Malaysia gave an undertaking to continue supplying water to Singapore beyond the water agreement expiry dates when Singapore Prime Minister Goh Chok Tong made an official visit to Kuala Lumpur. 

Singapore proposed “funds-for-water deal” as recession-hit Malaysia requested for funding assistance. Goh told parliament that Singapore would raise funds for Malaysia “on very favourable terms” while, in return, Singapore's long-term supply of water would be secured with a new agreement. 

On the sidelines of the Asean Summit in Hanoi, Dr Mahathir and Goh met and agreed to have all the outstanding issues that strained bilateral relations to be discussed as a package. 

Apart from water, the package covered Malaysia's railway land in Singapore, the use of Malaysian airspace by the Singapore Air Force, pension savings of Peninsular Malaysians held by Singapore's CPF and the location of Malaysian CIQ checkpoint at the Malaysia-owned railway station in Tanjung Pagar, Singapore. 

At the same time, Dr Mahathir declined Singapore's offer of US$4bil (RM15.2bil) under the funds-for-water arrangement. 

Officials from both countries met for the first time to discuss outstanding bilateral issues as a package on March 11 and by late May, three meetings had been held but little progress was made.  

Package deal talks stalled. Singapore demanded that Johor double supply from 350 million gallons daily (mgd) to 750mgd under a new 100-year agreement ending in 2161 but Malaysia viewed the request as excessive. 

Singapore Senior Minister Lee Kuan Yew made a four-day visit (from Aug 15) to Malaysia and discussed with Dr Mahathir on the way forward for the package talks. Singapore also proposed to raise the price of water to 45 sen per 1,000 gallons. 

Dr Mahathir in a letter dated Feb 21 to Lee stated that Johor believed that a fair price would be 60 sen per 1,000 gallons and the price should be reviewed every five years. 

Lee visited Malaysia for the second time and in a joint press conference with Dr Mahathir, the two said both countries had arrived at an understanding on the basic skeleton of an agreement.        

Following Lee's visit, Syed Hamid informed the Cabinet that initial understanding was reached, among others: 

(1) Singapore agreed to give Malaysia a piece of land in the business district of Shenton Way in exchange for land in Tanjung Pagar belonging to Keretapi Tanah Melayu (KTM). 

(2) Malaysia would allow the Singapore Air Force to use Malaysian air space and in return, Singapore would let Peninsular Malaysians withdraw their contributions in CPF. 

(3) Upon expiry of the water agreement, Malaysia would for another 100 years from 2061 supply water to Singapore 

(4) Singapore would offer 45 sen per 1,000 gallons up to 2061, beyond that 60 sen per 1,000 gallons and price review every five years. 

A renewed round of package talks between Malaysia and Singapore was held in Putrajaya. Singapore Foreign Minister S. Jayakumar proposed pegging the price of water to an agreed percentage of the price of Singapore's Newater (recycled sewage water). 

Singapore announced that the island republic would let one of the two water agreements to lapse in 2011 to cut dependency on Malaysia for its water. 

A second Ministerial meeting was held on the package deal. Malaysia presented a price review proposal and suggested that agreement for continuation of water supply beyond 2061 be negotiated nearer to the date of expiry. 

In a letter dated Oct 7, Dr Mahathir wrote to Goh informing Singapore that Malaysia wanted to discontinue the package deal and single out water as an issue for future negotiations. 

On Oct 11, Dr Mahathir said Malaysia would recover losses from its two water agreements with Singapore by having the review price backdated to 1986 and 1987, the years when a revision of the water price was due. 

A meeting between senior officials from both countries was held in Johor Baru from Oct 16 to 17. Malaysia proposed a new price structure taking into account of Singapore's alternative source of water. 

Singapore published in the media a series of official correspondence between leaders of the two countries over the water dispute after S. Jayakumar presented the documents in Parliament. 

Singapore Information, Communications and Arts Ministry published the 84-page book entitled Water Talks? If Only It Could and sold it at S$5 (RM10.85) per copy or for free from the Ministry's website. 

Malaysia initiated a media campaign to rebut the allegations made by Singapore over the water issue.  

Related articlesProlonged water dispute will hurt Malaysia-S’pore tiesProspect of a merger in 1961 led to low pricingMalaysia' s stand on pricing consistentKL ‘using Singapore formula’Council puzzled over Singapore’s claimsJohor: We’ll stop buyingBackground to the Malaysia-Singapore water spatGive us a fair price, Singapore One Big Mac for 13-year supply 

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Official sites to download the booklet 

National Economic Action CouncilNEAC Special Consultancy Team on GlobalisationThe Information MinistryThe Ministry of Foreign Affairs 

Download from Star Online (Quick version)The water dispute booklet in pdf format (similar content but does not reflect the official print format)