MALAYSIAN FOREIGN MINISTER'S REMARKS

Mr Zainudin Nordin asked the Minister for Foreign Affairs what is his Ministry's response to the Malaysian Foreign Minister's remarks that during the economic crisis when Malaysia was looking for a loan from Singapore, the latter had agreed but made it 'very onerous'.

Prof. S. Jayakumar: At the height of the Asian financial crisis in early 1998, the ringgit was under speculative attack, and confidence in the Malaysian stock market had fallen. At that time, the Singapore Government was holding substantial funds in ringgit as part of our reserves. We also had investments in Malaysian stocks. Other investors were selling their ringgit and Malaysian stocks, but we held on to ours despite the risk of currency and capital losses. We did not want the ringgit and Malaysian stock market to further weaken.

Furthermore, the Malaysian banking system was experiencing a credit crunch. Deposits were being withdrawn from Malaysian banks, to be placed instead in foreign banks. We did the opposite to help Malaysia. At the request of Malaysia, we transferred RM2 billion of our deposits from banks in Singapore to Malaysian banks in Kuala Lumpur.

Malaysia also requested a package of financial assistance from Singapore amounting to RM15 billion (US$4 billion). This was to consist of additional ringgit deposits with Malaysian banks in Kuala Lumpur, purchase of the ringgit, and purchase of Malaysian stocks. As these actions involved considerable financial risks for Singapore, we proposed to provide the financial assistance within a framework of wider co-operation between the two countries, which would include the supply of water to Singapore after the expiry of the 1962 Water Agreement.

Later, Malaysia requested the RM15 billion package to be converted into a US dollar loan. We offered a medium-term US$4 billion loan at an interest rate which was significantly lower (about 4 percentage points lower) than what Malaysia would have had to pay in the market.

Eventually, however, we did not proceed with this financial assistance package. At a bilateral meeting in Hanoi during the ASEAN Summit in December 1998, Prime Minister Mahathir informed Prime Minister Goh that Malaysia no longer needed it.

As you can see, Singapore had tried to be helpful to Malaysia during the financial crisis. The terms of our proposed assistance were far from "very onerous", as alleged by Malaysian Foreign Minister Syed Hamid.

ANNEX

Pedra Branca (Question asked by Mr R Ravindran)

Pedra Branca is not a new issue in Singapore-Malaysia relations. It arose in 1979, when Malaysia for the first time published a new map which claimed the island. Prior to that, Singapore had occupied and exercised full sovereignty for more than 150 years since the 1840s without protest from Malaysia. Previous Malaysian maps, even as late as 1974, showed Pedra Branca as belonging to Singapore. As I had briefed Members on this issue in Parliament on 16th May 2002, both countries had agreed in 1998 to refer the dispute to the International Court of Justice (ICJ) and had settled on the text of a Special Agreement.

For four years between 1998 and the middle of last year, Malaysia made no real attempt to pursue the signing and ratification of the SA. After the 17th December 2002 judgement of the ICJ on the Sipadan and Ligitan case, there was an outburst of wild allegations, made on a daily basis. These came hot on the heels of their Mingguan Malaysia story on 22nd December 2002 which claimed that we were engaged in many kinds of construction activities on PB. They were wrong both in law and facts and we have rebutted these allegations fully in the MFA statement on 26th December 2002. Let me recap the main points.

First, that we were dragging our feet on the signing of the Special Agreement. What are the facts? Singapore had always been ready to sign the Special Agreement at any time and at any place. It was Singapore which had first proposed to resolve Malaysia's claim through the ICJ process, as early as 1989.

We had suggested that the Special Agreement could be signed at the sidelines of the ASEAN-EU Ministerial Meeting in Brussels, on 27-28th January 2003 because Malaysia wanted to sign the Agreement quickly and the meeting in Brussels was the earliest and most convenient time for Minister Syed Hamid and myself to meet. However, the Malaysians later counter-proposed other dates in January and February so that the signing can be done either in Malaysia or Singapore. As I have said publicly, it is absurd to quibble over the location of the signing ceremony as it will not affect the outcome of the case at the ICJ in any way. As Members know, we have now agreed to sign the Special Agreement in Putrajaya on 6th February 2003.

Second, Singapore's so called construction and other alleged "illegal" activities on Pedra Branca. The fact is that there has been no recent construction work on Pedra Branca. The last structures were built in 1991, well over 10 years ago.

In any case, there is no cause to make an issue of this, as it is a well-established principle in international law that acts done by disputing parties to advance their own case after the dispute has already arisen will not be given credence.

