Bilateral tensions between Malaysia and Singapore have surged amid disagreements over maritime boundaries and airspace. What are the implications?

SINGAPORE (Dec 17): Prime Minister Lee Hsien Loong was the second foreign leader who called on Malaysia’s Prime Minister Dr Mahathir Mohamad after the stunning election victory of the Pakatan Harapan coalition on May 9. “You are our nearest and closest neighbour, so when this happened I thought I would come up soon, touch base, renew our links,” Lee was quoted to have said before the meeting, which was held on Saturday, May 19.

Yet, there was already widespread expectation that relations between Singapore and Malaysia were headed for a turbulent period. Mahathir is remembered by many Singaporeans for the belligerent manner in which he handled bilateral issues. In particular, the final years of his first time round as Malaysia’s PM were marked by intense bickering over the price of raw water supplied by Malaysia to Singapore, as well as issues related to the return of Malaysia’s railway land in Singapore.

Things seemed to go more smoothly for Singapore while Mahathir’s successors Abdullah Ahmad Badawi and Najib Razak were in office. Notably, the railway land issue was put to rest during Najib’s time. Plans to build a high-speed rail (HSR) link between Singapore and Kuala Lumpur, and a cross-border “rapid transit system” that would link Woodlands with Johor Bahru also got underway.

As Mahathir took on the role of Malaysian PM once again, some observers suggested that he might have mellowed with age, or that he would be restrained by his new political allies, many of whom had once been his sworn enemies. But it was not long before it became clear that Mahathir’s attitude towards Singapore had not changed one jot. While he was cautious and circumspect on putting a stop to lopsided China-led infrastructure projects, he was almost flippant in his handling of the postponement of the HSR project that involved Singapore.

Then, last month, things quickly went from bad to worse. On Nov 22, Malaysia Airlines subsidiary Firefly alerted passengers that it would suspend flights to Singapore from Dec 1. The reason was that Singapore wanted to shift all turboprop flights from Changi Airport to Seletar Airport, but the Civil Aviation Authority of Malaysia (CAAM) had not given Firefly its approval for the shift.

An intriguing picture of diplomatic assertiveness and political gamesmanship by Malaysia as well as Singapore has since emerged. On Dec 4, Malaysia announced plans to take “full control” of the airspace over southern Johor, which is currently managed by Singapore under an agreement that dates back to 1974. On the same day, Singapore publicly complained that Malaysian government vessels had been intruding into Singapore waters for over a fortnight. This came after Malaysia “unilaterally and arbitrarily” extended the Johor Bahru port limits into Singapore waters on Oct 25.

For now, it appears that the main point of contention is Singapore’s plan to introduce the use of an Instrument Landing System at Seletar Airport next year. An ILS guides planes as they approach the airport, and is said to improve safety. Malaysia contends that the ILS at Seletar Airport will result in planes flying over Pasir Gudang at altitudes low enough to adversely affect port activities and the future development of tall buildings in the area.

Singapore has said it made plans for the ILS at Seletar Airport known last year, but its follow-up correspondence on the matter did not immediately elicit a reply from Malaysia. On Nov 28, the CAAM did raise “technical concerns” over the ILS procedures, according to Singapore’s Ministry of Transport. But the Civil Aviation Authority of Singapore addressed these concerns, and conveyed its intention to publish the ILS procedures on Dec 1.

For its part, Malaysia evidently believes its “technical concerns” were not properly addressed and that it needed to take drastic action. Threatening to take back the management of airspace over southern Johor, and encroaching into Singapore’s waters, might be part of a plan to bring Singapore to the negotiating table. “There is an impression that these two new issues are related, though this has yet to be officially confirmed,” says Yang Razali Kassim, a senior fellow at the S Rajaratnam School of International Studies (RSIS). “If indeed there is a link, it suggests a tit-for-tat, a fracas on two fronts that has broken out quite suddenly, threatening to undermine ­bilateral ties yet again between the two close neighbours.”

He adds: “Both neighbours cannot afford these untimely disputes. The new maritime discord is located at a sensitive juncture where Singaporean and Malaysian waters meet in the southern end of the strategic Malacca Strait. Trouble in the waters will affect shipping in the vital waterway and will have far-reaching effects not just on the Singapore economy but also Malaysia’s, and eventually international trade.” This past week, Malaysia appeared to open the door to some form of compromise on the ILS procedures, suggesting that they be implemented “on Runway 03 on the southern side of Seletar Airport as opposed to Runway 21 on the northern side”. Meanwhile, all but one of Malaysia’s vessels that had encroached into Singapore’s waters had been withdrawn.

