Water spat with S'pore mirrors gov't treatment of minorities

LETTER | Since Dr Mahathir Mohamad assumed his second tenure as the prime minister of Malaysia in May 2018, he wasted no time in raising all the disputed issues with Singapore - the crooked bridge, water supply, border, airspace, road charge/VEP etc.

Most of the disputes were created by Malaysia, or more precisely by Dr M personally. Take the long-standing water dispute with Singapore for instance. The agreement between Singapore and the then Malaya dated to 1962. The agreement stipulated that Singapore has the right to buy raw water from Johor at RM0.03 per thousand gallons and Johor has the right to buy treated water from Singapore at RM0.50 per thousand gallons, up to 5 million gallons per day.

The agreement was up for renegotiation in 1987, well within Mahathir's first term as PM. The government back then decided not to revise the terms of the agreement. The row between Malaysia and Singapore over the water agreement only started in 1998 after the Asian Financial Crisis.

On the surface, it appears Malaysia is dealt a raw deal. The agreement itself actually gave ample considerations to the rising cost of materials and labour (i.e. inflation) for future price negotiations. The agreement could not have predicted the existence of the Singapore dollar, so there was no stipulation on the vagaries of currency exchange rates.

Regardless of how the agreement is interpreted, Singapore and Malaysia signed a new water agreement in 1990. It is a supplement to the 1962 agreement and will expire in 2061.

If Malaysia thinks the price of raw water sold to Singapore is too low, why did they not negotiate a higher price in 1987 and then in 1990? Crucially, why did they extend the expiration date to 2061?

Whatever the dispute between Singapore and Malaysia, the latest agreement supersedes previous ones. By harping on the 1962 agreement, it gives the impression that Mahathir is trying to shirk his responsibilities.

If Malaysians feel shortchanged now, they can only blame themselves. Or rather, they can blame Mahathir because he was the one who signed the agreement. It is rather disingenuous for Mahathir to come out now playing the role of the victim and saviour.

Perhaps Malaysia had very good economic reasons to agree to, what is on the surface, seemingly lopsided terms. If we dig a little deeper into the cost of purifying the water, one begins to understand the economic considerations behind the agreement.

Several sources quote a price of RM2.40 as the cost of Singapore purifying the raw water from Malaysia. It is unclear if this cost is current or what exchange rate it is based on. For the sake of argument, I will use this figure.

The cost of raw water is zero. It literally falls from the sky. Even though Malaysia only gets RM0.03/thousand gallons, it is still pure profit. If not sold to Singapore, Malaysia would make zero ringgit on the water.

Furthermore, Malaysia is paying RM0.47 (RM0.50 – RM0.03) for something that costs RM2.40 to purify. In essence, Singapore is effectively subsidising Malaysia to the tune of RM1.90/thousand gallons! As the exchange rate between the ringgit and the Singapore dollar widens over time, the subsidy to Johor will only grow.

Furthermore, Malaysia, at times, drew more treated water than the 5 million gallons agreed upon. Singapore still charges Malaysia the RM0.50 price. If anyone should complain about being exploited, it should have been Singapore.

If Malaysia can purify water at less than RM0.50, then it makes economic sense to do it themselves but it is unlikely they can do so, ever. Hence the decision to extend the 1962 arrangement until 2061.

Johor domestic consumers pay RM0.80 for every cubic metre of water for the first 20/m3 with a minimum charge of RM7 (i.e. minimum usage of 8.75/m3). If a household uses less than 8.75/m3 per month, it still pays RM7. 

1/m3 is equivalent to 220 UK gallons (US gallons are slightly different). 1000 gallons is roughly equal to 4.55/m3.

That means the consumers in Johor are effectively paying the water utility RM3.63 (4.55 x RM0.80) for a thousand gallons. And since the minimum tariff is set at RM7, Johoreans are actually paying at least RM7 for water that only cost the supplier RM0.47 to procure!

The water imported from Singapore to Johor is most certainly not enough to satisfy the demand of the entire state. So Johor has to treat its own water and the cost is probably much higher than RM2.40, let alone the RM0.50 it pays Singapore. Far from being exploited, Johor is reaping tremendous benefit from Singapore for the cheap water.

Furthermore, the government (taxpayers) foots the bill for the treated water, however, the profits from water tariffs go into the coffers of a private company. Taxpayers should rightfully feel shortchanged but they should not be fooled whom to direct their ire towards.

How the Malaysian government treats its smaller neighbour shows a similar pattern of behaviour with respect to the way it treats its minorities, and it offers insight on how the Malaysian government operates.

First of all, they do not view an agreement or manifesto as sacrosanct. Making promises is only a matter of expediency. Shifting goal posts to benefit oneself is par for the course. It shows people they are untrustworthy, fickle partners. A government that is beset by trust deficiency is like a person with a low credit score. It increases the cost of conducting business with and by the government. The bill ultimately goes to the taxpayers.

While the people who voted for the present government can do nothing if it reneges on its election promises, Singapore is no pushover. It can fight back and hurt Malaysian interests. Even if Singapore agrees to revise the price of raw water, it can simultaneously make counter-demands on the price of treated water it sells back to Malaysia. In the end, Malaysia lifts a rock only to drop it on its own foot.

Singapore has developed enough capabilities to replace/supplement its dependence on raw water from Malaysia. But Johor has not developed enough of a capability to safeguard against drought and water treatment for its own use. It does not take a genius to know who holds a greater negotiating power. When your opponent holds all the cards, the best strategy is to fold. Bluffing only courts drubbing and humiliation.

Secondly, Singapore also went above and supplied beyond 5 million gallons per day back to Johor at the same low price of RM0.50. There is nothing in the agreement that prevents Singapore from charging the full price for water supplied over the limit. But instead of being grateful, the Malaysian government accuses Singapore of exploitation.

It is like someone who inherited a piece of land, sells it to the developer for RM3,000. The developer builds a house on the land for RM240,000. That person buys back the land and the newly built house for RM50,000. That person then accuses the developer of paying him too little for the land. Had he just left the land undeveloped, he would have made zero profit, no matter how much the land is valued at.

Again, this shows striking similarities in how it treats its minorities.

The minorities did the bulk of heavy lifting in developing this country. Without their effort, rain will simply seep into the soil, tin mines remain buried, rubber trees untapped, farms left barren, cities unfounded, schools not established. Today’s menial jobs that are often done by foreign labourers, not unlike the jobs done by the forefathers of the minorities before Independence.

The Malay privileged class reaped tremendous benefits on the back and effort of the minorities, kept most of the profits while keeping their rural brethren poor and ignorant. But instead of being grateful, it is the benefactor that is hounded and reminded to be grateful for the “privilege” of creating wealth for the masses. This is a typical mafia, rent-seeking mindset. The recent resurfaced AP brouhaha is a classic example.

The agencies created to benefit exclusively the Malays/Muslims like Mara, Felda, Tabung Haji, not to mention the GLCs like KTM, MAS etc, have to be repeatedly bailed out with tax monies. Untold billions syphoned out of the country or hidden in condominiums and bungalows. Yet, it is the minorities who get blamed for the backwardness of the majority.

This is still how the Malaysian government operates. This is the Malaysian dilemma. 

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.