Singapore and Malaysia:
The Water Issue
What's at stake?
“It is not just a matter of money,” Singapore’s then-Foreign Minister S Jayakumar said in a ministerial statement delivered during a special Parliament sitting on Saturday, Jan 25, 2003.
“The significance of the water price, for both countries, is Singapore's existence as a sovereign nation separate from Malaysia, and the sanctity of the most solemn agreements that we have entered into with Malaysia.
“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."
“The Separation Agreement 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.”
WATCH: PROF JAYAKUMAR'S MINISTERIAL STATEMENT ON THE WATER AGREEMENTS IN 2003
An excerpt of the agreement relating to the separation of Singapore from Malaysia
What's the deal?
- There were two agreements signed. The first one, signed in 1961, expired in 2011. The second, signed in 1962, expires in 2061.
- Singapore buys raw water from Malaysia at 3 sen per thousand gallons, and sells it back treated at 50 sen.
- Singapore can draw up to 250 million gallons per day.
- Johor is entitled to buy treated water of the same volume as up to 2 per cent of the water extracted by Singapore on any given day, or about 5 million gallons if Singapore draws its full entitlement of water from the Johor River.
WATCH: SINGAPORE LAYS PIPES TO DRAW WATER FROM JOHOR RIVER IN 1960s
WATCH: SINGAPORE OPENS WATERWORKS IN JOHOR
- Provisions for price revisions: By bilateral consultation, failing which, through arbitration.
- Water agreements were guaranteed by the Malaysian government in the Separation Agreement in 1965; enacted into Malaysian Constitution.
- Agreements also allowed for a price review after 25 years - in 1986 and 1987 respectively.
WATCH: THEN-SINGAPORE PM LEE KUAN YEW VISITS TEBRAU WATERWORKS IN 1963
Why 3 sen per thousand gallons?
The Singapore government released a Water Talks booklet in 2003, explaining why Singapore buys raw water at 3 sen per thousand gallons.
Singapore bears the full cost of treating the water, and other infrastructural costs, building dams and treatment plants and operating and maintaining the pumps and pipelines, the document explained.
It had spent S$1 billion on such projects as of 2003, while “Malaysia did not have to spend a cent”.
The government added the real cost of treating the water is RM2.40 per thousand gallons. Singapore is therefore "absorbing" RM1.90 per thousand gallons in cost.
Why didn’t Johor ask for a price review in 1986 and 1987?
Then-Prime Minister Mahathir Mohamad 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, Prof Jayakumar said in Parliament.
Johor State Assembly Speaker Zainalabidin Mohd Zain defended the decision, saying Johor had not made a mistake in not pressing for a review.
“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,” he said.
Singapore’s position: By not exercising its right to review the price of water in 1986 and 1987, as provided for in the agreement, Malaysia no longer has right of revision.
How did we get here?
It started when Malaysia ran into 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, though not the review of water prices under the current 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.”
Dr Mahathir told then-Singapore Prime Minister Goh Chok Tong that Malaysia no longer needed financial assistance from Singapore.
Dr Mahathir proposed that the outstanding bilateral issues be resolved together as a package. In the interest of clearing the decks of bilateral issues, Mr Goh agreed.
What was discussed in the final package from Aug 2000?
- Future supply of water for 100 years after 2061
- Use of Malaysian airspace by RSAF
- Variation in the terms of the POA, including giving an additional 12 parcels of KTM or Malayan Railway land at Bukit Timah for joint development
- Early withdrawal of CPF funds amounting to some RM 3 billion by West Malaysians
- Malaysia’s proposal to replace the Causeway with a bridge*
- Revision of the current water price*
*The last two issues were brought into the package by Dr Mahathir, which then-Senior Minister Lee Kuan Yew agreed to.
Aug 15, 2000
Mr Lee and Dr Mahathir agreed on a list of items, including a new price of raw water for 45 sen per 1,000 gallons for both current and future water.
This was the first time that the issue of current water was discussed as part of the package.
Feb 21, 2001
Dr Mahathir told Mr Lee that Johor believed that a “fair price” for raw water would be 60 sen per mgd* and that this “should be reviewed every five years”.
* This was 60 cents per million gallons a day. Dr Mahathir probably meant 60 sen per thousand gallons, as explained by Prof Jayakumar.
Letter from Dr Mahathir to Mr Lee Kuan Yew, dated Feb 21, 2001
Sep 4, 2001
After meeting in Kuala Lumpur, Mr Lee and Dr Mahathir announced that they had agreed on a basic skeleton of an agreement on the package of bilateral issues.
Mr Lee said Singapore had offered to pay 45 sen for current raw water although Singapore was not legally obliged to do so. This was in return for assured water supply from Malaysia beyond 2061. This would be priced at 60 sen per 1,000 gallons for raw water.
Mar 4, 2002
Dr Mahathir wrote to Mr Lee with a completely new proposal.
The 60 sen price - which he had earlier agreed to - would now apply for the first five years, from 2002 to 2007.
From 2007 to 2011, the price would be RM3 per 1,000 gallons.
And from 2011 until the expiry of the 1962 Water Agreement in 2061, the price of water would be revised annually from RM3, based on the average inflation rate of Malaysia and Singapore.
As to the future supply of water after 2061, Malaysia proposed that negotiations begin only in 2058 - in other words, just three 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.
