Unravelling the water dispute mystery between Singapore and Malaysia
THE MATHS
1000 gallon = 4.54609 m3
malaysia sell raw water at 3 sen per 1000 gallon
malaysia buy treated water at 50 sen per 1000 gallon
singapore spend 2.40 ringgit to treat per 1000 gallon
singapore lost 1.90 ringgit per 1000 gallon
Malaysian water tariff is currently at:
80 sens per cubic meter /
3.60 ringgit per 1000 gallon
(0-20 cubic meter usage),
2 ringgit per cubic meter /
9.09 per 1000 gallon
(21-35 cubic meter usage),
and
3 ringgit per cubic meter /
13.63 ringgit per 1000 gallon
(more than 35 cubic meter usage).
Cover Photo / Photo: Straits Times
—
So even on the lowest possible end, Malaysia is making:
3.60 ringgit – 0.5 (buy treated water) + 0.03 ringgit (sell raw water)
= 3.13 ringgit profit per 1000 gallon.
Singapore buy 250 million gallons per day
= 7500 ringgit
Malaysia buy 16 million gallons per day
= 8000 ringgit
Malaysia revenue from selling 16 million gallons per day
= 50080 ringgit revenue (80 sen per cubic meter)
= 137920 ringgit revenue (2 ringgit per cubic meter)
= 210560 ringgit revenue (3 ringgit per cubic meter)
Cost of treated water (16 million gallons)
= 38,300 ringgit
Cost of treating water for Singapore usage (234 million gallons)
= 561,600 ringgit
Singapore P/L in regards to water per day
= -99,900 ringgit
Malaysia P/L in regards to water per day (relating to Singapore alone)
= +49,580 ringgit (80 sens per cubic meter)
= +137,420 ringgit (2 ringgit per cubic meter)
= +210,060 ringgit (3 ringgit per cubic meter)
WHY MALAYSIA WANTS A RENEGOTIATION?
So the problem is Malaysia is unhappy that they are “losing money” because they are spending more on buying treated water, then selling raw water. More importantly, Malaysia is NOT making money on selling huge amount of water to Singapore – which is what disturbs Mahathir so much.
Photographer: Kiyoshi Ota/Bloomberg
Malaysia wants to increase the rates of the raw water to Singapore by 10 times (or at least) – which will bring it to 30 sens per 1000 gallons.
Under this scenario, it will bring in 75000 ringgit per day in revenue for Malaysia. But of course, such aggressive moves from Malaysia will aggravate Singapore to sell treated water at least the full price of 2.40 ringgit per 1000 gallon (although it is more likely for Singapore to sell water at a profit of 3.60 ringgit per 1000 gallons).
Singapore buy 250 million gallons per day (30 sens)
= 75,000 ringgit
Malaysia buy 16 million gallons per day (2.40 ringgit)
= 38,400 ringgit
Malaysia buy 16 million gallons per day (3.60 ringgit)
= 57,600 ringgit
As a result, instead of losing 500 ringgits per day, they ended up making 36,600 ringgits per day. This is a whopping 13,359,000 ringgit profit just by doing nothing. Even at the the price of 3.60 ringgit per 1000 gallon, Malaysia will still make 6,351.000 ringgits profit per year.
INITIAL INVESTMENT BY SINGAPORE
While is might sound “fair” just by purely looking at these numbers, this is absolutely not considering the fact to Singapore had actually invested over an enormous amount of money in water infrastructure, which will eventually be handed over to Johor.
In the building of the Linggiu Dam in Johor, a needed infrastructure in order for Singapore to be able to draw up to the 250 million gallons per day limit, Singapore compensated Johor RM$320 million for the land needed to build the dam and its surrounding facilities. This was in addition to a premium of RM18,000 per ha (per 10,000 sq m) and an annual rent of RM30 for every 1,000 sq ft (per 92.9 sq m) of the land. Singapore would also bear the cost of constructing and maintaining the dam, which would be transferred to Johor at a later date.
http://eresources.nlb.gov.sg/history/events/84999566-0858-4826-abf8-09c5d61ab097
https://www.malaysiakini.com/news/432101
In return, Singapore will sell treated water from the project to Johor according to a formula that is calculated based on Johor’s water tariff, PUB’s distribution cost and other factors, plus a premium.
