Singapore and Malaysia continue warming to each other

Singapore and Malaysia continue warming to each other

Jason Szep, Reuters, Singapore

The imposing 72-year-old railway station in the heart of
Singapore's business district evokes a forgotten era. Ceiling
fans twirl overhead. Tiled mosaics of Chinese junks and coconut
plantations line its walls.

It is also a source of irritation to Singapore's rulers: its
18 hectares of prime real estate belong not to the wealthy city-
state but to Malaysia -- a monument to the historic rivalry
between the Southeast Asian neighbors.

The outpost is Malaysian territory under a pact reached when
the two were linked under British colonial rule. The station's
signs are still written in the Malay language. Its workers are
mostly ethnic Malay. Malay food steams in its cafeteria.

The ultra-modern city has grown around it, a highway overpass
nearly clipping it on one side, sleek office towers on another.

"This is Malaysia. Look around," said 62-year-old money
changer Sahib Yahya, who began work at the station in 1960, five
years before Singapore seceded from an independent Malaysia.
"There is very little that has changed here."

Yet change, at last, may be in the air.

Leaders from both countries are signaling a new era of
economic cooperation that political analysts say could accelerate
talks on a long list of festering disputes that date back to
independence, including sovereignty over the railway land.

Underlining the new conciliatory tone, a large "Welcome to
Malaysia" sign at the station was recently taken down.

"The bottom line here is you have a much more pragmatic
administration in Malaysia. There is an attitude on both sides of
'let's talk, let's move on, because if we don't China and India
could swamp us'," said economist Song Seng Wun of brokers GK Goh.

In his first visit to Malaysia since taking power in August,
Singapore Prime Minister Lee Hsien Loong met his Malaysian
counterpart, Abdullah Ahmad Badawi, last week. Both pledged to
improve business ties and to tackle terrorism and other issues
together.

It was the latest in a list of ministerial-level contacts
since last year when Abdullah replaced veteran leader Mahathir
Mohamad, who often seized on tension with Singapore to rally
support at home. Mahathir seldom met Singapore's leaders.

"Personalities are very important," said Malaysia's ambassador
to Singapore, N. Parameswaren. "What could not have happened
before is beginning to happen now."

The question is where to go from here. Banks are sizing up the
opportunities, and Malaysia's banking system, telecoms sector and
transport links are seen as particularly ripe.

Under Mahathir, investments by the state-linked corporations
that dominate wealthy Singapore were held hostage to progress on
tougher bilateral disputes, such as the price that resource-poor
Singapore pays for Malaysian water.

Bickering was common, and ties deteriorated in 1997 when Lee's
father, Singapore's modern founder Lee Kuan Yew, infuriated
Mahathir by describing Malaysia's southern Johor Bahru state as
"notorious for shootings, muggings and carjackings".

"You don't see these types of hyperbolic statements made by
either side any more, or through the media," said Nathan. "It
seems they do not see any political mileage in doing that."

The fence-mending partly reflects new economic realities, as
the cheap labor and rising wealth of fast-growing China and India
siphon foreign capital from Singapore and Malaysia.

As China booms, foreign direct investment in Southeast Asia
has crumbled to 1.9 percent of the region's total economic
output, the lowest in a decade and just half of what China
receives, say economists at brokers CLSA Asia-Pacific.

The neighbors are also paying a price for having failed for
decades to capitalize on a common history and culture. Many
families have kin on both sides of the border. About 200,000
people cross a causeway linking the countries each day.

Singapore is already Malaysia's second-largest export market
and top trading partner. Their two-way trade of US$45.8 billion
last year represented about half of trade within the 10-state
Association of South East Asian Nations (ASEAN).

Lee has appointed his predecessor, Goh Chok Tong, to negotiate
the tougher bilateral rows. Some worry that progress could stall
once talks move down from prime ministerial level, and even
designating Malaysia's foreign minister to talk to Goh could mean
hard issues go untackled.

Two of the most emotional issues -- sovereignty over a tiny
island called Pedra Branca and a Singaporean land reclamation
project opposed by Malaysia -- have gone to international courts.
But a list of others remains.

"The relationship has gone through all kinds of vicissitudes
in the past," said the ambassador, Parameswaren. "We have come to
a common understanding."