IN-PRINCIPLE AGREEMENT WITH MALAYSIA ON OUTSTANDING BILATERAL ISSUES (Assessment)

Mr Inderjit Singh asked the Prime Minister whether Singapore got a fair deal out of the recent agreement with Malaysia on the outstanding bilateral issues.

Mr Noris Ong Chin Guan asked the Prime Minister if he will give an assessment of the recent in-principle agreement with Malaysia, announced by the Senior Minister and the Malaysian Prime Minister.

Mr Tay Beng Chuan asked the Prime Minister when will the price increase to 45 sen per 1,000 gallons for the purchase of raw water from Malaysia take effect and whether it will significantly affect the retail price of water in Singapore.

The Minister for Foreign Affairs (Prof. S. Jayakumar) (for the Prime Minister): Mr Speaker, Sir, may I have your permission to take the three questions by Mr Inderjit Singh, Mr Noris Ong Chin Guan and Mr Tay Beng Chuan together as they are related?

Mr Speaker: Yes.

Prof. Jayakumar: Sir, let me first sketch the background to the recent positive developments in our discussions on the bilateral package. Senior Minister visited Kuala Lumpur last year in August, with Prime Minister Goh's agreement, to try and narrow the differences over the outstanding bilateral issues. Following discussions with Dr Mahathir, Senior Minister had written to Tun Daim regarding Singapore's proposals.

The next step came, in February this year, when Malaysian Deputy Prime Minister Abdullah Badawi visited Singapore and discussed with Prime Minister Goh the package of outstanding issues. At this meeting, Prime Minister Goh agreed in-principle to Malaysia's request to move their KTM railway station from Tanjong Pagar to Kranji, and to have the KTM trains run in an underground tunnel from Johor to Kranji, as part of the larger package of issues. They both agreed on the need to resolve these outstanding issues on the package as soon as possible.

Shortly after Deputy Prime Minister Abdullah Badawi's visit, Senior Minister received a reply from Dr Mahathir in March 2001 regarding Singapore's proposals. Members will recall that I told the House on 13th March that our preliminary study showed that there were variations on some points between Dr Mahathir's reply and Senior Minister's understanding with Dr Mahathir during his visit to Kuala Lumpur last year. I added, however, that at first blush, the difference did not appear that great.

Senior Minister's recent visit to KL was a follow-up to Dr Mahathir's reply. After consulting Prime Minister Goh, Senior Minister visited KL again to continue discussions on the package.

I now turn to the outcome of the most recent discussions between Senior Minister and Dr Mahathir. As Senior Minister has made clear in his comprehensive press conferences in KL, there is now accord on the basic skeletal or framework agreement, which would form the basis to resolve the outstanding issues.

This framework agreement, firstly, spells out the elements of the package; secondly, indicates the areas where there is agreement on both sides; and thirdly, sets out areas where further discussions are needed to close the gaps.

To recapitulate, the key elements of the broad agreement are the long-term supply of water to Singapore beyond 2061, implementation of the POA, the proposal for a new bridge to replace the existing Causeway, use of Malaysian airspace by the RSAF and the early withdrawal of CPF funds by West Malaysians.

On water, for the period 2011 to 2061, Malaysia has offered to provide Singapore with an additional 100 mgd of treated water to replace the 1961 Water Agreement, which expires in 2011. While Singapore has agreed to the quantity, Singapore has proposed that this continue to be provided in raw form as Singapore has the necessary filtration capacity.

From 2061 to 2161, Malaysia has offered to provide 350 mgd of water to Singapore - 100 mgd raw and 250 mgd treated water. Singapore has agreed to 350 mgd of water, but has proposed to draw 150 mgd of raw water and 200 mgd of treated water.

As regards the source, Singapore's position is that the source of additional water to be provided from 2011, and from 2061-2161 must be the Johor River. Furthermore, the production of treated water to be supplied to Singapore after 2061 will be done jointly between Singapore and Malaysia.

As for the price of water, for the existing supply of 350 mgd of raw water under the 1961 and 1962 Water Agreements, Singapore has agreed to a revision of the price of raw water purchased. Singapore has proposed to revise the price from 3 sen to 45 sen per 1,000 gallons.

