Malaysians and Singaporeans want to see forward and positive momentum in bilateral relations between the two countries. There is no doubt that the planned swop agreement concerning KTM (Keretapi Tanah Melayu) land in Singapore can potentially be a landmark diplomatic milestone.

It is important by how much the deal improves bilateral relations between the two governments. However, public reaction to such a deal is equally, if not more, important. To avert any possible backlash, full disclosure of the details of the proposed deal would be most helpful, if not  crucial.

It is natural for Malaysians to want to know more details because the agreement reached by prime ministers Datuk Seri Najib Razak and Lee Hsien Loong as reflected in the joint statements issued at the end of their meetings on May 24 and Sept 20 this year did not contain details.

The bottom line is that the deal must bring the bilateral relationship to a new level of mutual trust and  benefit. Let us hope that this apparent lack of transparency does not lead to one side or the other messing up the final package.

On the surface, differences over the deal being worked out between the parties do not seem that broad, but on closer examination, it appears that differences are, or might become, fairly deep.

Channel News Asia, Singapore, and Bernama carried reports that the latest meeting between Malaysian and Singapore officials to discuss the implementation details of the agreement reached by the two prime ministers was held on Oct 20 and 21 in Kuala Lumpur.  The joint press statement by the Foreign Offices of both countries stated that the implementation team will complete its work by Dec 31 this year.

Following the decision of the two prime ministers, another meeting, in a series, among officials of the two countries took place on Nov 29 and 30 in Singapore  and again the joint statement revealed little.

These talks must have surely involved tough negotiations, not simply implementation discussions. While several matters must have been discussed, it seems obvious to all concerned, including the public, that the big issue centres only on one subject: the fate of all the land owned by KTM in Singapore.

The first time Malaysians heard about a new breakthrough was via the joint statement of the two prime ministers on May 25. There must have been prior negotiations at lower levels before the new deal was announced. The question is, who carried out these negotiations? Were they between the Foreign Offices of Malaysia and Singapore, or were they between Khazanah National Bhd of Malaysia and Temasek Holdings Ltd of Singapore?

The Malaysian public has the right to know these and other details because their country is about to part with some very valuable strategic national assets which it owned in Singapore for almost 100 years. These assets consist of the railway line, the railway land and the railway station in Tanjung Pagar, and other support facilities in Bukit Timah, Kranji and Woodlands.

The KTM railway line, which physically divides the island of Singapore into two, stretching from Woodlands in the north to Tanjung Pagar in the south, will soon be scrapped. The KTM land will revert to Singapore in accordance with the deal signed by the two prime ministers in May and September this year.     

A bit of history
In 1918, the British colonial authorities sold to the government of the Federated Malay States the properties and estates previously owned by Singapore Railway for Straits dollars 4,136,000. The railway was renamed the Federated Malay States Railway, which finally became corporate entity KTM.

In 1990, Tun Daim Zainuddin, at the time the minister of finance, signed the Points of Agreement (POA) with Lee Kuan Yew — one day before the latter relinquished his position as prime minister of Singapore to his successor Goh Chok Tong.

The 1990 POA provided for joint development of certain pieces of land in Tanjung Pagar, Kranji and Woodlands. But prime minister Tun Dr Mahathir Mohamad did not allow the POA to be implemented as such.

It is said there were two reasons why Mahathir refused to implement the POA. The first was because the many parcels of land in Bukit Timah belonging to KTM were not included in the provisions for joint development. The second — perhaps the bigger reason — was that all KTM land not identified for joint development or not used for railway purposes would revert to Singapore free of charge — at no cost to the island state.

Numerous negotiations were held between Malaysian and Singapore officials after 1990 to seek a revision of the lopsided terms of the original POA.

These negotiations lasted many years but failed in the end.

Fresh attempts were made to reopen negotiations during the premiership of Tun Abdullah Ahmad Badawi (2003 to 2009) but they too were not conclusive. Najib seems to have had more success, having secured an agreement to settle the problems related to the POA within 17 months of taking office.

He agreed, according to the joint statement of Sept 20, 2010, that the three parcels of KTM land in Tanjung Pagar, Kranji and Woodlands and three parcels in Bukit Timah would be swopped for four parcels in Marina South and two parcels in Ophir-Rochor.

The large parcels of land in Tanjung Pagar, Bukit Timah, Kranji and Woodlands are being exchanged for small parcels in Marina South and Ophir-Rochor on the basis of equivalent values. The joint development of these parcels will be carried out by a Malaysia/Singapore joint venture company, to be called M-S Pte Ltd.

Najib, during his joint press conference with his Singapore counterpart Lee Hsien Loong on Sept 20, said that the latest deal reflected an enhanced POA.

Those familiar with past and on-going negotiations confirm that the “enhancement” consists of the agreement to swop all the six parcels  with better located parcels in Marina South and Ophir-Rochor while the original 1990 POA provided for joint development on site in Kranji and Woodlands, except for the land in Tanjung Pagar.

Kuan Yew, apparently, wanted to keep the large parcel in Tanjung Pagar because of its high value — being near Keppel Harbour — which has long been slated for redevelopment. He had, it is understood, offered at the time another piece of land in a different location in exchange for Tanjung Pagar.

The inclusion of some of the many pieces of land in Bukit Timah as part of the new deal is also an enhancement of the 1990 agreement (the original POA). In short, the latest deal is a noticeable and palatable improvement on the original POA of 1990 in the sense that all the six pieces of KTM land will be swopped with six pieces in better locations, instead of being jointly developed on site in their respective original locations.