Mar 11, 2002
Mr Lee’s reply: “The major proposals in your latest letter have completely changed from what we have been discussing”.
Singapore would have to study the implications of Malaysia's new offers and would respond in due course, he said.
Mr Lee Kuan Yew responds to
Apr 11, 2002
Prime Minister Goh Chok Tong responded to Dr Mahathir’s Mar 4 letter.
“I do not want bilateral relations to be always strained by the issue of water,” he wrote.
“For the sake of good long-term relations … Singapore will produce as much water by ourselves as we can, to supplement the existing Water Agreements.”
Mr Goh Chok Tong's letter to Dr Mahathir
He added that Singapore has decided to ramp up its NEWater programme to replace the supply of water under the 1961 Water Agreement when it expires in 2011.
As Malaysia had withdrawn its offer of 60 sen for current water and future water, Prime Minister 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.
Also, the agreement should be valid for 100 years from 2061 as this had been the basis for negotiations - and not 100 years from 2002, Mr Goh said.
Sep 2-3, 2002
At ministerial talks, Malaysia proposed the price of RM6.25 per 1,000 gallons of raw water.
This formula, it said, was pegged to the average cost of NEWater and desalination.
Malaysia also proposed that discussions on future water supply take place only in 2059 - two years before the expiry of the 1962 Water Agreement (instead of the three years before the expiry, as Prime Minister Mahathir had proposed earlier).
Singapore also stressed that discussions on future water must be undertaken now and not in 2059 as the issue of future water had always been part of the package under negotiation.
Oct 8, 2002
Dr Mahathir told Mr Goh at a meeting in Putrajaya that Malaysia wanted to "decouple the water issue" from the other items in the package.
Mr Goh responded that all the issues were tied together. If the water issue was taken out of the package, then Singapore would have less leeway to make concessions on other issues.
Oct 10, 2002
Mr Goh received a letter from Dr Mahathir dated Oct 7, 2002 stating 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".
This letter was not mentioned at the Oct 8 meeting between the two PMs.
Dr Mahathir's letter to Mr Goh Chok Tong, dated Oct 7, 2002
Oct 14, 2002
Mr Goh reminded Dr Mahathir that they had both agreed on the package approach in Dec 1998 and that was why Singapore had been prepared to make concessions.
“Since you now want to deal with the water issue separately and discontinue the package approach, these trade-offs (on other issues in the package) are no longer possible.
“And as the package deal is off, I have instructed my officials to deal with water and the other issues individually and separately, on their stand-alone merits and no longer as a package.”
Mr Goh responds to Dr Mahathir's letter on the package approach
Jan 25, 2003
To counter “baseless” claims by Malaysian political leaders and media, Prof Jayakumar delivered his ministerial statement in Parliament and Singapore released the correspondence between the two countries on the negotiations.
WATCH: S JAYAKUMAR ACCUSES MALAYSIA OF REPEATEDLY CHANGING ITS POSITION ON WATER IN 2003
Oct 2003: Changing of guard
Dr Mahathir stepped down as prime minister; Abdullah Badawi took over.
Aug 31, 2011: 1961 agreement lapses
Singapore returned the Gunung Pulai and Skudai waterworks as well as the pump houses at Pontian and Tebrau.
Jan 2018: Singapore and Malaysia affirm terms of water agreement
“Both countries … affirmed the terms of the 1962 Water Agreement, under which Singapore is given the full and exclusive right to draw up to a maximum of 250 million gallons of water per day from the Johor River.”
May 2018: Dr Mahathir returns as Prime Minister
Jun 25, 2018: Price of water “manifestly ridiculous”
WATCH: MALAYSIAN PM MAHATHIR MOHAMAD SPEAKS TO CHANNEL NEWSASIA
"I think it is manifestly ridiculous that we should sell water at 3 sen per thousand gallons. That was okay way back in the 1990s or 1930s. But now what can you buy with 3 sen? Nothing.”
He said Malaysia was “studying the case properly” and would make a presentation to Singapore on renegotiating the terms of the water supply deal.
Jun 25, 2018
Both Malaysia and Singapore must "comply fully" with the provisions of the 1962 Water Agreement and the 1965 Separation Agreement, Singapore’s Ministry of Foreign Affairs said.
Singapore must be psychologically prepared to face water shortages if its reservoirs dry up and when the second water agreement with Malaysia ends in 2061, Deputy Prime Minister Teo Chee Hean said in March 2017.
Imported water meets about half of Singapore’s current water needs.
Following periodic dry spells, water levels have fallen in Johor’s Linggiu Reservoir, which feeds into Johor River, where Singapore draws its supply from.
Singapore now has 17 reservoirs, up from the original three - MacRitchie, Seletar and Peirce - and two-thirds of Singapore’s entire land is made up of water catchment areas.
As of 2017, Singapore has invested about S$430 million per year in water infrastructure since 2000. This will double to S$800 million per year over the next five years.
This will fund major investments in desalination and NEWater plants, as well as water pipes and pumps.
Singapore currently has five NEWater plants and three desalination plants.
The NEWater plants are now able to meet up to 40 per cent of the country’s total daily water needs.
The newest desalination plant, in Tuas, opened on Jun 28, 2018.
Two more desalination plants are in the pipeline at Marina East and on Jurong Island. They are slated to be completed in 2020, bringing the total daily water production in Singapore to 190mgd.