Issue cover-dated September 27, 2004

A Warming Current

New leaders improve Singapore-Malaysia relations

By Lorien Holland and Sonia Kolesnikov-Jessop
Newsweek International

Sept. 27 issue - The billboard had irked Singaporeans for years. Standing beside the train station at the heart of their glass-and-steel city, it boldly read WELCOME TO MALAYSIA—a reminder that, as a legacy of British rule, their neighbor to the north still holds title to the only railway line linking the two countries. Then last month the sign was quietly hauled down, marking a subtle but symbolic thawing in one of Southeast Asia's more chilly relationships. "We want to remove whatever irritations there are, however small they may be," explained Malaysia's ambassador to Singapore, N. Parameswaran.
With new leaders in both nations, the two Southeast Asian neighbors are looking past memories of their painful 1965 separation and toward a more cooperative future. The movement began after Malaysia's light-handed new prime minister, Abdullah Badawi, took power from strongman Mahathir Mohamad last October—putting a friendlier face on Malaysian politics. A recent leadership change in Singapore, where the scion of founding father Lee Kuan Yew became the city-state's third prime minister last month, portends even stronger ties, say analysts. "I have known Prime Minister Abdullah Badawi for many years already. Under him our relations have taken a fresh start," Lee Hsien Loong, the new prime minister of Singapore, declared during his first National Day Rally address on Aug. 22.
The rapprochement runs deeper than upbeat banter. After decades of acrimony, both countries are cooperating in important areas like security, tourism and trade. Last July, Singapore and Malaysia began coordinating sea-lane patrols with Indonesia to combat piracy in the Strait of Malacca. In addition, both governments now actively encourage two-way tourism, and bans have been lifted to allow their businesses to cooperate and compete in key industries like banking and telecommunications.
The list of potentially divisive issues remains long, to be sure. It includes disagreements over military use of shared airspace, Malaysia's terms for providing Singapore with fresh water, sovereignty over a tiny island called Pedra Blanca and a Singaporean land-reclamation project that Malaysia opposes. The latter two disputes will be resolved by the International Court of Justice and the International Tribunal for the Law of the Sea. In January, Abdullah met the then premier of Singapore, Goh Chok Tong, for a round of golf, and the pair agreed to untangle their various disagreements. "We have to think out of the box," Abdullah said at the time. "We have to find some other strategies to resolve our issues."
Commerce is a balm for the bad feelings on both sides. Singapore is now Malaysia's second largest export destination and top trading partner. Two-way trade—which hit $45 billion last year—accounted for more than 60 percent of inter-ASEAN commerce in 2003, putting the neighbors at the center of the regional alliance. Between 1998 and 2003, Singapore ranked as the fourth largest source of foreign investment in Malaysia, with total investments amounting to $2.1 billion.
Abdullah's strong stance against cronyism and corruption has improved his country's investment climate, and a flurry of new deals suggest increasing interdependence. Four years ago Mahathir barred Singapore Telecommunications (Singtel) as a security risk from entering the Malaysian market. Yet in March Temasek Holdings, the Singapore government's investment arm and main shareholder in Singtel, took a 5 percent stake in Telekom Malaysia—a signal that Abdullah welcomes Singaporean capital. More recently the Government of Singapore Investment Corp. (GIC) acquired small stakes in two Malaysian companies, and GIC Real Estate invested in a prime shopping center in Johor Baharu, the Malaysian state that borders Singapore. Meanwhile, Malaysian conglomerate Sime Darby has acquired a 29.9 percent stake in Jaya Holdings, a Singapore shipbuilding and maritime chartering firm.
Singaporean television is doing its bit to draw the two countries closer. In a departure from the local media's penchant for unflattering stories about lawlessness and corruption next door, a popular new travel program regularly touts Malaysia's top holiday spots. According to the Tourism Malaysia office in Singapore, Singaporeans made 5.5 million visits between January and July, a 25 percent increase over 2002. So even though the WELCOME TO MALAYSIA sign has fallen, the door to real friendship is open wider than ever.

Parent site: "Focus on Malaysia"