Diving deep into Johor-S'pore water agreements

EDITOR'S NOTE: An earlier version of this article erroneously tallied the land premium and annual rent for Linggiu Dam, as per the 1990 agreement, to RM388.8 million and RM70 million respectively. Malaysiakini regrets the error. The relevant passages have been amended to reflect the facts, and the calculations have been removed as there is insufficient information to arrive at the correct figure.

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KINIGUIDE | The water trade between Johor and Singapore is back in the spotlight again after Prime Minister Dr Mahathir Mohamad called it “ridiculous”.

He contended that the price at which Johor is supplying raw water to Singapore is too low, and among the issues that Malaysia needs to settle with Singapore.

Singapore had responded by saying the terms of the agreement must be complied with, to which Mahathir clarified that this is not an urgent matter to be dealt with as yet.

But what is this agreement the two countries are talking about and what are its terms? In this instalment of KiniGuide, we dive deep into the Johor-Singapore water agreements.

Wait. Johor-Singapore water agreements? Plural?

Yes. There were four agreements signed on the issue of water supply between the governments of Johor and Singapore, two of which are still in force.

These were signed in 1927, 1961, 1962, and 1990. It is noteworthy that Singapore was a British colony until it joined Malaysia in 1963 and was then expelled from the federation after which it became an independent state in 1965.

What are the agreements still in force?

The 1962 Johore River Water Agreement is a 99-year deal allowing Singapore to extract up to 250 million gallons (1.14 billion litres) of raw water a day from the Johor River at the price of 3 cents per 1,000 gallons.

Water demand in Singapore, incidentally, was recorded at 430 million gallons per day as of June last year.

The land used by Singapore at Johor River for this purpose would be charged rent equivalent to “the standard rate applicable to building lots in townlands”.

Johor is also entitled to treated water equivalent to two percent of the raw water Singapore extracts, at a rate of 50 cents per 1,000 gallons.

Reportedly, the actual amount of treated water supplied to Johor is often several times above Singapore’s contractual obligation.

This agreement was signed between the state of Johor and the city council of Singapore and expires in 2061.

The other agreement is the 1990 “Agreement between the Government of the State of Johor and the Public Utilities Board of the Republic of Singapore” and is regarded as a supplement to the 1962 agreement. It, too, expires in 2061.

It allows Singapore to build and operate a dam and water treatment plant at Sungai Linggiu at its own expense, although Johor will have ownership of the dam while Singapore's Public Utilities Board (PUB) will handover the water treatment plant to Johor when the deal expires.

In return, Singapore will sell treated water from the project to Johor according to a formula that is calculated based on Johor’s water tariff, PUB’s distribution cost and other factors, plus a premium.

To facilitate the project, Johor is required to set aside and lease about 21,600ha of former forest reserve for the project for which Singapore is to pay RM320 million in compensation.

In addition, Singapore will pay RM18,000 per hectare in land premium and RM30 per 1,000 square feet (92.9 square metres) in annual rent; for the land occupied by the water treatment plant itself and related permanent works.

Apart from this agreement, the governments of Malaysia and Singapore also signed a separate agreement on the same day promising that Johor and PUB would each uphold their end of the bargain.

How much water is 1,000 gallons?

An imperial gallon is equivalent to 4.5461 litres, so 1,000 gallons would be equivalent to 4,546 litres or 4.54 cubic metres. That’s roughly the size of five refrigerators of the type one would typically find in a family home.

If you were a domestic water user in Johor and your household had used that amount of water in a month, you would have been billed RM3.63 for the water except for the fact that the minimum charge is RM7 per month.

Note that water tariffs in Johor are among the most expensive in Malaysia. The same amount of water would have been worth RM1 (subject to minimum charge of RM2.50 per month) in Penang and is totally free in Selangor.

How much water does Malaysia supply?

According to a 2015 report by The Straits Times, imported water supplies up to 60 percent of Singapore’s water needs.

What about the previous agreements?

The 1927 Agreement as to Certain Water Rights in Johor reserves 2,100 acres (8.5 square kilometres) of land in Gunung Pulai over which Singapore will have the exclusive right to extract all water there.

In return, Singapore would have to pay Johor S$0.30 per acre (totalling S$630), and Johor would be entitled to buy up to 800,000 gallons per day for S$0.25 per 1,000 gallons (4,546 litres). This means that Johor would have to pay S$200 if it buys all the water that it is entitled to.

The currency this agreement was denominated in was the Malaya and British Borneo Dollar. It was the common currency for Malaya, Singapore, Sabah, Sarawak, Brunei, and Riau until 1967.

