S'pore, Malaysia make up, after Mahathir era ends

S'pore, Malaysia make up, after Mahathir era ends

Jake Lloyd-Smith, Associated Press/Singapore

For decades, Southeast Asian neighbors Singapore and Malaysia traded barbs about a host of petty differences - from the price of water Malaysia sells to the city-state to the ownership of a small islet no larger than a football field.

Many of the disputes were heightened by a personality clash between the two countries' long-serving leaders - the acerbic Mahathir Mohamad of Malaysia and Singapore's equally testy founding father, Lee Kuan Yew.

But Mahathir stepped down in November after 22 years in power and was replaced by the more moderate Abdullah Ahmad Badawi, who analysts say is working to improve Malaysia's ties with its wealthy neighbor. Lee quit the top job in 1990 and was replaced by current Prime Minister Goh Chok Tong.

Last week, Singapore Home Affairs Minister Wong Kan Seng visited Malaysia to discuss security affairs, and the two countries have recently launched economic initiatives amid growing competition for foreign investment from China and India.

"I think there's a will on the Malaysia side to really try and put relations on a much better track, and I think that a lot of that can be traced to the PM (Abdullah) himself," says Manu Bhaskaran, a director at Centennial Group, a consultancy.

Malaysia and Singapore were united briefly in the Malaysian Federation in the mid 1960s, but policy differences and personality clashes between Mahathir and Lee led to a break up just two years later.

But the quarrels continued, especially over Malaysian shipments of water to Singapore, which accounts for half of the city-state's daily needs.

The two countries have also long bickered about who owns Pedra Branca, a small island in the Singapore Straits, and two nearby rock formations.

But economic pressures are forcing the two countries to move closer together, as both grapple with rising challenges from China and India for foreign investment.

"We must make sure our businessmen talk to their businessmen, and at the foreign ministry level we hold talks," Abdullah told the Far Eastern Economic Review magazine last month. "The comfort level has gone up."

In March, Singapore's powerful state investment fund, Temasek Holdings, bought a 5 percent stake in Malaysia's Telekom Malaysia. Temasek may soon follow that with a pioneering deal in Malaysia's banking sector.

Malaysia's stock market has also opened talks to boost ties with the Singapore bourse, possibly clearing the way for companies to list their shares on both.

Abdullah has tried to play down suggestions he is breaking with Mahathir's policies, but analysts say his less combative style has help boost the country's economic ties with Singapore.

"Mahathir is less of a factor, less of an issue, so we can move onto economic issues," says Song Seng Wun, an economist for GK Goh in Singapore.

The two countries swapped S$77 billion (US$45 billion) worth of goods last year, and that figure is expected to rise in 2004.

The change in tone is remarkable, said Lee Yi Shyan, the head of Singapore's trade promotion body, International Enterprise Singapore.

"In the past we didn't really feel welcome," Lee told reporters after touring Malaysia last month with a pack of businessmen. "This time around, the atmosphere is very good."