For the additional raw water to be supplied from 2011-2061, and from 2061-2161, Singapore has agreed to the price of 60 sen per 1,000 gallons, to be reviewed every five years for inflation.

Mr Tay Beng Chuan asked when will the price increase to 45 sen commence, and whether it will significantly affect the retail price of water in Singapore. The answer to that is the proposed price increase will commence only after full agreement on the package has been finalised with Malaysia, and only after it is signed by both Prime Ministers. The increase from 3 sen to 45 sen is, of course, significant. However, the retail price of water also includes other components, including manpower costs, treatment and distribution costs, and the Water Conservation Tax. Therefore, any increase in the overall retail price of water, arising from the higher raw water price paid to Johor, should be manageable.

On the POA, let me first stress that the new agreement will not supersede the 1990 Points of Agreement, unless they are explicitly varied as part of the wider package negotiations.

As I have mentioned earlier, Singapore agreed for the KTM station to be relocated from Tanjong Pagar to Kranji, with the KTM trains running in an underground tunnel from Johor to the Kranji railway station. Malaysia will pay for the cost of building the underground tunnel.

The rail Customs, Immigration and Quarantine (CIQ) facilities will move from its current location to Kranji following the completion of the railway tunnel. Pending the shift to Kranji, we have proposed that the KTM railway station will be located temporarily at Woodlands.

The plot of land at Tanjong Pagar currently occupied by KTM will be exchanged for a plot at Shenton Way of equivalent value for joint development.

In addition, Singapore has agreed to variations of the POA to include 12 lots at Bukit Timah together with the original three land parcels to be jointly developed.

On the causeway and the bridge, Singapore has agreed to Malaysia's proposal for a bridge to be built between Singapore and Malaysia. However, Singapore proposed that the demolition of the causeway take place after 2007, when both the bridge and the tunnel have been completed and provided the tolls charged at the bridge do not exceed the present toll rates at the causeway adjusted for inflation.

Singapore will reclaim its side to the maximum and build its side of the bridge to meet the Malaysian side at the boundary. Singapore's toll rates at the bridge will match that of Malaysia.

As regards airspace, Malaysia will reinstate all the arrangements and understandings for RSAF aircraft to use Malaysia's airspace (including the South China Sea Training Areas) for transit and training.

As regards CPF, Singapore will allow the early withdrawal, on an individual basis phased over two years, of the CPF monies of West Malaysians who have left Singapore permanently.

Mr Speaker, as Members can see, there has been progress. However, many details still have to be sorted out by the officials of both countries to be put in a form of words into an Agreement which the respective Prime Ministers can agree.

Let me stress two important points. Firstly, all the items are to be considered as part of a package. Secondly, the skeletal or framework agreement has to be completed by settling the details that remain to be resolved.

The Member for Ang Mo Kio has asked whether Singapore had received a fair deal from the broad agreement reached between Senior Minister and Dr Mahathir. This question has also been raised in the media. Senior Minister had dealt with this issue during his press conference in KL, but I shall also touch on it.

Let me first say, Sir, that, in the nature of international negotiations, the broad agreement reached between Singapore and Malaysia was a compromise made by both sides to move the long-standing bilateral issues forward. Having been subjects of contention for so long, the deal marks a psychological breakthrough in our bilateral negotiations. It shows that despite sporadic problems in our relations, both countries recognise the value of cooperation and each country has a stake in the other's stability and growth. I believe this will place relations on a surer footing.

Viewed in that context, Singapore has decided to try to reach an agreement with Malaysia. Some of the items are not balanced in our favour like reducing our water request for some 750 mgd to 350 mgd without any reduction of the concessions we are making.

The key question Singaporeans should ask ourselves is this: Are we better off concluding a deal, or by allowing such outstanding issues to fester? I think both sides are better off with the outstanding issues resolved. We decided it was best to have a deal with Malaysia.

While we have decided to reach a deal with Malaysia, let me assure Members that we will continue with our plans for desalination, as well as water reclamation to produce NEWater, a process which involves micro-filtration followed by Reverse Osmosis based on membrane technology. We can expect advancements in membrane technology to continue to reduce the costs of these two alternative sources of water.

Sir, this package will put behind us the outstanding issues and it can have positive effects for both Singapore and Malaysia.

