MALAYSIA-SINGAPORE AIRLINES (Restructure of)

[Mr Speaker in the Chair]

Mr Hwang Soo Jin asked the Minister for Finance whether it was not possible to reconcile the conflicting objectives of the Singapore and Malaysian Governments on the running of MSA, chiefly in relation to the expansion of Malaysian domestic air services, in order to avoid a dissolution of their partnership. Next, what is the current state of the negotiations and what are the objectives of the proposed Singapore national airline.

The Minister for Finance (Mr Hon Sui Sen): Mr Speaker, Sir, it has become common knowledge that the policies and objectives of the Governments of Singapore and Malaysia towards Malaysia-Singapore Airlines have become divergent. Differences have arisen from time to time in recent years.

On the 2nd September, 1970, the Malaysian Ministry of Foreign Affairs delivered a note to the Singapore High Commission in Kuala Lumpur requesting the Singapore Government to designate a committee of officials to discuss with their committee the creation of a Malaysian Domestic Airline. On the 13th November, the Ministry of Foreign Affairs delivered a note in reply to the Malaysian High Commission in Singapore nominating this committee.

The differences of objectives between the two Governments have become irreconcilable. A parting of the ways was unavoidable. Continuation of the partnership would only have led to constant friction and unnecessary conflict.

The Singapore Government's interest is centred upon a fast-expanding commercially viable operation with flights on international routes to Europe and the United States. The Malaysian Government has different priorities. A major point of disagreement was the proposal to expand MSA domestic air services regardless of the loss forecast by management.

Now that the decision has been taken to dissolve the co-ownership and joint control of MSA, it is in the best interests of both Governments that the proposed restructuring of the company should be proceeded with as expeditiously as possible. There are good reasons for proceeding with deliberate speed. First, in the airline business nothing stands still. The transitional period before restructuring is completed is not conducive to the taking of important decisions on the expansion of services and the acquisition of new aircraft. Secondly, staff of the company, contractors, agents, suppliers and clients would find a long transitional period unsettling not knowing where exactly they stand. Thirdly, Government officials as well as the staff of MSA who are directing, planning and undertaking the arrangements for the restructuring of the company cannot have their attention distracted from their normal duties for a prolonged period of uncertainty and restlessness pending the final hiving off into two separate airlines.

Negotiations between officials of the two Governments have resulted in a measure of agreement. There are a few points on which further talks are to take place. It has been agreed that, first, the restructuring will be completed by the end of 1972 or any earlier date that may be agreed upon by the two Governments; secondly, that the Fokker aircraft will be transferred to the proposed Malaysian national airline and the Boeing 707 aircraft to the Singapore national airline; thirdly, that projects approved will be implemented and that projects required for the orderly growth and expansion of the company will not be held up on account of the proposed restructuring of the airline. The Governments have also appointed, through MSA, a reputable firm of accountants to value the assets, both tangible and intangible, of the company; the report of the accountants is to be submitted by 30th June this year.

The Singapore Government has proposed that, to facilitate the establishment of the Malaysian national airline, the internal operations of MSA should over a period of time be separated, and placed under the control of a "Malaysian Division" of the company. In the near future, such a Division would become the nucleus of the Malaysian national airline and would be handed over as such. It is the intention of the Singapore Government that this transfer should take place as soon as possible. It is the Singapore Government's intention that there will be completely separate financial accountability in respect of domestic services under the Malaysian Government, and international services under the Singapore Government, by 1st. January, 1972, or that the national airlines of the two countries should be on their feet by the 1st January, 1972.

I have dealt with the distribution of the Fokker and the Boeing 707 aircraft, but not with the Boeing 737 aircraft. These aircraft are used extensively on services between Singapore and Malaysia as well as on international routes stretching to Bangkok, Hong Kong, Djakarta, Bali and Sumatra. Clearly, a sharing of these aircraft will have to be worked out on the basis of the requirements and interests of each Government. This basis will be decided at separate negotiations on an air services agreement which are scheduled to be completely by the end of this month.

It is appropriate for me to outline the policy of the proposed Singapore national airline. We have conveyed to the Malaysian Government the fact that the Singapore Government will inherit the corporate entity of MSA which is; a Singapore registered company, as was its precursor, Malayan Airways.

There should not be any hiatus in the rapid growth of the airline. Since the bulk of MSA's international services are operated on Singapore traffic rights and as a considerable proportion of traffic originating in the Singapore-Malaysia region is derived from Singapore, the proposed restructuring of the company will not impair its growth prospects. MSA is now preparing a five-year development plan which, subject to scrutiny and approval by the Government, will be implemented vigorously. I understand that consideration of the purchase of wide-bodied aircraft is one of the highlights of the plan.

Employment opportunities in a wholly- owned Singapore company should grow at a rapid rate. Management will be given a free and unfettered hand to carry out its tasks under the effective control and supervision of the Board of Directors. With good management and run on the basis of efficiency and profitability, our national airline has considerable growth expectations. It should be at least as profitable as and probably larger than Hong Kong's airline. Unlike Cathay Pacific which is not allowed to cut into BOAC's profitable international routes, we shall circle the globe.