Singapore–Malaysia 1988 memorandum of understanding on water, gas and ferry service

After six years of negotiations between Singapore and Malaysian officials over a new agreement on water and gas supplies, Singapore’s then Prime Minister Lee Kuan Yew and his Malaysian counterpart, Mahathir Mohamad, finally signed a memorandum of understanding (MOU) on 28 June 1988. The MOU set out the terms of future sales of water and gas by Malaysia to Singapore.1

Negotiations between Singapore and Malaysia on water and gas supplies began in August 1982, in response to Singapore’s need for more water.2 Among other issues, Lee and Mahathir agreed at the time to the joint development of water-extraction facilities at the Johor River and to study the feasibility of piping natural gas from Terengganu to power stations in Singapore.3 Singapore and Malaysian officials subsequently held talks on several occasions, but progress was stalled by the issue of water and gas prices.4

On 23 August 1986, Lee made a brief visit to Kuala Lumpur to restart negotiations with Mahathir. During the talks, Lee proposed that Singapore would buy natural gas from Malaysia, help develop the gas-processing plant in Terengganu and help finance the building of a gas pipeline from Terengganu to Singapore. The purchase of gas from Malaysia by Singapore was seen to be mutually beneficial, and henceforth water and gas were linked in the same deal.5

On 20 January 1988, Mahathir made an unpublicised visit to Singapore at Lee’s invitation. During their talks, the two leaders came to an understanding on water and gas supplies – most significantly, on a new and mutually agreeable approach to the development of Johor’s water resources for the benefit of both countries. The details of the agreement were then worked out by a steering committee composed of Singapore and Malaysian officials.6

Signing of MOU
Based on the significant progress made in the January 1988 talks, Lee led a delegation to Kuala Lumpur for talks on 27 June 1988. The Singapore delegation included Minister for Finance Richard Hu; Permanent Secretary for Finance and chairman of the Public Utilities Board Lee Ek Tieng; Permanent Secretary for Foreign Affairs Peter Chan; Deputy Secretary for National Development Lim Hng Kiang; and Director of the Tourist Promotion Board Joseph Chew.7 Originally slated to be a meeting between only Lee and Mahathir, the talks came to also include their respective finance ministers and Johor’s Chief Minister, Muhyiddin Yassin.8

The two-hour meeting centred on the issues of water and gas supplies, a ferry service and a new link between Johor and Singapore. The Malaysians wanted a ferry service between Changi Point and southeast Johor to draw tourists from Singapore to the Malaysian beach resort at Desaru, while Singapore proposed having a second bridge linking Johor and Singapore to ease traffic congestion on the Causeway.9

The following day, on 28 June 1988, Lee and Mahathir signed the MOU on the future sales of water and gas to Singapore and the new ferry service.10

Under the MOU, Malaysia agreed to increase the limit of 250 million gallons (1.135 billion litres) of water sold per day to Singapore – the term stipulated in the 1962 water agreement. The proposed new limit was, however, not disclosed at the time. On the issue of water-extraction facilities, the MOU outlined that Singapore would not only be paying for the construction of the dam and the pumping station, but also for the use of the land in Johor; furthermore, all the facilities would be owned by Johor, but maintained by Singapore.11

It was also agreed that Malaysia would supply Singapore with gas on a long-term basis. On its part, Singapore would make land available for a ferry terminal at Changi Point for a nominal sum. The second bridge linking Johor and Singapore remained under consideration, as its location had not been decided upon. Both Lee and Mahathir were said to be satisfied with the terms of the deal, which was hailed to be a landmark in bilateral relations.12

The MOU was endorsed by the Johor Executive Council in early July 1988.13 The resulting new water pact, which supplemented the 1962 agreement, was eventually signed on 24 November 1990.14

1. Cheong Yip Seng and Ismail Kassim, “Memorandum of Understanding to Be Signed Today,” Straits Times, 28 June 1988, 1. (From NewpaperSG)
2. Cheong and Kassim, “Memorandum of Understanding.” 
3. Cheong Yip Seng, “PM Lee and Mahathir Discuss Bilateral Ties,” Straits Times, 20 October 1987, 32; “Accord on Settling the Outstanding Issues,” Straits Times, 24 August 1982, 9. (From NewspaperSG)
4. Cheong and Kassim, “Memorandum of Understanding.” 
5. Cheong, “PM Lee and Mahathir Discuss Bilateral Ties”; H. L. Lim and Mano Sabnani, “How Water and Gas Became a Package Deal,” Straits Times, 24 August 1986, 8. (From NewspaperSG)
6. “New Approach to Water Pact: Mahathir,” Straits Times, 23 January 1988, 1. (From NewspaperSG)
7. “PM to Hold Talks with Mahathir in Kuala Lumpur Tomorrow,” Straits Times, 26 June 1988, 1. (From NewspaperSG)
8. Cheong and Kassim, “Memorandum of Understanding.” 
9. Cheong and Kassim, “Memorandum of Understanding”;  “PM to Hold Talks with Mahathir in Kuala Lumpur Tomorrow”; Ismail Kassim, “PM Lee, Mahathir Satisfied with Outcome of Talks,” Straits Times, 29 June 1988, 18. (From NewspaperSG)
10. Kassim, “PM Lee, Mahathir Satisfied with Outcome of Talks”; “Council Signs for Johore River Water.,” Straits Times, 30 September 1962, 10. (From NewspaperSG)
11. Kassim, “PM Lee, Mahathir Satisfied with Outcome of Talks.”
12. Kassim, “PM Lee, Mahathir Satisfied with Outcome of Talks”; Cheong Yip Seng, “Landmark Deal, Says PM Lee,” Straits Times, 29 June 1988, 1. (From NewspaperSG)
13. “Johore Exco Endorses KL-S’pore Water Pact,” Straits Times, 7 July 1988, 32. (From NewspaperSG)
14. Han Fook Kwang, “S’pore, Johor Sign New Water Pact,” Straits Times, 25 November 1990, 1. (From NewspaperSG)

Further resources
Cheong Yip Seng, “Progress in Water, Gas Talks with KL,” Straits Times, 17 December 1987, 1. (From NewspaperSG)

Gas, Water Deal Needs Scrutiny, Says KL paper,” Straits Times, 17 September 1986, 16. (From NewspaperSG)

H. L. Lim, “‘Prices and Needs... They Can Be Sorted Out’,” Straits Times, 25 August 1986, 24. (From NewspaperSG)

Johor River Basin as Water Source,” Straits Times, 25 January 1988, 32. (From NewspaperSG)

New Approach to Water Pact: Mahathir,” Straits Times, 23 January 1988, 1. (From NewspaperSG)

What Made the Sticky Points Sticky,” Straits Times, 25 August 1986, 24. (From NewspaperSG)

The information in this article is valid as at 14 October 2014 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.  

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