To facilitate the project, Johor is required to set aside and lease about 21,600ha of former forest reserve for the project for which Singapore is to pay RM320 million in compensation.
In addition, Singapore will pay RM18,000 per hectare in land premium (totalling about RM388.8 million) and RM30 per 1,000 square feet (92.9 square metres) in annual rent. This amounts to about RM70 million in annual rent, but is subject to revision by the Johor government.
Apart from this agreement, the governments of Malaysia and Singapore also signed a separate agreement on the same day promising that Johor and PUB would each uphold their end of the bargain.
MalaysiaKini
The dam, together with other saddle embankments and ancillary works to create the Linggiu Reservoir, was completed in April 1993 at a cost of S$310 million. Total land cleared/utilised/paid for the dam is 21,600 ha
1993 Exchange Rate 1 SGD =1.59 MYR
310 million SGD = 492.53 Ringgit
EXPENDITURE BY SINGAPORE
Compensation: 320,000,000 ringgit
Premium: 388,800,000 ringgit (18,000 ringgit per hectare)
Construction: 492,530,000 ringgit
Annual Rent: 70,000,000 ringgit per year (30 ringgit per year per 1000 sq.ft)
Operating Cost: ???
So all the above additional income + extra income on the annual basis for Malaysia, Malaysia are still “unhappy”?
Just to put things into perspective:
Total expenditure on buying treated water from Singapore
= 8000 ringgit x 365 days
= 2,920,000 ringgit per year.
Total rent paid by Singapore just for Linggiu Dam
= 70,000,000 ringgit per year.
And then we wonder why Singapore government is so adamant and defensive against any form of “breaking of contract/agreement” by the Malaysian side.
Thus adding the Linggiu Dam “income” by Malaysia, the new P/L statement on Singapore-related water goes to:
Rent Paid by Singapore for Linggiu Dam
= 70,000,000 ringgit per year
= 191,780.82 ringgit per day
Malaysia P/L in regards to water per day (relating to Singapore alone)
= +241,360.82 ringgit (80 sens per cubic meter)
= +329,200.82 ringgit (2 ringgit per cubic meter)
= +401,840.82 ringgit (3 ringgit per cubic meter)
At the low end, Malaysia is making at least over 88 million dollars off the entire water agreement, and this is before any renegotiations, or adding any additional income from the rent from other reservoirs/treatment plants as well as any compensation in the building of dams/treatment plants.
Parliament: S’pore will honour 1962 Water Agreement and expects Malaysia to do the same, says Vivian Balakrishnan
SINGAPORE – Singapore will fully honour the terms of the 1962 Water Agreement with Malaysia, including the price of water stipulated in it, and expects Malaysia also to do so, Foreign Minister Vivian Balakrishnan said on Monday (July 9). Responding in Parliament to a question about bilateral relations with Malaysia, Dr Balakrishnan said the 1962 deal is “not an ordinary agreement”.
So why didn’t Malaysia review the agreement when they could. This quote probably says it best:
Dr Balakrishnan noted that in 2002, then Johor State Assembly Speaker Zainalabidin Mohd Zain said a review in 1986 of the water price was pointless because Johor relied on Singapore for treated water, and Singapore would have priced it higher for Johor.
….
IN CONCLUSION
Honestly, the attempt by Malaysia to try to renegotiate the water agreement, is now looking more like outright greed than anything (if they are being serious about it). All these research thus far is telling me that, Mahathir/Malaysia wants to have the cake and eat it too.
With all these numbers, I can expect nothing but extremely robust challenge by Singapore against Malaysia’s “greed”. But of course, it is likely that Malaysia only want massive distraction from their domestic problems that they have little political conviction in resolving.
