Hansard, 2003-01-25

Under the provisions of clause 2(d) of Article 46 of the Constitution of the Republic of Singapore, the following Members have been granted permission to be or to remain absent from sittings of Parliament (or any Committee of Parliament to which they have been appointed) for the periods stated: FromTo Name(2003)(2003) Mr Gan Kim Yong24 Jan- Mr Lee Kuan Yew25 Jan- Dr Amy Khor28 Jan30 Jan Mr Mah Bow Tan9 Feb12 Feb MRS LIM HWEE HUA Deputy Speaker Parliament of Singapore

asked the Minister for Foreign Affairs if he will give his comments on the recent statements and accusations made by Malaysian leaders on bilateral issues between Singapore and Malaysia.

asked the Minister for Foreign Affairs if he will give the status of the bilateral negotiations with Malaysia on the water issue and whether he sees any progress on this issue.

asked the Minister for Foreign Affairs (a) whether it is true that Singapore is reluctant to submit the dispute on Pedra Branca to the International Court of Justice and (b) when will the Special Agreement be signed.

asked the Minister for Foreign Affairs if he will comment on the Malaysian allegations that Singapore always opposes proposals from Malaysia such as the ASEAN+3 Secretariat and the East Asian Economic Caucus (EAEC).

asked the Minister for Foreign Affairs what is Singapore's position on comments by the Malaysian Prime Minister and other Malaysian leaders that (i) Singapore failed to keep to an undertaking to let Malaysia continue to maintain its naval base facilities in Singapore after the Separation; and (ii) Singapore deliberately increased the rate for the lease of those facilities in Woodlands, thereby forcing Malaysia to vacate them.

asked the Minister for Foreign Affairs, in view of the constant remarks of war by Malaysian Ministers, (a) what is the likelihood and possibility of Singapore going into a stage of heightened tension or war with Malaysia over the unresolved bilateral issues and (b) what can Singapore and Singaporeans do to help reduce the tension.

Mdm Deputy Speaker, several Members have asked many questions on the state of our bilateral relations with Malaysia - not only Dr Ong but also Mr Ahmad Khalis, Mr Ravindran, Mr Sin Boon Ann, Ms Irene Ng and also Mr Steve Chia, and there was a Question for Written Answer by Mr Zainudin. They have also asked questions on a number of allegations made against Singapore on a wide range of 'old' issues as well as new issues, from water, Pedra Branca, the ASEAN+3 Secretariat to KD Malaya, the former Malaysian naval training base in Woodlands. These allegations paint Singapore as "insensitive", "arrogant" and "unneighbourly" in the conduct of our bilateral relations with Malaysia. We are also said to be "selfish", "profiteering" and "legalistic". Now, they even talk of war, using as a peg a book that spoke favourably about the SAF. The author, Tim Huxley, is a British who has no connections with us. These allegations have no basis whatsoever. KD Malaya was an old issue. The Malaysians left their naval training base in Woodlands on their own accord in 1997. When we revised the rent in 1991, far from forcing them out, we offered them several options to maintain their base and stay on here in Woodlands. However they chose not to take up the offers and decided in 1992 to relocate their base to Malaysia. On Pedra Branca, it is not true that we were reluctant to sign the Special Agreement (SA) to refer the matter to the International Court of Justice (ICJ). In fact, we were the ones who proposed referring the issue to the International Court of Justice. Nor have we carried out construction activities recently. The last structures were built well over 10 years ago. Likewise, it is untrue that Singapore was the only ASEAN country which had problems with the proposal for a separate ASEAN+3 Secretariat located in Kuala Lumpur. Indonesia, among others, also did not support it. And as for the East Asia Economic Caucus (EAEC) proposal, it is completely false that Singapore opposed it. In fact, we were one of the first countries to come out in support of it. Mdm Deputy Speaker, I shall circulate fuller details on these specific issues as an Annex* to my Statement. But for this afternoon, I wish to focus on water, which is the core problem underlying all this endless, vitriolic barrage. I have to state the facts on this central issue to show what is the true position. The water issue is critical to Singapore because it has grave implications for our survival. In setting out the facts, Mdm Deputy Speaker, I shall be releasing the correspondence between the leaders of both countries and also the diplomatic exchanges. I will also circulate copies of the two Water Agreements of 1961 and 1962, plus a supplementary water agreement in 1990 relating to the building of the Linggiu dam on the Johor River and the purchase by Singapore of treated water in excess of the 250 million gallons per day (mgd) from this river. These are all documents for the record. Mdm Deputy Speaker, I have been reluctant to release these documents despite misrepresentation of facts from the other side because we have hoped for a win-win situation. But I have to release them now because this hope is no longer realistic and because so much misinformation on the water issue has been put out by Malaysia that needs to be