Malaysian Prime Minister, Mahathir Mohamad, yesterday criticised that the price of raw water sold to Singapore is ridiculous.
He wants to renegotiate the terms but also said it is “not urgent“.
We hope he’s serious and sincere about resolving the water issue because Mahathir left this issue hanging in 2002 before he stepped down as Prime Minister.
The water issue was never resolved during Mahathir’s time.
Now that he’s back in power, this water issue has resurfaced.
1962 water agreement
The 1962 water agreement will only expire in 2061. That’s 43 years later from now.
It allows Singapore to buy raw water from Johor, Malaysia at 3 sen (SGD 1 cent) per thousand gallons.
1000 gallons of water is about this much.
We use about 430 million gallons of water in Singapore every day. So that’s about 430,000 pools of water in the picture above.
In return, Singapore sells treated water back to Johor at 50 sen (SGD 17 cents) per thousand gallons.
So is Singapore buying low, selling high?
In fact, Singapore is giving Malaysia a VERY good discount for treated water.
It costs Singapore RM2.40 (SGD 81 cents) to treat every thousand gallons of raw water from Malaysia.
By selling it at 50 sen (SGD 17 cents), Singapore is actually losing money.
We are absorbing RM1.90 (SGD 64 cents) per thousand gallons of water.
Foreign Minister Vivian Balakrishnan said Singapore has been regularly supplying Johor with 17 million gallons of treated water a day but Malaysia has chosen to buy up to 37 million gallons of water.
That means we’ve been subsidizing Malaysia for approximately RM 70,000 (SGD 23,668) a day and RM25 million (SGD 8.4 million) a year!
To make matters more interesting, Malaysia actually sells the treated water to Johoreans at a profit.
This profit is worth more than RM127,650 (SGD 43,161) a day and RM46 million (SGD 15.5 million) a year.
What’s with the water drama?
To understand the context of this issue better, we have to look at the history between Singapore and Malaysia since 1998.
Here’s a simplified version of the timeline:
1998 (Mahathir was PM)
Malaysia wants to renegotiate the price of raw water sold to Singapore at 3 sen per thousand gallons.
By right they cannot do that because they lost their right to review the price but Singapore is a nice and friendly neighbour.
Lee Kuan Yew (then Senior Minister) and Mahathir agree to increase water price to 45 sen per thousand gallons.
If this negotiation went through, we would have been paying this amount to Malaysia for their water.
But it didn’t work out.
Malaysia isn’t happy with 45 sen per thousand gallons. They want 60 sen.
They also want to review the price every five years.
LKY and Mahathir agree to revise price to 45 sen per thousand gallons.
After 2061, it will increase to 60 sen per thousand gallons. This is what Malaysia wants.
Once again, Singapore has shown to be a friendly neighbour.
Malaysia decided to try its luck again and push their boundaries.
This time, they want more.
They want to raise the price to 60 sen per thousand gallons and increase it to RM3 per thousand gallons for 4 years (2007 to 2011).
After 2011, Malaysia wants to adjust the price yearly for inflation.
Goh Chok Tong (then Prime Minister) told Mahathir about Newater.
Malaysia now wants to sell their water to Singapore at RM6.25 per thousand gallons.
This is a huge jump from what was originally agreed at 60 sen per thousand gallons.
Mahathir drops all the water talk.
He said the negotiations did not produce meaningful results and the country wants to settle their price review of raw water first.
Singapore releases its public correspondence with Malaysia on this water issue.
It shows that Malaysia keeps changing its mind.
Mahathir steps down. Abdullah Badawi takes over.
Najib Razak (then Malaysian Prime Minister) and Lee Hsien Loong (Prime Minister) reaffirm the terms of 1962 agreement.
Clearly, there was a good relationship going on between Singapore and Malaysia under Najib’s administration.
Mahathir returns as second-time Prime Minister of Malaysia.
16 years later, he decided to reopen the water issue which he dropped in 2002.
The 1962 water treaty was guaranteed by the Malaysia and Singapore governments in the Separation Agreement.
It was registered with the United Nations when Singapore separated from Malaysia in 1965.
Malaysia cannot anyhow increase the price of water as and when it likes or wants.