It is not clear that the ILS matter will ultimately be settled without further tensions, though. And, some observers say that the Pakatan Harapan government in Malaysia may well continue resorting to confrontational diplomacy in the future, at least for as long as Mahathir remains at the helm. “It is to be expected with a new government in Malaysia, and more so under Mahathir’s leadership, that disputes with Singapore would come to the fore,” says Mustafa Izzuddin, a fellow at the ISEAS-Yusof Ishak Institute. He adds that Singapore is a “convenient bogeyman or whipping boy” for Malaysia’s leadership to exploit in the face of “domestic unrest caused by ethno-religious politics”.

New leaders, new challenges

That poses a new challenge of sorts for Singapore’s so-called 3G leaders, as well as the 4G batch that has just been identified. Singapore’s current PM Lee took over from his predecessor Goh Chok Tong in 2004. Mahathir had stepped down the year before, in 2003. Lee had, however, spent many years as Singapore’s deputy PM, and would have directly engaged with Mahathir’s government at the time. The same cannot be said of the 4G leaders. Heng Swee Keat, who is likely slated to succeed Lee, and Chan Chun Sing, who is likely to be Heng’s deputy, were not in politics during Mahathir’s time. Heng and Chan only participated in their first general election in 2011.

Lawrence Loh, deputy head of the strategy and policy department at the National University of Singapore, says Mahathir may well have been testing the 3G and 4G leaders amid the recent tussle, to determine if they have the same thinking and resolve as their predecessors. “[This leadership] in Singapore is different from past transitions,” Loh adds, referring to the 4G leaders. “The fact is that the successor was not too clear until the last few moments. There were a few forerunners. When PM Lee came, there was some clarity along the way. He was in the training seat for a pretty long time.”

The new crop of Singapore leaders will not only have to learn to cope with Mahathir’s belligerence but also ensure they do not alienate younger Malaysian leaders who will eventually take over. Mahathir has pledged that he will stay in office for only two years, after which he will hand over the reins to Anwar Ibrahim. “The signals are pointing towards Anwar. He is more measured. He does not seem to shoot from the hip,” Loh says.

Malaysia’s new crop of leaders are being similarly tested. While many of them are seasoned opposition politicians, they are rank novices when it comes to running government ministries and managing foreign relations. Accepting the leadership of Mahathir, whom many of them had once opposed, is also unfamiliar territory for them.

“Mahathir has never tried to hide his disdain for Singapore. What is perhaps more surprising is that other politicians in Pakatan Harapan appear to be happy to jump on the bandwagon of taking a less accommodating stance with respect to foreign policy towards Singapore,” says Harrison Cheng, associate director at global risk consultancy Control Risks. “This is likely because Pakatan Harapan fears that it could be seen as domestically weak at a time when it is trying to handle rising racial and religious tensions,” he adds.

Indeed, after dislodging the Barisan Nasional coalition that dominated Malaysian politics for more than six decades, the Pakatan Harapan government is still in “campaign mode” as it seeks to establish itself. “It also does appear that the younger Malaysian ministers are trying a little too hard to show to their domestic population that they are capable and competent,” says Mustafa of ISEAS.

At risk is a bilateral relationship from which neither Malaysia nor Singapore can escape. “The face-to-face bilateral meetings that have been held thus far have been fruitful and cordial,” Mustafa notes. “Part of the problem is that some of the Malaysian leaders would say one thing for domestic consumption but another to keep relations with Singapore calm and stable. We also see a lack of coordination among the different ministries, culminating in contrasting viewpoints on the same issue.”

Looking forward, historical baggage

There is more to the shifting tone of Malaysia and Singapore’s bilateral relations than Mahathir’s combative personality alone, though. Malaysia’s previous PM Najib left behind a mountain of government debt as well as a number of big infrastructure projects that the Pakatan Harapan government is now trying to cancel or postpone. “There is market suspicion that Malaysia may be raising these [airspace and maritime boundary disputes] as a pretext to forestall reimbursing Singapore in 2019 for deferring the HSR project by two years to May 2020,” says Cheng of Control Risks.

“Such a theory may not be so far-fetched, given that the Malaysian government has resorted to quite drastic means in trying to reduce national debt, and the commitment to the HSR project by the Malaysian government is very weak,” Cheng adds.

More generally, the relationship between Malaysia and Singapore has been defined by their acrimonious separation in 1965. That has coloured each country’s perception of the other in profound ways, making it difficult to maintain a relationship of cordial cooperation. Even a casual perusal of comments on stories about the recent disagreements in sea boundaries and airspace turns up countless instances of Malaysians and Singaporeans caricaturing each other.

“There was always this idea during the Najib and Badawi administrations that if you have very good relations with Singapore, it is somehow conciliatory on your part,” says Eddin Khoo, a Malaysian political commentator and director of cultural organisation Pusaka. “Somehow, Malaysia and Singapore require that emotional tension for us to mutually acknowledge each other. It is strange, an almost surreal kind of relationship.”

