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."