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Oral Answer to Questions by Minister for Foreign Affairs Mr K Shanmugam: Price of Raw Water from Malaysia, 6 March 2014

06 Mar 2014

PRICE OF RAW WATER FROM MALAYSIA

Ms Ellen Lee asked the Minister for Foreign Affairs (a) whether the existing water agreement signed between Malaysia and Singapore allows for Malaysia to raise the price of raw water sold to Singapore at any time before its expiry in 2061; (b) if not, what is the reason for the Johor state government to make this proposal now; and (c) how will bilateral relations between Singapore and Malaysia be impacted if Singapore rejects the proposal for a price increase.

The Minister for Foreign Affairs (Mr K Shanmugam): Mdm Speaker, Ms Ellen Lee has asked whether Malaysia had the right to review the price of raw water sold to Singapore. We have stated our position on this issue, and also conveyed it officially to the government of Malaysia on several occasions.

As I had mentioned in my COS speech yesterday, neither Malaysia nor Singapore can unilaterally change the price of raw water sold to Singapore. Indeed, neither party can unilaterally change any of the terms of the 1962 Water Agreement. This is no ordinary agreement. It was guaranteed by both governments in the Separation Agreement in 1965, which was registered with the United Nations. Both countries have to honour the Water Agreement and the guarantee in the Separation Agreement. Any breach of the Water Agreement would also be a breach of the Separation Agreement and of international law.

Singapore’s position is that Malaysia has lost its right to review the water price. The Water Agreement provided for the review after 25 years. Specifically, there was a right to review the price jointly in 1987. However, Malaysia consciously chose not to review the price.

It had good reasons for this. Malaysia benefits greatly from the current pricing arrangement. Johor buys 16 million gallons per day of treated water back from us at 50 cents per 1,000 gallons. Fifty cents per 1,000 gallons is only a fraction of the true cost to Singapore of treating the water, which includes building and maintaining the entire infrastructure of the water purification plants.

Malaysian leaders have acknowledged that Malaysia benefits from the current arrangement, and explained that indeed, that was why Malaysia made a carefully considered decision not to review the water price in 1987.

Then Malaysian Prime Minister Dr Mahathir Mohamad said in 2002 that 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. One can refer to the Bernama report on 11 October 2002.

Then Johor State Assembly Speaker Zainalabidin Mohd Zain 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". This was from New Straits Times, 3 July 2002.

Under the agreement, after Malaysia decided not to review the water price in 1987, there is no longer any right to review the price of water. Had Malaysia exercised the right to review the water price in 1987, Singapore might then have made different investment decisions to develop Johor River, for instance, that Linggiu Dam project of 1990.

In the event Malaysia chose to not to review the water price in 1987, and on that basis, Singapore then took several actions which also benefitted Malaysia. This included building the Linggiu Dam at the cost of over $300 million, which has increased the yield of the Johor River, and enabled both Johor and Singapore to draw water from it during this dry season.

Our position on this issue is well known to Malaysia. We have stated this publicly and also conveyed it to the Malaysian government, including at the highest levels. The Malaysian government understands the position. Foreign Minister Anifah Aman said on 17 February 2014 that, "an agreement is an agreement. When there is an agreement, we will honour the agreement. If there is any need for review, we will forward it and if their response is positive, we will start talking".

We welcome the Foreign Minister’s statement. It reaffirms the position Malaysia has taken previously on honouring the agreement -- indeed, that cannot be in any doubt – and acknowledges that a review on the water price is possible only if Singapore agrees with such a review.

Ms Lee also asked about Johor government’s reported proposal for a price review. We have only heard of this proposal from media reports emitting from Johor, but there have been on official approaches from Malaysia on this issue. It would thus be premature to speculate on the impact of any such approach on our bilateral relations.

We enjoy good relations with Malaysia at all levels, starting with the two Prime Ministers. But good relations also depend on both parties taking a broad approach to the relationship and honouring all agreements between the two countries. We will continue to work to enhance our cooperation and friendship with Malaysia in order to benefit both our peoples.

Ms Ellen Lee (Sembawang): Mdm Speaker, Minister’s comprehensive reply has taken away two out of my three supplementary questions, but I still have one – thank goodness. Do we still need to buy raw water now that we have our own reservoirs, desalination plants and NEWater?

Mr K Shanmugam: I think you may want to ask that of the Minister for the Environment and Water Resources.

Mdm Speaker: Minister Vivian Balakrishnan?

The Minister for the Environment and Water Resources (Dr Vivian Balakrishnan): Mdm Speaker, I am actually answering a question on this tomorrow. So maybe the Member can wait awhile, and we will provide a more comprehensive answer.

11.37 am

Mdm Speaker: Order. End of Question Time.