, Mahathir took a firm stance and told the press, “Well, international agreements have been broken before. I have seen people go to war, even which is not by agreement.”

The following year, Singapore’s Minister for Foreign Affairs Jayakumar said in Parliament, “The 1961 and 1962 Water Agreements 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.

It is not a matter of money — 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.”

By October 2003, Mahathir retired as Malaysia’s prime minister.

2018—Water issue revived

Shortly after returning to power in Malaysia when he won the General Election in May 2018, Mahathir began to call the 1962 Water Agreement “unfair” and even “unreasonable.” It has become an oft-repeated refrain with him.

In November he asked Singapore Prime Minister Lee Hsien Loong for discussions on the water issue to be again opened, to which PM Lee agreed.

Why Singapore believes prices under the Water Agreement is fair

Singapore justifies the price gap between the water it buys and sells since it pays for water treatment infrastructural costs. A 2003 booklet Water Talks explains how construction, operation and maintenance costs for dams, treatment plants, pumps and pipelines have all been, and are all paid for by Singapore. An example the booklet used was a project for which Singapore had paid S$1 billion but for which Malaysia shouldered none of the costs.

According to the government, the real cost of treating the water is RM 2.40 (S$0.80) per thousand gallons, which means that Singapore pays for RM 1.90 (S$0.63) per thousand gallons.

For Singapore, a sovereignty issue

In July of 2018, Singapore’s Minister of Foreign Affairs Dr Vivian Balakrishnan, claimed that the 1962 Water Agreement is no ordinary pact. Balakrishnan echoed both former PM Goh and foreign affairs minister Jayakumar when he said in Parliament, “Any breach of the 1962 Water Agreement would call into question the Separation Agreement, which is the basis for Singapore’s very existence as an independent sovereign state.”

He also underlined that it is not the price increase that is the most important issue, but how it’s done: “As was stated then, the core issue is ‘not how much we pay, but how any price revision is decided upon. Neither Malaysia nor Singapore can unilaterally change the terms of this agreement between our two countries.”

Disagreement from Malaysia

For every argument that Singapore has, Malaysia’s leaders have a counter-argument.

  1. The expiration of the time for review

Malaysia’s Minister for Foreign Affairs Saifuddin Abdullah vehemently disagrees that Malaysia has lost its chance to review the terms of the 1962 Water Agreement.

On Mar 12, he said, “Clause 14 of the agreement states that “it shall be subject to review after the expiry of 25 years from the date of these presents…”, not at the 25th year. As such, I do not understand the type of English used by the Singapore Foreign Minister, given his interpretation. We respect agreements, that is why we say we can review the agreement after 25 years.”

2. Unreasonable prices, unfair payments

In August, Dr Mahathir announced that he planned to raise the price of raw water Malaysia is selling to Singapore by as much as 1000 percent. For him, this is reflective of the change in the cost of living from the time the agreement was drawn up almost six decades ago.

Last month, Mahathir said: “We need to fight for this (water price negotiation). A rich country (Singapore) (cannot be) buying water from poor countries at such an unreasonable price. If we are reasonable, we must say that this payment is unfair. They are growing rapidly because we are supplying them water.”

3. Taking the issue to the International Court of Justice

Speaking to members of the Malaysian press on Mar 3, Mahathir said that if Singapore takes the water price issue to the World Court (International Court of Justice or the International Court of Arbitration), the republic would lose the case.

He added, “To go to the World Court, you must have agreement from both parties.”

4. Just who is subsidizing whom?

As explained above, Singapore has justified the price for selling treated water to Johor, since water treatment is pricy.

But Malaysia’s foreign affairs minister has a different take on the matter. He claims that based on the prices under the 1962 Water Agreement, Singapore had actually received at least RM 2.4 billion in “subsidy.” This translates to RM 42 million a year or roughly RM 100,000 a day from Malaysia, Mr Saifuddin said in Parliament.

“We sell (water) at a very low price, but buy it back at a high price,” he added.

A response from Singapore’s MFA

On March 13, Singapore’s Ministry of Foreign Affairs (MFA) responded to Mr Saifuddin’s allegations. “Singapore has been clear and consistent that our position is that Malaysia has lost the right to review the price of water under the 1962 Water Agreement (62WA). No review of the price of water has taken place,” says a MFA spokesperson.

Concerning third-party arbitration, the MFA spokesman said that the country has been prepared “to agree to refer this matter to international arbitration by the Permanent Court of Arbitration in the interest of resolving the dispute.”

What exactly does Malaysia want?

In Feb 2019, Mahathir reiterated his stance that new prices should reflect current costs of living from the time the agreement was drawn up to almost six decades ago.

The Malaysian Prime Minister insists that as a developed country, Singapore has a per capita income of S$77,000 (about RM232,300), and therefore, should not be even buying water from Malaysia, where the per capita income is not even S$13,500 (about RM40,700) at 1962’s rate of three sen per 1,000 gallons.

Looking at the 1962 Water Agreement in today’s context

For Malaysian Member of Parliament Charles Santiago, the 1962 agreement should be understood in the context of both countries’ development. In an interview with The Independent, he said that when the pact was made, both countries were developing nations, and out of goodwill, Malaysia sold water to Singapore at a very cheap rate. But Singapore has become one of the leading countries in the region, and he says that “it’s time to level the playing field.”

“Commercial agreements are based on a variety of circumstances. This agreement was made with the prosper thy neighbour approach. Now that our neighbour is doing better, it’s time to look at the agreement again. This is how real politics works,” he added.

So where does the issue go from here?

Malaysia seems to be determined to negotiate for a higher price of water, as this is an issue that Mahathir is pursuing.

However, the 1962 Water Agreement is legal and binding.

But, who can blame Mahathir from wanting to change an agreement that he finds onerous and exploitative to his people? On the other hand, who can blame Singapore for insistently standing by an agreement that affirms its sovereignty?

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