The bilateral ties between Singapore and Malaysia in 2002 were marked by high-profile disputes over many issues, in particular over water. Other issues included the reaction towards land reclamation in Singapore, the management of the lighthouse on Pulau Pisang by Singapore, the banning of the use of the tudung in Singapore schools, and Singapore's bilateral Free Trade Agreements (FTAs) with other countries. These disputes demonstrate that the relations between Singapore and Malaysia continue to be driven by fundamentally competitive forces which show little sign of dissipating in the foreseeable future. Shared key interests such as economic interlinkages as well as the fight against terrorism may have mitigated the intensity of the differences to a certain extent but the overall tone remains conflictual. The outlook is not necessarily bleak. There remains a potential for bilateral ties to be brought to a modus vivendi in which both sides, while acknowledging deeply differing interests, nevertheless are cognizant of the detrimental effects of over-intense competition. Singapore and Malaysia can look for ways to work more closely according to the principle that harmonious ties are likely to lead to better economic and security conditions for both countries.

THE ISSUES AND THE DRIVING FACTORS

Water

Perhaps no issue has captured the attention more than that of water. The crux of the dispute is this: Malaysia has argued that it has a right to review the price of raw water under the current agreements while the Singapore Government has maintained that the right of review lapsed in 1986 and 1987 when Malaysia chose not to undertake the review. To understand how the discussions progressed in 2002, it is helpful to trace the key events in the negotiation process (see Table 1).

Why is Malaysia only seeking a price review now? In 1986, Malaysia did not press for a review because it was felt that the increase in the price of raw water sold to Singapore would translate into a price increase in treated water sold to Johor. It was a matter of conscious policy.