SINGAPORE (June 25): Malaysia’s new finance minister Lim Guan Eng is appealing to the Singapore government to be more understanding of his country’s tight financial position. Malaysia says it cannot afford the RM110 billion ($37.3 billion) bill for an agreed-upon high-speed rail (HSR) project connecting Kuala Lumpur with Singapore. But pulling out could cost Malaysia RM500 million in compensation.
“We’re talking about the possibility of deferring and discussing with our good neighbours Singapore to see how they can help us out of this debt predicament,” Lim says in an interview with Channel NewsAsia. “I’m sure Singapore would understand that this is not the moment for us to embark on high-cost projects such as the HSR.”
Lim’s remarks have drawn some flak. “A contract is a contract, we should enforce as is. Otherwise, we set the wrong precedent,” said one comment on CNA’s Facebook page. “Singapore has lost much by relocating and preparing the place for this project. No love lost but we need to recover cost.”
Said another, fiercer, one: “Malaysia only think [sic] of us as neighbours when they want our money. I can never forget the humiliation of skinning a cat. How about we skin them now?”
These comments are a reference to Malaysian Prime Minister Dr Mahathir Mohamad’s purported words in a 2002 Berita Harian report: “We can skin a cat in many ways. To skin Singapore, there is not just one method.” That year, Malaysia-Singapore relations turned particularly acrimonious as Malaysia accused Singapore of profiteering from the purchase of water from Johor at a low price and the sale of treated water back to Johor at a high price. Malaysia also alleged that Singapore’s land reclamation near Pulau Tekong would affect the development plans of southern Johor.
Mahathir later denied using the phrase “skin Singapore”; yet, he can hardly claim to have been an understanding neighbour. During his first term as prime minister — from 1981 to 2003 — Mahathir’s administration also had disagreements with Singapore on airspace rights, joint military exercises, a cross-border stock market and land links between Singapore and Johor.
Why should Singapore do its neighbour a favour now? Good economics may be one reason to. David Hume, an 18th century Scottish philosopher, historian and economist, addressed the subject of prospering from one’s neighbours in his essay Of the Jealousy of Trade. “Nothing is more usual, among states which have made some advances in commerce, than to look on the progress of their neighbours with a suspicious eye, to consider all trading states as their rivals, and to suppose that it is impossible for any of them to flourish, but at their expense,” Hume wrote.
“In opposition to this narrow and malignant opinion, I will venture to assert, that the increase of riches and commerce in any one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbours; and that a state can scarcely carry its trade and industry very far, where all the surrounding states are buried in ignorance, sloth, and barbarism.”
Hume was writing, at the time, of Great Britain’s relations with its neighbours: Germany, Spain, Italy and France. He said he prayed for “flourishing commerce” in those nations and suggested that all would benefit from sovereigns and ministers adopting “enlarged and benevolent sentiments towards each other”.
His ideas continue to be cited by proponents of free trade today. But as globalisation beats a retreat around the world, Hume’s wisdom seems in short supply. Singapore and Malaysia are not the only neighbouring countries or trade partners at odds with each other. The US and China recently announced additional tariffs on trade with each other. The UK is trying to leave the European Union. And there is growing rivalry between Hong Kong and Shenzhen.
Such positions arise from the misconception that economics is a zero-sum game. US President Donald Trump appears to believe that China is unfairly profiting by flooding the US market with cheap steel or cars. Likewise, some Singapore netizens may think giving Malaysia a leg-up may one day lead to the latter’s achieving greater prosperity at Singapore’s expense.
Is it possible for neighbours to build win-win relationships? Malaysian billionaire Robert Kuok, in his memoirs published last year, credited his success in China to his “willingness to give way”. Kuok had faced significant challenges building his property and hospitality operations in China, as government officials constantly tried to extract more out of him. In negotiating for a joint contract to build the China World Trade Center, for instance, Kuok gave the Chinese the important role of managing director and also subsidised the cost of quality manpower. “We subsidised everything, quietly, without asking for credit.” But in the end, Kuok says, the project was “one of the best investments anybody has made in China”.
Interestingly, Kuok has been named to a special council of advisers to the Malaysian government. Other members of this Council of Eminent Persons are former Malaysian finance minister Daim Zainuddin, former Bank Negara governor Zeti Akhtar Aziz, former Petronas CEO Hassan Marican and economist Jomo Kwame Sundaram.
Singapore is known for its pragmatism, and has readily offered its neighbours assistance. For example, it sent two warships and a naval helicopter to help search for Malaysia Airlines flight MH370; the Singapore Armed Forces was also deployed to help in Aceh, after the tsunami hit in 2004. It may be more pragmatism, but Singapore is also working with Malaysia to help manage water resources in the Johor River.
In the case of the HSR, who should give way? Singapore could demonstrate its neighbourliness once more. Malaysia, meanwhile, must be the good neighbour it expects Singapore to be.