To strengthen their allegations, Malaysia claimed that they had never done similar "unfriendly" or "un-neighbourly" acts to Indonesia in their dispute over Sipadan and Ligitan. What are the facts? According to documents filed by Indonesia at the ICJ, Jakarta had in fact protested at least five times about continued Malaysian activities on Sipadan. Malaysia had rejected these complaints, saying that the activities were simply the continuation of actions they had undertaken before the dispute arose. Well, in this light, Singapore's actions on Pedra Branca are no different in law from Malaysia's own actions on Sipadan.

To sum up, Singapore's position on Pedra Branca continues to be clear and consistent. Our sovereignty and ownership of Pedra Branca is based on facts and sound principles of law. Nevertheless, we are prepared and ready to work with Malaysia to move forward with the ICJ process. We have always dealt with Malaysia's claim amicably and in the spirit of goodwill, and will continue to do so. Our media has never attacked Malaysia in the way their media has attacked Singapore.

KD Malaya (Question asked by Ms Irene Ng)

This was never an issue. The Malaysian Navy departed from the Woodlands Naval Base on their own accord in December 1997. In fact, then Defence Minister Syed Hamid gave a warm final address at the passing-out ceremony in August 1997, where he thanked the Singapore Government for its "help and cooperation in making it possible to have a recruit centre here for so long". He said that as Malaysia was an independent country, it was timely that its navy had its own training centre. He had also described Singapore-Malaysia relations as "good with no problems or complaints".

It is strange that in 1997 there were "no problems or complaints", but five years later the Malaysian leaders have turned their voluntary departure from Singapore into an issue and an example of how unneighbourly we have been. PM Mahathir said that "they (Singapore) deliberately increased the rate for the lease for the naval base in Woodlands that we were forced to vacate and we vacated without being paid even a sen" (Bernama, 30th December 2002).

They allege that we 'forced' the Malaysian Navy to leave the Woodlands naval base by increasing the rent.

What are the facts? Yes, there was a rent revision in 1991. But the truth is that Singapore Government tried to find ways to help the Malaysians maintain their base and stay in Woodlands when the rent revision was carried out in 1991. When we increased the rental it was part of a government revision of property rates applied to all, not targeted at KD Malaya, but in line with our market-based rental policy to maximise the use of land in land scarce Singapore. This policy applied to all, including voluntary and charitable organisations. The increase of rental from $1.936 million to $6.152 million reflected the difference between the rent that the Malaysian Navy was paying, and the market rental rate of the day. We understood that such a sudden and sharp increase in rental might cause the Malaysian government budgetary difficulties and we went out of our way to be as helpful as possible. So, in the spirit of goodwill and on our own volition, we offered them a 20% discount of the proposed rate of $6.152 million, reducing the rental to $4.8 million, with a phase-in period of five years.

We also offered a second option, whereby Singapore would build a camp on an alternative piece of land nearby in place of the facilities at the Woodlands base, for the Malaysian Navy to occupy at a nominal fee of about S$500,000 for as long as it needed. The new camp would have cost MINDEF about S$50 million to build.

During all stages of the discussions on this matter, Singapore repeatedly emphasised to the Malaysians that we welcomed their Navy to stay at the Woodlands base for as long as it wanted to. In 1981, then PM Lee Kuan Yew told PM Mahathir that Singapore would not seek the return of the land for as long as the Malaysian Navy needed to use it. PM Goh also told PM Mahathir in September 1992 that he would like KD Malaya to stay in Singapore for as long as Malaysia wished. It was our policy to continue our close defence links with Malaysia.

Indeed, after the Malaysians announced that they would withdraw from Woodlands in 1997, we reiterated our assurance that they were welcome to stay and that our offer of the substitute camp remained open. In December 1992, when then Malaysian Defence Minister Najib Tun Razak wrote to us formally to inform us of their decision, then Defence Minister Dr Yeo Ning Hong had replied to convey that PM Goh would like the Malaysian Navy to stay in Woodlands. It was emphasised that the Singapore offer of SAF-built facilities to be placed at the disposal of the Malaysian Navy remained open, if it wished to take it up later. But Malaysia never did.

Despite Singapore's best efforts to offer alternative options to enable the Malaysian Navy to remain in Singapore, then Defence Minister Najib had made a public announcement on 25th November 1992 that the Malaysian Navy would relocate the base from Woodlands to Malaysia after 1997. Until then, the Malaysian Navy will stay at Woodlands "at the rate rental which has been determined by the Singapore Government". Najib explained that Malaysia's decision to leave was "based on economic factors". He also said that "the Malaysian government understands the decision of the Singapore Government to increase the rate of rental on the basis of market principles", and this "will not adversely affect the good relations in the realm of defence between the two countries". It was clear that citing economic reasons, the Malaysians had left Woodlands on their own accord.