For many politicians of that era, separation was more than just about legal agreements that have to be honoured. “We have a sovereignty that is defined by the rule of law, recognised by international law. There is also another kind of sovereignty as well, which we live out on a day-to-day basis. I think there is a bit of a gap there,” says Graham Ong-Webb, a research fellow at RSIS. “In the hearts of the Malaysian political leaders or Mahathir, this is something that they haven’t had a chance to square off. Knowing what [Mahathir] championed in the past, it shouldn’t be surprising that he has unfinished business,” Ong-Webb adds.

Yet, for a small city state like Singapore, honouring bilateral agreements and upholding international law are existential matters. “That means you stand your ground, especially when it comes to the rule of law, which is an equaliser. If we give up an inch, we feel… the Malaysians will gun for something more,” Ong-Webb says.

In short, Malaysia and Singapore are locked in a troubled relationship as two neighbours with strong common interests but vastly different views on the way things ought to be. “I think this is a multidimensional issue,” Ong-Webb says. “One dimension is the rule of law, which is Singapore’s playing field. But it cross-cuts with another plain, which is the intangible side of [a troubled] relationship.”

So, what does it all mean for businesses and investors on both sides of the Causeway? Is there a chance of tensions ever getting out of control? For all the tough talk from ministers in Malaysia and Singapore, investors probably have little to worry about.

“These bilateral tensions will resolve themselves, mainly because both countries have too much at stake,” says Jayant Menon, lead economist at the Asian Development Bank. “Since the 1980s, Malaysia and Singapore have become more interdependent. They are part of the regional supply chain network. There is too much at stake for relations to sour. Also, since the 1980s, Malaysia and Singapore have increased their exchange of peoples and investments. They are more interdependent now than they were before. When countries are interdependent, they will not risk an economic fallout, because the costs are very high.”

Even the most prickly of the outstanding bilateral issues between Malaysia and Singapore — the supply of raw water by the former to the latter — is unlikely to ever be a real problem for businesses. “I think this sort of issue will not end up affecting the overall relationship, because there is too much at stake. The amount in trade and investment in many areas will not be overshadowed by this issue,” Menon says.

That is not to say that Malaysia and Singapore are not losing out on anything by failing to get past their troubled relationship. James Chin, director of the Asia Institute at the University of Tasmania, sees a tense period ahead for the two countries. “The leadership in Singapore is likely to play the waiting game until Anwar takes over. These things can take a very long time,” he says. “It will lead to a [gridlock] where both sides can’t move, can’t do ­anything about any issue, because the big issues are not resolved,” he adds.

That would be a pity, according to some observers. “Right now, the world is facing a lot of uncertainty and turbulence. As you know, the US-China conflict is already showing early signs of affecting other countries. It might spill over into the region. This is a time for countries that have longstanding, strong relationships to continue them to weather the storms developing all around them. This is a time for Malaysia and Singapore to increase cooperation and not decrease it,” says Menon.

He points out that both Malaysia and Singapore are members of the Association of Southeast Asian Nations, 11-nation Trans-Pacific Partnership (TPP 11), Regional Comprehensive Economic Partnership and Asia-Pacific Economic Cooperation. “Co­operation in many areas can blossom through these arrangements as long as they keep cordial relations,” Menon adds.

Timeline of key issues between Singapore and Malaysia

Singapore and Malaysia sign the first Water Agreement, expiring in August 2011. Under the deal, Singapore is entitled to draw an unrestricted quantity of raw water from the Tebrau and Skudai rivers. In return, Singapore would provide Johor with treated water amounting to 12% of the water imported. Singapore would operate and maintain the water facilities at its own cost. Singapore pays Johor three sen per thousand gallons of raw water, while Johor pays Singapore 50 sen per thousand gallons of treated water. The Agreement provides for a price review after 25 years, in 1986.

Singapore and Malaysia sign the second Water Agreement, expiring in 2061. Under the deal, Singapore is entitled to draw and use a maximum of 250 million gallons of raw water a day from the Johor River. In return, Singapore would provide Johor with treated water of up to 2% of the water imported. Singapore pays Johor three sen per thousand gallons of raw water, while Johor pays Singapore 50 sen per thousand gallons of treated water. The Agreement provides for a price review after 25 years, in 1987.

Malaysia publishes a map showing Pedra Branca, a rocky island in the South China Sea, within its territorial waters

Singapore lodges a formal protest with Malaysia to assert that Pedra Branca belonged to the city state

July — Dr Mahathir Mohamad becomes Malaysia’s prime minister

Singapore proposes bringing the dispute over Pedra Branca to the International Court of Justice (ICJ)

PUB and the Johor state government sign a supplementary agreement to the 1962 Water Agreement, to construct the Linggiu Reservoir to increase the yield of the Johor River. The reservoir would regulate the flow of seawater into and out of the Johor River. Singapore pays for the construction of the reservoir and for the land on which it sits.