rebutted by conclusive evidence. Despite repeated attempts to clear the air through various statements from my Ministry, MFA Spokesman's statements as well as Parliamentary statements that I have made in this House, Malaysian misrepresentations have not ceased. Recently, there have even been loose talk of war in some Malaysian circles. We therefore have no choice but to set the record straight by releasing these documents for people to judge for themselves the truth of the matter. These documents will clear the air for everyone, especially Singaporeans who travel to Malaysia, read their media and talk to their Malaysian friends. These documents Volume 1 - Correspondences Volume 2 - Agreements are in two volumes which will be given to Members later. Mdm Deputy Speaker, I request that they be part of the official records of the House. I would also be circulating the text of my statement later. The text of my statement will contain cross-references to the documents as well as the various correspondences. Mdm Deputy Speaker, my statement has three parts. First, it is to make clear that the fundamental issue for us is not the price of water as such. The vital issue is not how much we pay, but how any price revision is decided upon. Malaysia wants Singapore to pay more for water. But the price cannot be revised at the will or dictate of Malaysia. The 1961 and 1962 Water Agreements were enshrined in the Separation Agreement which was registered at the United Nations. They are fundamental to our very existence as an independent nation. Neither Singapore nor Malaysia can unilaterally change them. This is the root of the dispute between us. During the negotiations on the package of issues, both sides asked for and offered various concessions. Singapore agreed to pay more for existing water, but only as part of a package deal that included the future supply of water. Malaysia agreed to settle several outstanding bilateral issues as a package. The documents will demonstrate this clearly. However, in October last year, Malaysia unilaterally decided to take the water price revision out of the package, to be discussed and decided on its own. Second, I will give a full chronology of the talks on water. This will show that Singapore has been consistent and forthcoming in the negotiations. The difficulties arose because Malaysia repeatedly changed its position, and shifted their goal posts each time we neared an agreement. No sooner had we agreed on a price for water when they changed their minds and upped the price. After the two countries had discussed all the issues as one package for several years at Malaysia's request, Malaysia unilaterally and without prior notice abandoned the package approach, saying that they only wanted to discuss the current price of water. But despite all these sudden twists and turns, we accommodated and persevered, never closing the door on negotiations, in order to reach a mutually beneficial agreement. The Malaysian allegations against us are totally unjustified when we were trying to find an amicable way forward. The third part of my statement is that I want to stress that it is in the overwhelming interest of both countries to settle our differences in accordance with international law, either through the International Court of Justice (ICJ) or the Permanent Court of Arbitration (PCA), or in the case of the water price revision through the method provided for in the Water Agreements themselves, namely, arbitration according to the laws of Johor. This process of arbitration can determine what we have not been able to agree on, namely, whether Malaysia has the right to revise the price after a lapse of 16-17 years and, if so, by how much the revision should be. Sanctity of the Water Agreements and the Separation Agreements Let me start with the first part. Mdm Deputy Speaker, some Singaporeans and foreign observers have asked why is it that the two Governments are quarrelling over what appears to be a relatively small and simple issue over the price of water. Why cannot Singapore be more accommodating, more reasonable and pay a little more for the sake of neighbourliness and good bilateral relations? If only the matter were that straightforward. Let me be clear. It is not just a matter of money. The issue goes beyond whether we have to pay 45 sen or 60 sen or stick to 3 sen. Of course, we, in Singapore, are not going to be impoverished by an increase from 3 to 45 sen. Neither will Malaysia be enriched. In fact, Prime Minister Mahathir himself has said, and I quote: "We don't depend on them (Singapore) to bring us revenue to finance the government as income from selling water is a small fraction (of our revenue). It's not a major source of income for the government." (Bernama, 6th August 2002). The significance of the water price, for both countries, is Singapore's existence as a sovereign nation separate from Malaysia, and the sanctity of the most solemn agreements that we have entered into with Malaysia. The two Water Agreements are no ordinary agreements. They are so vital that they were confirmed and guaranteed by both Governments in the 1965 Separation Agreement, also known as the Independence of Singapore Agreement. The Separation Agreement was registered at the United Nations. Both countries have to honour the terms of the agreements and the guarantee in the