Mr Inderjit Singh (Ang Mo Kio): Mr Speaker, Sir, I have three supplementary questions. The first question is on the issue of CPF withdrawal. Is this a total withdrawal by an individual, or is it going to be transferred to the Malaysian EPF? And related to that, would not this create a disadvantage or unfair situation for Singaporeans who cannot withdraw their CPF until retirement? What would be the rules that would not create this disadvantaged position for us?

The second question is on the 12 new plots of land that have been released in place of the relocation of the railway. Does the Minister have the current market value of the 12 pieces of land?

The third question is, while we have got the broad strokes of agreement, when do we expect the agreement to be finally concluded, as we know the POA was something that we thought would have been implemented, but was not implemented? Will this be another example of something that has been discussed, but not implementable?

Prof. Jayakumar: I thank Mr Inderjit Singh for his questions. The first question concerns CPF, and the answer to the question is that it is a withdrawal by individuals.

Whether it will put Singaporeans at a disadvantage, let me say that, as I mentioned in my main answer, the withdrawal is for Malaysians who were working here and who have returned to Malaysia permanently. So that would be an important consideration.

On the question whether I have with me the current market value of the 12 plots at Bukit Timah, I do not have that particular detail with me.

The third question was, with regard to a general point, whether we expect any new agreement to be implemented considering our experience with the POA. Let me say that, as with any international negotiation with any country, we must approach the deal in good faith that both sides will keep to the terms of the agreement when we do settle the details and finalise the agreement, and it is signed. The items in the bilateral package would have to form part of a new written agreement which has to be formally concluded between the two countries. And the two countries would be bound under international law to comply with the terms of the agreement. Therefore, I would not want to speculate on a situation where the Malaysians choose not to abide by the terms, and so on. Let me also point out something which both the Prime Minister and I have mentioned on a previous occasion when a similar question was raised and, that is, as these agreements are major agreements between Malaysia and Singapore, both the Prime Minister and I have said that it is the intention that we should come to Parliament and place the agreements before the House after it has been signed.

Mr S. Iswaran (West Coast): Sir, may I ask the Minister is there a specific timeframe within which the detailed negotiations are targeted to be concluded for the agreements to be signed? I ask this because experience has shown that our negotiations on these matters have taken unexpected twists and turns leading to long delays.

Prof. Jayakumar: I wish I could answer Mr Iswaran by giving a clear date when it is expected to be concluded. But I am unable to do so for the reason that there are very many details on important matters to be sorted out. What I can say is that, certainly on our side and also on the Malaysian side, the desire is to resolve this as soon as possible because we really have to put this behind us.

Mr Low Thia Khiang (Hougang): Sir, I have two supplementary questions. The first concerns the price of water. The Minister, in his main answer, has said that any price increase in retail water, arising from the agreement would be manageable. I would like to know from the Minister what does he mean by "manageable". How much would he expect the retail price of water to increase and has the Government studied the impact before agreeing to pay Malaysian 45 sen per 1,000 gallons of raw water? The second question is: under what consideration did the Government agree to the additional 12 plots of land in Bukit Timah for Malaysia?

Prof. Jayakumar: Sir, I do not have with me the details. My Ministry does not deal with the details of water price by PUB. All I am able to say, at this stage, for the reasons I have given, is that whatever price increase may take place, it will be manageable. The details will be given to this House at a later stage. When we agreed to various increases, and when we put forward certain proposals, have we made our calculations? I think the House must expect that, yes, we do not put forward proposals lightly. We have to take into account what advances our interests, what we can manage, and we will not put forward a proposal - particularly on the price of water - that we are unable to justify to ourselves. So, our national interests are always at the back of our mind in such international negotiations.

As to the KTM lands, let me say that this is really not a new issue. If Members cast their minds back to 1997, Prime Minister spoke to this House on the difficulties about the POA and his approach to solving the problems with Malaysia within the context of a framework of wider cooperation. He already mentioned that if there is a framework of wider cooperation and there can be a resolution of a package of items, he is prepared "notwithstanding the terms of the POA, to agree to the joint development of the KTM land in Bukit Timah, in addition to the agreed three parcels of land referred to in the POA." In other words, as part of the overall package deal - we are not under an obligation to include the additional land in Bukit Timah - but if we want to advance the process and to solve the package, he is prepared to consider this as part of the package deal. And that is the approach we have taken.

