Singapore ties to wane under Pakatan, says BMI research

May Robertson
Singapore’s Prime Minister Lee Hsien Loong shakes hands with Prime Minister Tun Dr Mahathir Mohamad, as Mahathir’s wife Tun Dr Siti Hasmah and Lee’s wife Ho Ching look on prior to their private meeting in Putrajaya May 19, 2018. — Reuters pic

KUALA LUMPUR, July 25 — Malaysia’s diplomatic relations with Singapore are expected to decline in coming years but will not affect trade between the two neighbours, said BMI Research today.

In the Fitch Group unit’s report analysing political risk between Singapore-Malaysia, it noted that Prime Minister Tun Dr Mahathir Mohamad was confrontational towards the island-state during his previous stint and is expected to resume this stance now.

“This will mark a shift in relations, which had been friendly under the leadership of previous Malaysian Prime Minister (Datuk Seri) Najib Razak.”

“Despite the cooler ties between the two countries, it is unlikely to significantly alter Singapore’s political landscape, and we are therefore maintaining our strong short-term and long-term political risk score for Singapore at 94.8 and 81.1 (out of 100), respectively,” BMI research said.

BMI noted that many of the issues that were flashpoints during Dr Mahathir’s first stint as prime minister remain today, such as the supply of water to Singapore as well as territorial disputes that set the tone for later ties.

It said Singaporean-Malaysian diplomatic ties had been tense at the time, despite late Singapore founding father Lee Kuan Yew stating in his memoirs that more was achieved with the Mahathir administration then than with the two preceding Malaysian PMs.

“One major issue was with respect to the Points of Agreement of 1990 that was signed by the two countries on November 27 1990 to resolve the issue of the future of railway land owned by the Malaysian government through Malayan Railways in Singapore.”

BMI Research also cited two points of contention that can be expected in the new dynamics — including the 350-km Kuala Lumpur-Singapore High-Speed Rail project and the 1962 Water Agreement.

Putrajaya is seeking to either halt or delay the HSR and is again agitating over the price of raw water sold to Singapore.

In an interview with Bloomberg on June 25, Mahathir said the price of water sold to Singapore was “ridiculous” and renegotiation of the terms of the agreement would ensue.

However, BMI Research noted that despite the cooler ties, both countries will remain dependent on each other, particularly on trade matters.

“Malaysia is Singapore’s second largest export destination, even though its share has trended lower from a high of close to 20 per cent in 1994 to 10.6 per cent in 2017,” said BMI Research.

“Meanwhile, Singapore is among Malaysia’s top overseas shipment locations, accounting for 14.3 per cent of total exports in 2017, despite declining from 23.3 per cent in 1991.”

Singapore had been part of Malaysia until 1965 when the city-state was expelled via a unanimous vote in Parliament.