Malaysia and Singapore sign the Malayan Railway Land Points of Agreement. Malaysia agrees to vacate the Tanjong Pagar Railway Station in return for three parcels of land in Singapore.

November — Lee Kuan Yew steps down and Goh Chok Tong becomes Singapore Prime Minister

Malaysia accepts the proposal to bring the dispute over Pedra Branca before the ICJ

Singapore and Malaysia negotiate “framework of wider cooperation”.

During the Asian financial crisis, Malaysia wants loans to support its currency. In return, Singapore suggests that Malaysia give its assurance for a long-term supply of water to Singapore.

The loans are eventually not needed, so the two sides negotiate other issues. One of them is the joint development of land parcels in Singapore, in return for Malaysia relocating the KTM railway station from Tanjong Pagar.

August — Malaysia wants Singapore to pay 45 sen per thousand gallons of raw water it imports from Johor

February — Malaysia wants Singapore to pay 60 sen per thousand gallons of raw water imported from Johor

September — Malaysia wants Singapore to pay RM6.25 per thousand gallons of raw water imported from Johor

October — Mahathir tells Goh Chok Tong that Malaysia wants to “decouple” the water issue from the package of issues

July — The dispute over Pedra Branca is brought to the ICJ

October — Mahathir steps down as prime minister. Abdullah Badawi takes over.

December — Lee Hsien Loong becomes Singapore prime minister, taking over from Goh Chok Tong

May — The ICJ rules that Singapore has sovereignty over Pedra Branca, while Malaysia has sovereignty over the Middle Rocks. The judgment is final and not subject to appeal.

June — The Sultan of Johor says Pedra Branca belongs to Johor, and that he will find a way to reclaim the island for the state

September — Kelantan prince and MP Tengku Razaleigh Hamzah says Johor’s interests are not raised before the ICJ. Therefore, the Malaysian government, in accepting the ICJ ruling, has infringed on Johor’s constitutional rights.

Najib Razak becomes Malaysia’s prime minister

May — Lee Hsien Loong and Najib meet for the Leaders’ Retreat

Both parties agree to implement the Points of Agreement on Malayan Railway lands, which include relocating the KTM railway station from Tanjong Pagar to Woodlands; and setting up a joint-venture company, M+S Pte Ltd, 60% held by Khazanah Nasional and 40% held by Temasek Holdings. Additionally, six parcels of land — in Tanjong Pagar, Kranji, Woodlands and Bukit Timah — will be vested in M+S for development, and which in turn could be swapped for land in Marina South and/or Ophir-Rochor.

August — Both Singapore and Malaysia reduce toll charges on the Second Link by 30%

September — Najib announces plans to build a High Speed Rail (HSR) link between Kuala Lumpur and Singapore

June 30 — KTM train to Malaysia leaves Tanjong Pagar Railway Station for the last time as the Malayan Railway Lands Points of Agreement take effect. The station is closed and ownership transferred to the Singapore government.

Lee Hsien Loong and Najib launch the Marina One and DUO projects, to be developed by M+S. The two projects have a gross development value of $11 billion.

February — Malaysia files new application to the ICJ to revise the judgment on Pedra Branca, citing new evidence based on three documents obtained from British archives

June — Malaysia files new application to the ICJ to interpret the 2008 ICJ judgment on Pedra Branca

December — Joint AssetsCo tender for the KL-Singapore HSR is called.

The Civil Aviation Authority of Singapore presents the implementation plan for Instrument Landing System (ILS) procedures at Seletar. CAAS also says a new passenger terminal building will be built at Seletar Airport, for Malaysian airline Firefly to operate from.

January — Lee Hsien Loong and Najib meet in Singapore for 8th Singapore-Malaysia Leaders’ Retreat

The Johor Bahru-Singapore Rapid Transit System (RTS) Link Bilateral Agreement is signed. This is the second cross-border rail agreement signed in two years, and covers technical, commercial, financing, procurement, regulatory, and customs and immigration arrangements for the RTS. The stations are to be built in Woodlands North in Singapore and Bukit Chagar in Malaysia. Passenger services are to start by Dec 31, 2024.

Lee Hsien Loong and Najib officiate at the opening of the Marina One project in Marina South and the DUO in Ophir-Rochor

Malaysia abolishes the Eastern Dispersal Link highway toll starting from Jan 1, while Singapore removes it from Feb 1

April — The ICJ announces that it will hold public hearings in June on the two cases concerning Pedra Branca brought by Malaysia

May 9 — Mahathir becomes Malaysia’s prime minister for the second time

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