Malaysia lost its right to review water price after choosing not to do so in 1987: Shanmugam

Malaysia lost its right to review water price after choosing not to do so in 1987: Shanmugam

SINGAPORE - Singapore thus welcomed the Malaysian Foreign Minister Anifah Aman's recent statement that they would honour the 1962 Water Agreement and that any review of water pricing is possible only if Singapore also agreed to it, Foreign Affairs Minister K. Shanmugam said.

Get the full story from The Straits Times.

Below is the transcript of Mr Shanmugam's reply to a parliamentary question by Ms Ellen Lee (Sembawang GRC), who had asked 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:

Ms Ellen Lee had 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 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 at with 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 of water 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 sen per 1000 gallons. 50 sen per 1000 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 a Bernama report on 11 October 2002.

Then-Johor State Assembly Speaker Zainal Abidin 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" (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 the Johor River, for instance the Linggiu Dam project of 1990. In the event, Malaysia chose 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 a cost of over S$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 (and indeed that cannot be in any doubt), and acknowledges that a review of the water price is possible only if Singapore agrees to such a review.

Ms Lee also asked about the Johor government's reported proposal for a price review. We have only heard of this proposal from media reports emanating from Johor. But there have been no 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. Thank you.

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