Separation Agreement. Any breach of the Water Agreements must call into question the Separation Agreement and can undermine our very existence. Mdm Deputy Speaker, not many people know that Malaysia also gave effect to the Separation Agreement by an amendment to the Malaysian Constitution on 9th August 1965 through an Act of the Malaysian Parliament, Act 53 of 1965. Section 14 reads, and I quote: `The Government of Singapore shall guarantee that the Public Utilities Board of Singapore shall on and after Singapore Day abide by the terms and conditions of the two Water Agreements dated 1st September, 1961, and 29th September, 1962, entered into between the City Council of Singapore and the Government of the State of Johore.' `The Government of Malaysia shall guarantee that the Government of the State of Johore will on and after Singapore Day also abide by the terms and conditions of the said two Water Agreements.' In other words, the guarantees are an integral part of an international agreement solemnly entered into, adopted by a constitutional amendment in Malaysia and later registered with the United Nations. In international law, both parties must ensure that the Water Agreements are observed and neither side can unilaterally vary their terms and conditions. If Malaysia can unilaterally revise the price of raw water from 3 sen to 60 sen, and then from 60 sen to RM 3, then they can eventually fix it at RM 8, which they said is the price since that is what Hong Kong pays to China, or to any other price. The sanctity of the Separation Agreement would have been breached. All other agreements we have signed with Malaysia will become meaningless. Nor will any new agreement we conclude with Malaysia be worth anything. In such a world, there would be no basis for international relations. There would be no foundation for international law, which all UN members have a duty to uphold, in order to maintain a stable and peaceful international order. Malaysia has actually acknowledged the importance of the Water Agreements for a long time. For example, three years after our independence in 1968 at a very important conference of plenipotentiaries, the UN Conference on the Law of Treaties, mind you, the Conference was on the Law of Treaties, the Malaysian representative to that Conference, Mr M. O. Ariff said, and I quote: 'Some treaties might be so fundamental to the very existence of States that they simply could not be dispensed with, whatever political differences might

arise. For example, the new island State of Singapore was dependent on Malaysia for its water supply; the treaty under which Malaysia had to supply a certain quantity of water daily to Singapore could not be terminated or suspended between the two states for any political reason.'

However, in early 2002, Prime Minister Mahathir began to criticise the water agreements as allegedly unequal treaties foisted on Malaysia by the British. Prime Minister Mahathir said that the price for water under the agreements was too low and that as such "practically, they (Singapore) get their water free". He also said that "also, the agreement was drawn up by the British which of course favoured Singapore." Later, he said "what we know is that we have been charging them 3 sen per thousand gallons of raw water and we also know that countries like Hong Kong buy their raw water from mainland China at RM 8 per thousand gallons". Other Malaysian leaders took up the refrain and stoked a frenzy of media criticism against Singapore. For example, Menteri Besar of Johor Ghani said "all this while, we have been supplying Singapore with free water..." This deliberate raising of Malaysian ground sentiments seriously alarmed Singapore. It could easily have spiralled out of control and led to grave consequences. Therefore, on 5th February last year, we sent Malaysia a diplomatic note, Third Person Note (TPN) in which we pointed out that "pending a binding agreement on the overall package of issues, all legal obligations of the existing Water Agreements and the Points of Agreement (POA) remain in force and are binding on both Governments". We reminded them that the Water Agreements are binding legal arrangements duly confirmed and guaranteed by the Governments of Malaysia and Singapore in the Separation Agreement. We said that the Separation Agreement "is the fundamental basis of Singapore's existence as an independent sovereign nation" and that "any variation of the Water Agreements without the consent of both Governments will be a breach of the Separation Agreement and that cannot be accepted". We also pointed out that "further negotiations on new agreements pertaining to the long term supply of water to Singapore can only proceed on the basis that the agreements already concluded cannot be altered without the explicit consent of both parties. And we added, otherwise any new agreements on water can similarly be altered without consent. This will have grave implications for bilateral relations." On 14th March 2002, the Malaysian Government replied to Singapore's demarche. Malaysia's TPN conveyed "its commitment to resolving the issue of water with Singapore in the context of an agreement on the overall package of issues", and they also said, "at no time was there a suggestion that the Government of Malaysia would depart from such a commitment." They said that