The joint statement of May 24, 2010, also said that the KTM railway station in Tanjung Pagar will be vacated and moved to Woodlands by July 2011, where some space will be provided for the station inside the existing Singapore CIQ building in Woodlands. This means that on that date, all KTM land south of Woodlands will revert to Singapore. KTM would then be left with only some land between Woodlands and the Causeway in the north, which consists mainly of railway tracks.

Now, how much land is actually involved that will finally revert to Singapore as a result of the latest deal? In a statement made in Parliament on June 28 this year, Deputy Foreign Minister Kohilan Pilly said that in total, KTM owns 434.26 acres (173.7ha) of land in Singapore, of which 352.52 acres (141ha) were to be held by the Federal Land Commissioner for 999 years and 81.74 acres (32.7 ha) in perpetuity. The land held in perpetuity are those pieces sold in 1918 while the rest on lease had been purchased by KTM subsequently when the railway services in Singapore expanded and needed more land to support its operations.

However, Kohilan did not give Parliament details of the monetary value of the 434.26 acres of land. Neither did he cite the value of the six pieces of land in Marina South and Ophir-Rocher that Singapore exchanged for KTM’s land in Tanjung Pagar, Kranji, Woodlands and Bukit Timah.

In a nutshell, a huge amount of land is actually going back to Singapore without compensation except for the so-called swop.

Currently, the narrow strips of land hosting the KTM railway line may not have much value while the railway line remains in place.  However, their commercial value will definitely increase significantly once the north-south line is removed, and the surrounding space opened up for development in an east-west configuration.

In fact, analysts quoted in the website of Channel News Asia have confirmed that in the future — beyond the value of the large parcels of KTM land located in Tanjung Pagar, Bukit Timah, Kranji and Woodlands — Singapore will also gain from the potential value unlocked in the areas surrounding these sites. In addition, the parcels currently adjacent to the railway track will realise their full market potential once they are amalgamated with other parcels, thus allowing for greater flexibility in their redevelopment.

Channel News Asia confirmed this when it quoted the Singapore Ministry of National Development as saying that the parcels of KTM land which revert to Singapore will be put to optimal use by Singapore to realise their full commercial value.

The joint statement of May 24 stated that M-S Pte Ltd will be established as soon as practicable but not later than Dec 31, 2010, and that Malaysia’s 60% will be held by Khazanah Nasional and Singapore’s 40% will be held by Temasek Holdings.

Points to note
Khazanah Nasional must ensure that the articles of association establishing the joint venture company include a provision that the percentage of 60:40 equity holding shall remain unchanged forever. It would indeed be a great disservice to future generations of Malaysia if the 60:40 ownership formula of M-S Pte Ltd is subjected to the vagaries of the marketplace instead of being guaranteed by a written undertaking.  

The May 24, 2010, joint statement further gave KTM the option to relocate once again from Woodlands to Johor Baru sometime in 2018.  However, in view of the very uncertain status of occupancy of the KTM station in the Singapore CIQ in Woodlands, there is a great possibility that the final departure of KTM to Johor Baru might take place much earlier than in 2018.

When that happens, the KTM chapter in the history of Singapore will be closed forever — a dream come true for Lee Kuan Yew, who conceived and signed the POA in 1990 with that objective in mind.

The removal of the KTM railway line would be like pulling out a sword stuck in the heart of Singapore — indeed, a big pain to their psyche and a huge obstacle to their development. Singapore ought to appreciate this friendly gesture of Malaysia.

There is a footnote to the story of KTM land ownership in Singapore. In 1968, the Malayan Railway Administration and the Jurong Town Corporation signed an arrangement which included the 99-year lease of a track of land connecting Bukit Timah to Jurong.  KTM then constructed a branch line from Bukit Timah to Jurong to facilitate the export of Malayan products, mainly rubber and tin in the early days, through the port in Jurong.

However, the Jurong Spur Line (as it was called) fell into disuse when Malaysian exporters stopped using Jurong Port in the 1990s, and KTM stopped operating the railway service to Jurong Port. Singapore has since repossessed the land associated with the Jurong Spur Line. Little is known about this matter. It, however, remains part of the story of KTM land in Singapore. 

There is another caveat on the implementation talks between Malaysian and Singapore officials. Najib and Lee Hsien Loong could not come to an agreement on certain development charges. What this is all about is still very unclear, including exactly which pieces of land are supposedly liable for such development charges.

The joint statement of Sept 20 merely states that both countries have different views on the development charges, and that both leaders have agreed to settle this issue amicably through arbitration under the auspices of the Permanent Court of Arbitration.

In preparing for the arbitration, our negotiators must learn from Malaysia’s past experiences when we went to the International Court of Justice (in the case of Pedra Branca, Middle Rocks and South Ledge) and the International Tribunal for the Law of the Sea (in the case of land reclamation by Singapore).  The form of words to be used in the question or subject matter to be decided upon by the arbitrator is absolutely critical. This calls for skilful negotiations of the highest order. We hope the Malaysian officials responsible for this task will be really well prepared when they meet their Singapore counterparts.

The Malaysian public might also want to know why a political deal on the issue of development charges, like those done on other issues, was not possible. Arbitration could very well end up a zero sum game.

Is Singapore’s insistence on arbitration a trap being put in place so as to be cited as a precedent when the time comes for both countries to resolve the water agreement issue? In other words, is Malaysia being set on a slippery slope?

Datuk Deva Mohd Ridzam is former ambassador to the European Union, Belgium and Luxembourg and Cambodia.  The fifth round of the Malaysia-Singapore Joint Implementation Team meeting starts on Dec 22.

This article appeared in Forum page, The Edge Malaysia, Issue 837, Dec 20-26, 2010