Malaysia and Singapore have had their share of rows, but few have been as sensitive as the question of water. September 29 marked the 59th anniversary of the 1962 water agreement between the Malaysian state of Johor and Singapore, which was followed by a supplementary agreement in 1990. The two agreements, which grant Singapore rights to the use of water originating on the Malaysian side of the border, will expire in 2061.
Water is a precious and scarce resource for Singapore due to its limited land catchment. The city-state currently uses about 430 million gallons of water per day, and imported raw water from Johor is important in sustaining its growing demand for water. When Singapore separated from Malaysia in 1965, the two water agreements were construed as “mutual government guarantees” in the Independence of Singapore Agreement (also known as the Separation Agreement) signed between the governments of Singapore and Malaysia on August 9, 1965.
The water agreement that was signed on September 19, 1962 between the city council of the state of Singapore and the government of the state of Johor abrogated two earlier agreements between Johor and Singapore that were signed in 1927 and 1961. The agreement gave Singapore the right to draw 250 million gallons of water per day from the Johor River. For its own part, Johor was entitled to a daily supply of treated water from Singapore totaling up to 2 percent of the volume of the raw water it supplied.
On top of that, Singapore had to pay rent for the land it used for water catchment areas “at the standard rate applicable to building lots on town land.” The water prices remained the same as in the previous agreement: 3 cents per 1,000 gallons of raw water supplied to Singapore and 50 cents per 1,000 gallons of treated water sold to Johor. After Singapore and Malaysia stopped using a common currency in 1973, the prices were denominated in Malaysian ringgit and sen (1 sen=1/100th of a ringgit).
The 1962 agreement (as with the 1961 agreement) provided for a price review after 25 years, with arbitration being the agreed course of action if bilateral price negotiations failed.
The supplementary water agreement was signed on November 24, 1990 between the Public Utilities Board (PUB) of Singapore and the government of the state of Johor. Under this agreement, Singapore was allowed to construct a dam across the Linggiu River, near a town called Bandar Tenggara, to facilitate the extraction of water from the Johor River.
Singapore agreed to pay compensation for the permanent loss of use of the land and its associated revenue, in addition to a premium of 18,000 ringgit per hectare and an annual rent of 30 ringgit for every 1,000 square feet for the land occupied by a water treatment plant and other ancillary permanent works. The cost of building and maintaining the Linggiu Dam – today Singapore’s main source of drinking water – would be borne by Singapore.
As a consideration of Johor’s consent for the construction of the dam, Singapore was allowed to purchase treated water from Johor generated by the new dam. The price of this additional supply would be calculated based on a fixed formula: the weighted average of Johor’s water tariffs plus 50 percent of the surplus from the sale of this water by PUB to its consumers after deducting Johor’s price and PUB’s cost of distribution, or 115 percent of the weighted average of Johor’s water tariffs, whichever was higher.
The conflicts over water started in late 2000, when Mahathir Mohamad was prime minister of Malaysia. Under Mahathir, Malaysia requested that the price of raw water be increased to 45 sen per 1,000 gallons. On August 15 of that year, Mahathir met with the late Lee Kuan Yew and both agreed that Singapore would pay 45 sen per 1,000 gallons. According to Malaysia, the price review was needed considering nearly four decades of inflation and to justify a fair share of water price.
In the early 2001, however, Malaysia suggested that the price be hiked further to 60 sen per 1,000 gallons and Singapore countered that such a price increase might be possible only after 2011. Malaysia remained adamant until March 2002, when the conflict reached its peak. Malaysia planned to charge Singapore 60 sen per 1,000 gallons regardless of its agreement and wanted the price to be back-dated to 1986. Malaysia also said the price would be set at 3 ringgit from 2007 to 2011, after which it suggested that it be adjusted upward each year for inflation.
Officials in Malaysia and Singapore exchanged letters and official press releases stating their positions until August 14, 2002, when the state government of Johor officially sent a notice that it was reviewing the water price. Singapore’s PUB subsequently replied that it reserved its right to negotiate a “mutually acceptable price package” between the two governments.
In September, Malaysia presented its price formula to Singapore while Singapore maintained its position that the Malaysian offer was unfair. In early 2003, Singapore published in the media a series of official correspondence between leaders of the two countries over the water dispute, after Foreign Minister S. Jayakumar presented the documents in Parliament. In April 2003, Singapore’s Ministry of Information, Communications, and Arts published an 84-page book entitled “Water Talks? If Only It Could,” which offered the city-state’s interpretation of the Johor-Singapore water spat. Meanwhile in Malaysia, the government initiated a media campaign to rebut the allegations made by Singapore over the water issue, which went on right until Mahathir’s resignation on October 30, 2003.
The water issue has been kept under wraps since then, though the public perception on this matter remained negative in Malaysia until Mahathir’s return as prime minister following his unexpected win in the general election of 2018. In 2019, Malaysia renewed calls for Singapore to cooperate in revising the water price from the 1962 water agreement due to the fact that water reserve areas in the state of Johor had fallen to 4 percent and were on track to reach zero by 2020.
Although calls for a water price review were made, the issue was not discussed properly in Malaysia until September 21 of this year, when Malaysian officials said in Parliament that the review of the water price would resume once the pandemic situation in both countries had “recovered completely.”
At the height of the dispute in the early 2000s, Singapore claimed that Malaysia’s right to a price review under the 1962 agreement has expired because the 25-year review provision contained in the agreement had elapsed. Singapore contended that Malaysia could only review the water price in 1986 and 1987, which marked 25 years since the 1961 and 1962 agreements, respectively, but did not do so.
In truth, the 25-year provision is rather ambiguous. Clause 14 of the 1962 Agreement stated that:
the provisions of paragraphs (1) and (2) of the foregoing clause of these presents shall be subject to review after the expiry of twenty five years from the date of these presents and shall be reviewed by the parties and the facts that are to be taken into account upon such review shall include inter alia any rise or fall in the purchasing power…
Malaysia interpreted the phrase “after the expiry of twenty five years” literally, which would allow Malaysia to review the water price at any time after the 25th anniversary of the agreement.
In 2002, Singapore’s Prime Minister Goh Chok Tong told Parliament that it was clear that any breach of the water agreement would undermine the existence of Singapore, as the provision of a water supply was guaranteed in the Separation Agreement of 1965.
In a bold move, Mahathir, while speaking about this issue to reporters in Kuala Lumpur in 2002, stated that international agreements have been broken several times by other countries, and that nations have gone to war over such breaches.
What now? It is a fact that the 1962 and 1991 agreements will expire in 2061. To reduce Singapore’s dependence on imported water, the city-state has built up its water supply from non-conventional sources, namely NEWater (reclaimed water) and desalinated water (treated seawater), by setting up water treatment plants in various parts of the island. The plan is for Singapore to be self-reliant in water by 2061 if it needs to be.
As for the water price conflicts, in 2019 Malaysian officials considered taking the matter to international arbitration if no consensus was achieved. As stated above, Malaysian officials say that the water talks will resume once the COVID-19 situation in both countries has improved. For Malaysia, resolving the longstanding issue of the water price review is a priority while Singapore has been consistent in its position of maintaining the water price though several negotiations designed to show that they are open to revising the price at a future date.
Finding an amicable solution through direct negotiations or dispute resolution through arbitration is important for both countries in resolving the water issue and removing a persistent obstacle in bilateral relations once and for all.