any suggestion to the contrary is "misleading and constitutes a gross misinterpretation of the well known position of the Malaysia Government." We replied through another TPN on 25th March 2002 taking note of their commitment and assurances. And we also reiterated our own commitment to reaching a mutually beneficial agreement on the package of outstanding issues. Foreign Minister Syed Hamid himself noted at the First Ministerial Meeting at Putrajaya on 1st July 2002, and I quote: 'Malaysia has repeatedly said that it will honour the 1961 and 1962 Agreements until their expiry in 2011 and 2061 respectively..' He added: '. During the Separation of Singapore, Malaysia did not propose for the Agreements to be reviewed. It continues to honour the Agreements and such commitment is further reinforced when Malaysia signed the Separation Agreement in 1965.' We were thus flabbergasted when their Minister in the Prime Minister's Department Rais Yatim publicly declared on 24th October 2002, that as Malaysia's solution, Malaysia could enact domestic legislation to render the Water Agreements null and void. But as I had said at our sitting on 31st October 2002, no country can evade its international treaty obligations by enacting a domestic law. This is a very well established principle of international law. Should any country choose to violate that principle, it would signal to the world that it can and will do likewise for any other international agreements. Let me also add that contrary to what Malaysia has alleged, these Water Agreements of 1961 and 1962 were not fixed by the British in Singapore's favour. These Agreements were signed by the Johore State Government and the Singapore City Council in 1961 and 1962 respectively. By then, Malaysia was already an independent and sovereign nation, and Singapore had achieved self-government. It is really absurd to suggest that the Federal Government of an independent and sovereign nation Malaysia would allow the Johore State Government to be manipulated by the British to sign an agreement that was against Malaysia's national interests. Chronology of the Package and Water Agreements Now, let me address the allegations that Singapore has been the unreasonable party in the negotiations. To do so, I will have to recount to Members in some detail how the matters unfolded over the last few years. A full chronology is set out in the bundle of documents, but let me take you through the major milestones. When Malaysia experienced problems in the Asian Financial crisis in 1997-98, at Malaysia's request, Singapore began to discuss a financial assistance package for Malaysia in the context of a framework for wider cooperation. The framework included the supply of water to Singapore after the expiry of the current Water Agreements. Singapore's assistance entailed significant market risks and potential financial losses for Singapore. This framework would make it politically possible for Singapore to carry these financial risks. The price review of water under the current Water Agreements was never raised by then Prime Minister Mahathir and was not part of that framework. At the ASEAN Summit in Hanoi in December 1998, Prime Minister Mahathir informed Prime Minister Goh that Malaysia no longer needed financial assistance from Singapore. Prime Minister Mahathir proposed that the outstanding bilateral issues be resolved together as a package. In the interest of clearing the decks of bilateral issues, Prime Minister Goh agreed to this. What were the items in the final package as from August 2000? The key items in the package were: future supply of water for 100 years after 2061; use of Malaysian airspace by RSAF; variation in the terms of the POA, including giving an additional 12 parcels of KTM or Malayan Railway land at Bukit Timah for joint development; early withdrawal of CPF monies amounting to some RM 3 billion by West Malaysians. And later, as I will elaborate, two more items were added to the package by Prime Minister Mahathir, namely: the Malaysian proposal to replace the Causeway with a bridge; and revision of the current water price. The meeting between Prime Minister Goh and Prime Minister Mahathir in Hanoi was followed by three rounds of negotiations on the package at the officials' level from March to May 1999 where not much progress was made. In August 2000, with Prime Minister Goh's approval, Senior Minister Lee visited Kuala Lumpur to try to make progress on the package . He worked through then Finance Minister Tun Daim Zainuddin. After first meeting Tun Daim, Senior Minister had a four-eye meeting with Prime Minister Mahathir on 15th August 2000. Prime Minister Mahathir brought into the package two new issues: the price of current water, and the replacement of the Causeway with a new bridge. Senior Minister Lee agreed to these inclusions. The two leaders reached agreement on a list of items, including a new price of raw water for 45 sen per 1,000 gallons for both current and future water. This was the first time that the current water agreements featured in the bilateral package. Following that meeting, Senior Minister Lee wrote to Tun Daim on 24th August 2000 to confirm the list of items which he and Prime Minister Mahathir had agreed to. On 21st February 2001, Prime Minister Mahathir replied to Senior Minister Lee in which he said, "Johore