That was five years ago. Now, in 2002, we are accused of not having displayed neighbourliness in our dealings with them. But the KD Malaya case clearly showed that we had put in tremendous effort to help them out. We did offer alternatives at our expense. We offered to fork out S$50 million to build another camp near the Woodlands site for the Malaysian Navy to use at a nominal fee. This proposal, which entailed additional capital outlay on the part of Singapore, was made in the spirit of goodwill and to show the Malaysians that we were sincere in keeping our word to them about staying on in Woodlands. It was Malaysia which chose not to take up this offer.

ASEAN+3 Secretariat and Malaysia's proposal on the East Asia Economic Caucus (Question asked by Mr Sin Boon Ann)

Let me now turn to some of the other absurd allegations. Mr Sin Boon Ann asked about their claim that Singapore was the country which had opposed the setting up of an ASEAN+3 Secretariat in KL; that (a) Singapore always opposes any initiative from Malaysia and (b) Singapore was the only country to do so. Related to this was the other complaint that we had opposed their EAEC proposal.

Commenting on Singapore's reaction to Malaysia's ASEAN+3 Secretariat proposal, PM Mahathir had said, "Singapore rejects everything that comes from Malaysia. We have problem with the EAEC (East Asia Economic Caucus) before because Singapore rejected (it)," adding that Malaysia had tried to be as friendly as possible with Singapore but that this was impossible (Bernama, 11th October 2002).

In more recent remarks, FM Syed Hamid had accused Singapore of influencing the other ASEAN countries to oppose the proposal. He said "sometimes we find that quietly, they (Singapore) also have given very negative signals to other countries, like in the case of the ASEAN+3 Secretariat. Singapore has objected very strongly and yet they host the APEC Secretariat there, and they go very strongly in trying to belittle Malaysia's efforts and yet they talk about East Asia community" (Star, 2nd January 2003). In a Berita Minggu interview (5th January 2003), Syed Hamid alleged that "when Malaysia proposed the establishment of the ASEAN+3 Secretariat, Singapore was the only ASEAN country to oppose it."

Were we the 'only' country to oppose it? What are the facts?

ASEAN+3 Secretariat: As regards the proposed ASEAN+3 Secretariat in KL, yes, Singapore had reservations about this proposal but not because it was a Malaysian proposal but because of the implications on ASEAN and the ASEAN Secretariat in Jakarta. While Singapore recognises the value of the ASEAN+3 process, we hold the view that it should be allowed to evolve gradually.

Is it true only Singapore had this view? Other countries such as Indonesia were also clearly uncomfortable with the proposal. In a Kompas report (14th August 2002), Indonesian FM Hassan Wirajuda was quoted as saying that "there is no consensus - if we want to speak honestly - ... because most of the ASEAN members do not see the need for the formation of ASEAN+3 (secretariat) yet". More recently, former Trade Minister of Indonesia Arifin Siregar said that Indonesia is not keen on another secretariat for the ASEAN+3 grouping and he said that the Indonesian view is that the ASEAN+3 secretariat could be a unit within the existing ASEAN secretariat in Jakarta (Straits Times, 8th January 2003).

On the EAEC, Singapore was one of the first countries to support, and I stress support, not oppose, Malaysia's proposal to establish the EAEC. Let me give you some examples.

At the dinner hosted by PM Mahathir on 11th January 1991 during PM Goh's first official visit to Malaysia as Singapore's Prime Minister, PM Goh had said:

'I share your concerns about the future of the multilateral trading system. Like you, I hope the Uruguay Round will end successfully. If GATT breaks down, we will all be adversely affected. Your idea of closer economic co-operation among countries on the Asian side of the Pacific Rim has immense potential. It is far-sighted. It is imaginative. I support it. I am in favour of strengthening regional economic co-operation among the Asian countries of the Pacific Region, whatever the outcome of the Uruguay Round.'

In a New Straits Times report filed on PM's visit (12th January 1991), the newspaper said:

'Singapore has reiterated its commitment to support Malaysia's recent proposal for the establishment of an East Asian economic grouping. Visiting Singapore Prime Minister Goh Chok Tong made this "very strong and very clear" statement at a meeting with Datuk Seri Dr Mahathir Mohamad at the Prime Minister's Department today. Briefing the Press on the 90-minute discussion between the two premiers, Foreign Ministry Secretary-General Datuk Ahmad Kamil Jaafar said Mr Goh stated that Singapore would join Malaysia in explaining the concept behind the move to countries that should be invited into the grouping.'

Further, in his Keynote Address at the CSIS-Asia Society Conference in Bali on 4th March 1991, PM Goh said:

'But even as ASEAN becomes more competitive, it may not be big enough a team to be able to insist on a level field. ASEAN may have to play within a bigger team. ASEAN can do this by linking up with other economies in the Asia-Pacific through structures like the East Asian Economic Grouping proposed by Dr Mahathir, and APEC. This way ASEAN will not be side-lined.'

These facts speak for themselves. Volume 1 - Correspondences Volume 2 - Agreements