S'pore, KL enjoy thaw in relations

S'pore, KL enjoy thaw in relations

Bernice Han, Agence France-Presse/Singapore

A new found warmth between Singapore and Malaysia has opened the door for the two neighbors to forge closer business partnerships after almost four decades of rocky ties, analysts said.

With former Singapore premier Goh Chok Tong due to meet Prime Minister Abdullah Ahmad Badawi on Monday, the two neighbors are finally putting aside their long-standing differences in favor of economic cooperation, they said.

Goh, who stepped down for Lee Hsien Loong in August, is traveling to Kuala Lumpur for the first time in his role as Singapore's special envoy to Malaysia, a position created in October to capitalize on rapidly improving relations.

Separated by the narrow Johor Strait, the two nations have endured an uneasy relationship since Singapore's traumatic ejection from the Malaysian federation in 1965.

Among the wide range of disputes to have held back closer economic cooperation are the price of raw water that Malaysia supplies to Singapore and rival claims to a rocky islet.

The future of Malaysian-owned railway land inside Singapore, land reclamation works by Singapore and a proposed new bridge linking the two countries are other issues to have hampered ties.

The famously feisty former Malaysia prime minister, Mahathir Mohamad, who stepped down in October last year, also had an enduringly testy relationship with Singapore's leaders.

"Ever since Badawi took over, we have noticed a perceptible shift in KL (Kuala Lumpur) dealings with Singapore at the higher level," said Song Seng Wun, a regional economist with G.K. Goh brokerage in Singapore.

"It appears both sides are willing to move forward... bottomline is it is better for both sides to be working together at the higher level than be at each other's throats.

"The world around us is changing too fast so they have to put economic survival ahead of petty squabbles."

Goh and other analysts said investments from Singapore's state investment firms in Malaysia this year are firm indications that the neighbors are increasingly placing economic interests ahead of their differences.

It was announced last month that the Government of Singapore Investment Corp. (GIC), which manages the city-state's foreign reserves of more than US$100 billion, had bought a 5.04 percent stake in Malaysian national car maker Proton Holdings for an undisclosed price.

In March Singapore's other investment firm, Temasek Holdings, made its first major direct investment in Malaysia by acquiring a 5.0 percent stake in Telekom Malaysia for $421 million.

Temasek-owned Mapletree Capital Management also announced a partnership last month with Malaysian investment bank CIMB to form Malaysia's first private institutional real estate fund with initial capital of 500 million ringgit ($132 million).

"Both governments have come around to recognizing that despite the unresolved problems, life has to go on and business opportunities have to be seized before they go elsewhere," said an analyst with a regional research institute, who did not want to be identified.

"In the past, any attempt by Singaporean GLCs (government- linked companies) to enter the Malaysian market was viewed with suspicion, if not hostility.

"It shows the political climate is conducive for the FDI (foreign direct investments) to flow from Singapore to Malaysia."

Chua Hak Bin, a Singapore-based regional economist with DBS bank, said that with increasing global competition for foreign investments it made sense for the two economies to mount a collective effort on trade.

"They have to realize there is a bigger cake and should try to integrate their markets more," the economist said.

"China and India should be seen as the bigger competitive threat, luring the foreign investments from the rest of the world."