believes that a fair price would be 60 cents (sic) per mgd (sic) of raw water" and this "should be reviewed every five years". Mgd is million gallons a day. I think there was a typographical error. I think what he meant was "60 sen per thousand gallons". On 23rd April 2001, Senior Minister Lee replied to Prime Minister Mahathir pointing out that this was a variation from their oral understanding of 15th August 2000 which was 45 sen for current and future water. And now Prime Minister Mahathir was proposing a higher price of 60 sen. In September 2001, Senior Minister Lee made a second visit to KL to try to close the gaps on the package of issues. After their meeting on 4th September 2001, Senior Minister Lee and Prime Minister Mahathir held a joint press conference to announce that they had agreed on a basic skeleton of an agreement on the package of bilateral issues. Senior Minister Lee told the media there, in Putrajaya, that Singapore had offered to pay 45 sen for raw water supplied under the current Water Agreements, although we were not legally obliged to do so. He explained that this offer was made in return for assured water supply from Malaysia, beyond 2061, at 60 sen per 1,000 gallons for raw water. On 21st September 2001, Senior Minister Lee wrote to Prime Minister Mahathir confirming and elaborating on this offer. Let me say here that the Malaysians have argued that since Senior Minister Lee had offered 45 sen for current water, it showed that Singapore had, in fact, accepted that Malaysia had the right to review. Prime Minister Mahathir said, "If we don't have the legal right, then why did Lee Kuan Yew come and see me and suggested that the water price should be revised upwards to 45 sen and then we said it should be 60 (sen), 15 sen more?" But, Mdm Deputy Speaker, it is clear from the documents that when Senior Minister Lee offered 45 sen for current water, it was "in return for assured water supply beyond 2061" at 60 sen. Senior Minister Lee never said that Malaysia had the right to review the price of water outside the package, which included water beyond 2061 as well as airspace. Picking up the chronology again, between 18th October and 10th December 2001, there were further exchanges of letters between Senior Minister Lee and Prime Minister Mahathir to clarify various details of the bilateral package, including the price of water. On 4th March 2002, Prime Minister Mahathir wrote to Senior Minister Lee enclosing totally different proposals. This was after Prime Minister Mahathir's statements to the press about RM8 being the real price of water. Under Malaysia's new proposal, the 60 sen price, which he had earlier agreed, would now apply for the first five years from 2002 to 2007, and from 2007 to 2011, the price will be RM3 per 1,000 gallons. And from 2011 until the expiry of the 1962 Water Agreement in 2061, the price of water would be revised annually from RM3, based on the average inflation rate of Malaysia and Singapore. And what about future supply of water after 2061? In that letter, Malaysia proposed that negotiations begin only in 2058; in other words, just three years before the expiry of the 1962 Agreement. Malaysia also proposed that the new water agreement would be valid for 100 years from 2002. In effect, this would mean that the new agreement would only last for 40 years after the expiry of the 1962 Water Agreement. So, Senior Minister Lee replied on 11th March 2002 that this had completely changed from what they had discussed before and in their subsequent exchange of notes and letters. He said that Singapore would have to study the implications of Malaysia's new offers and would respond in due course. On 11th April 2002, Prime Minister Goh Chok Tong wrote to Prime Minister Mahathir to give Singapore's response to Prime Minister Mahathir's letter of 4th March 2002. Prime Minister Goh stressed that he did not want bilateral relations to be always strained by the issue of water. Hence, for the sake of good long-term relations, he said that Singapore would produce as much water as it could to supplement the existing Water Agreements. Singapore would ramp up our NEWater programme to replace the supply of water under the 1961 Water Agreement when it expires in 2011. As for water after 2061, Prime Minister Goh accepted Malaysia's offer of 100 mgd of raw water and 150 mgd of treated water. On price, as Malaysia had withdrawn its offer of 60 sen for current water and future water, Prime Minister Goh proposed to peg the price of future water to an agreed percentage of the cost of the alternative source of water, ie, NEWater. Why? This was to provide a definite basis for future price revisions. Prime Minister Goh reminded Prime Minister Mahathir that this agreement should be valid for 100 years from 2061 as this had been the basis for negotiations, and not 100 years from 2002. Prime Minister Goh did not offer revision of the current water price. So, Prime Minister Mahathir's letter of 4th March 2002 and Prime Minister Goh's reply of 11th April 2002 then formed the basis for further discussions between the respective Foreign Ministers and officials on the package of issues. Two Ministerial Meetings were held, as hon. Members know, the first in Putrajaya in July 2002, and the second in Singapore in September 2002. I updated Members on the outcome of these two meetings