Mr Chiam See Tong (Potong Pasir): Sir, I would like to put on record that the Opposition is very happy that an agreement has been reached between Singapore and Malaysia on the outstanding issues. This is a great progress in the relationship between Singapore and Malaysia. I hope that before we finally sign the agreement, that there is an assurance from Malaysia that Malaysia shall continue to supply raw water to Singapore.

I am not asking a question. I am putting on record what the Opposition is going to say.

Mr Zulkifli Bin Baharudin: Mr Speaker, Sir, the Minister spoke about concessions Singapore has made. But it appears like surprises to me. My question is: on the issue of land, bridge, etc, did the Malaysian government inform us earlier that these are to be part of the deal or did these matters surface just during the discussions with the Senior Minister?

The other question is, if that is the case, are there enough consensus and provisions in the discussions to prevent further surprises from cropping up?

Prof. Jayakumar: Sir, Foreign Ministers have some abilities, but one of the abilities is not to be able to predict future events!

This is where we have reached after many years of discussions. The whole package has evolved. At one time, it was electric train (fast train) - POA-water. It evolved to water-and-loan. Then it evolved to POA-water-bridge-tunnel. I think we have taken it as far as we can to this point. It is in our interest to try to wrap it up as early as possible. The Senior Minister explained in his press conference why that is so. Both countries face various challenges and problems. The region also faces problems. So, as we tackle these problems, let us not be bedevilled by these outstanding problems. And when the Senior Minister said that, that was before 11th September. You have heard Minister George Yeo and Minister for Finance talking about how the global economy and the region may be affected by the recent terrorist attacks. So both countries and the region face enormous challenges and therefore it is good for both countries to try to put these behind us.

Will there be more surprises and twists and turns? I cannot guarantee that but, certainly, I hope that, and am sure, all Members of the House share my hope that will not happen.

Mr Leong Horn Kee: Sir, my question is about the effective date of the new water price. What I hear from the Minister is that the effective date will be from the point when the two Prime Ministers sign the new agreement. But would it not be possible to actually ask that the old agreement, which has the old price of about 3 sen, be allowed to run its full term, before the new price is implemented at a later date?

Prof. Jayakumar: If I understand Mr Leong Horn Kee, what he is saying is that the new price should only apply to the extension of agreements after 2011 and after 2061, and that the existing price be untouched. We did assessments and in the negotiations, it was considered that this proposal to adjust the existing price - which is not a legal obligation on our side - was a factor to advance the negotiations. So we may not be able to make any advance if that package did not have that element.

Mr Inderjit Singh: Mr Speaker, Sir, I would like to ask the Minister about the issue of the CIQ. I remember a few years ago we debated on this and many Singaporeans were quite emotional about locating the CIQ within Singapore, being a sovereign issue for us. Is there a plan in the agreement to finally locate the CIQ back to Malaysian soil rather than keeping it in Singapore?

Prof. Jayakumar: If we look back at the CIQ issue - what was the key issue in the CIQ? The key issue was that wherever the CIQ is located, where sovereign functions are being performed - such as immigration and customs - it must be with the consent of Singapore. That was the key issue on the controversy. As events developed and there was an exchange of letters, it was not controverted by Malaysians. If the CIQ was located here, it is with the consent of Singapore. If that basic issue is not challenged, then we can discuss where else the CIQ can be located. But that is the key principle.

Mr Low Thia Khiang: Sir, there is speculation outside this House as to why the Senior Minister was tasked to negotiate this agreement with Malaysia instead of the Prime Minister. Would the Minister like to explain that?

Prof. Jayakumar: I thought that the Senior Minister had answered this question quite comprehensively in the press conference. He had explained that this matter had been discussed for some time. There had been some difficulties. He had discussed this with the Prime Minister whether, given his past experience of having discussed with Dr Mahathir, he should take a crack at it. Senior Minister got the agreement and approval of the Prime Minister to proceed. He explained this fully in the press conference. There ought not to be any speculation. One more point - the Senior Minister, in all the negotiations, made it clear that the agreements and discussions that had taken place will, of course, be subject to the agreement of the Prime Minister.