The supply can be increased up to 1.2 million gallons (3.6 million litres) per day at Johor’s request after 1929.

In addition, Johor would set aside another 25 square miles (64.7 square kilometres) of land and not alienate it for 21 years without the consent of Singapore’s commissioners. Singapore would have the option to reserve any part of this land to extract water in exchange for paying Johor $5 annually per acre.

The 1927 agreement was superseded by the 1961 Tebrau and Scudai Rivers Water Agreement which declared the earlier agreement “forthwith void and hereafter of no effect.”

This 1961 agreement also set aside land in Gunung Pulai, Sungai Tebrau, and Sungai Skudai for Singapore to draw water from in exchange for S$5 per acre in annual rent for the land and three cents per 1,000 gallons of raw water extracted.

It says Singapore shall supply Johor with at least four million gallons (18.2 million litres) of treated water per day at a price of 50 cents per 1,000 gallons, provided that this does not exceed 12 percent of the raw water Singapore extracts. If necessary, Johor may request for more water to be supplied.

This agreement expired in 2011 and Singapore turned over control of four water treatment plants to the Johor government.

What happened to the water agreements when Singapore became independent?

The Independence of Singapore Agreement 1965 stipulates that the governments of Singapore and Malaysia will guarantee that the PUB and the Johor state government uphold their respective ends of the 1961 and 1962 agreements.

According to Singapore's Infopedia - an online encyclopaedia run by the National Library of Singapore - the currencies in the two agreements were redenominated in ringgit when the two countries stopped using common currencies in 1973.

Up to 1973, the Malaysian ringgit, Singapore dollar and the Brunei dollar had been interchangeable at par value (i.e. RM1 = S$1 = B$1).

Can be the water prices be revised?

In the case of the 1927, 1961, and 1962 agreements, yes. These agreements contain provisions for a price review.

The 1927 agreement stipulates that the review should take place “as soon as possible” after 15 years from when water is first supplied, which is 1942. Incidentally, this is in midst of the Second World War.

The Singapore commissioners were supposed to submit their accounts to the Johor government to determine whether Singapore was making “excessive” profits from the deal and to decide whether the agreement should be amended.

If no agreement could be reached between Johor and Singapore on the price modifications, there were mechanisms in place that would allow the Governor of the Straits Settlements to intervene by either ordering Singapore to pay a royalty for the raw water it extracts (it was free under the 1927 agreement), and/or reduce the price of treated water Singapore supplies to Johor.

As for the 1961 and 1962 agreements, both agreements contain near-identical clauses that say prices shall be “subject to review after the expiry of 25 years from the date” of the agreement.

The clause goes on to say that the factors to be taken into account in the review shall include any rise and fall in the purchasing power of money, cost of labour, power, and materials. Any dispute on this may be referred for arbitration.

Singapore had argued in August 2002 that since Malaysia did not seek a revision when the 25-year period for each agreement lapsed in 1986 and 1987 respectively, it had lost its right to review the water prices.

However, the wording of the agreement does not expressly state exactly when after the 25-year period the review should take place which could potentially mean that a review could still take place any time before the agreement lapses in 2061.

As for the 1990 agreement, there are no specific clauses for a review but prices could theoretically be varied by changing rental rates for the Johor land or by changing the state’s water tariffs.

Why does all this sound so familiar?

If you think you’ve heard similar arguments years ago, you may be right.

The water trade between Johor and Singapore was at the centre of a diplomatic dispute between Malaysia and the city-state in the late 1990’s and the early-2000’s which were the final years of Mahathir’s previous tenure as prime minister.

In 1999, Singapore wanted the water supply raised from 350 million gallons per day to 750 million gallons per day under a new agreement ending in 2161 but Malaysia refused.

Singapore then proposed raising the prices to 45 sen per 1,000 gallons but Mahathir said the price ought to be 60 sen per 1,000 gallons and subject to a review every five years.

The talks stalled and the exchange escalated into a media campaign with both sides accusing the other as being unreasonable. Tensions only fizzled out after Mahathir resigned as prime minister in 2003.

By then, Singapore had already decided to cut its dependence on Malaysia for water. Instead, it enlarged its water catchment areas and turned to water reclamation and desalination to supplement its daily supply.

PUB claims that its NEWater wastewater reclamation plants would be able to meet up to 55 percent of Singapore’s water demands by 2060 while desalination plants would meet another 30 percent of demand.

In January this year, then prime minister Najib Abdul Razak and his Singaporean counterpart Lee Hsien Loong had issued a joint statement affirming the terms of the current water agreements.

This instalment of KiniGuide was compiled by Koh Jun Lin.