on 23rd July 2002 and 31st October 2002 respectively, and the Senior Officials Meeting in Johor Baru from 16-17th October 2002. In short, really, there was no progress on the key issues. Mdm Deputy Speaker, Malaysia came out with another new formula under which the price of raw water in 2002 would be RM6.25 per 1,000 gallons. They did this at the Ministerial talks, and they did not explain how this price could be justified under the provisions of the water agreements. They also insisted that they had the right to review the price of current water, when we had pointed out that they had lost their right of review. They also said that they would not negotiate the terms of future water supply until 2059 - now it is 2059 - ie, two years before the expiry of the 1962 Water Agreement, instead of the three years before the expiry, as Prime Minister Mahathir had proposed earlier. After the Second Ministerial Meeting, as I had told the House, when Prime Minister Goh met Prime Minister Mahathir in Putrajaya on 8th October 2002, Prime Minister Mahathir said that Malaysia wanted to "decouple the water issue" from the other items in the package. Prime Minister Goh responded at that meeting that all the issues were tied together. If the water issue was taken out of the package, Singapore would have less leeway to make concessions on the other issues. Members would recall the many statements in the Malaysian media and from Malaysian politicians that misrepresented what transpired at that meeting between Prime Minister Goh and Prime Minister Mahathir. The Malaysians alleged that Singapore had agreed to delink water from the package and had accepted Malaysia's prerogative to review the price of current water. Those statements distorted what was discussed at the meeting and, in fact, impugned Prime Minister Goh's integrity. Two days after his meeting with Prime Minister Mahathir, Prime Minister Goh received a letter from Prime Minister Mahathir dated 7th October 2002, ie, one day before their meeting. In his letter, Prime Minister Mahathir informed Prime Minister Goh that Malaysia had decided to "discontinue the package approach and give the highest priority to first resolving the water issue, particularly the price review of raw water". In other words, even before Prime Minister Goh had met Prime Minister Mahathir, Malaysia had already unilaterally discontinued the package approach, which had been agreed to by both Prime Ministers, and reaffirmed in Malaysia's TPN of 14th March 2002. Hon. Members would remember that I had quoted the TPN, that they said that it is outrageous that you should even make that suggestion that we would do anything other than proceed in accordance with the package approach. On 14th October 2002, Prime Minister Goh replied to Prime Minister Mahathir, reminding him that they had both agreed on the package approach in December 1998 and that was why Singapore had been prepared to make concessions. But now that Malaysia wanted to deal with the water issue separately and discontinue the package approach, trade-offs against other issues in the package were no longer possible. Henceforth, Singapore would have to deal with water and the other issues on their stand-alone merits and no longer as a package. On this basis, the Singapore officials attended the meeting in Johor Baru to discuss the water issue from 16-17th October 2002. At that meeting, it was clear that Malaysia had no intention of striking a deal on future water. This left only the current water price on the agenda. Now we could no longer trade off a current water price revision against the supply of future water. Therefore, we have no choice but to rely on the express provisions of the Water Agreements, and that any variations must be in accordance with the terms of the Water Agreements. Mdm Deputy Speaker, from this chronology of events, Members can see how Malaysia has repeatedly changed its position, not only on the water issue, but also on the entire package negotiations. First, having agreed to 45 sen for current and future water in 2000, they then raised their demand to 60 sen. When we counter-offered 45 sen for current water and 60 sen for future water, they raised their demand further - an immediate increase to 60 sen for current water and then RM3 from 2007. And, later, they came up with the figure of RM6.25 for current water. As you know, Prime Minister Mahathir recently acknowledged publicly that he had proposed 60 sen to Senior Minister Lee, but he said that he had been later advised by Malaysian officials that the price was too low. Second, the starting point for the negotiations since 1998 had been the supply of water for another 100 years after 2061. But in March 2002, the Malaysians reduced this to 40 years, and only at a formula to be negotiated in 2058 and to supply treated water at a formula to be negotiated every 20 years. On 2nd July 2002, Malaysia again agreed to 100 years but now with a price formula based on rates benchmarked against the China-Hong Kong model (or RM8) and other models. And, finally, on 2nd September 2002, Malaysia said that negotiations on future water can only take place in 2059. Third, the Malaysians committed themselves to resolving the issues as a package from December 1998 to September 2002. However, Prime Minister Mahathir later unilaterally took water price revision out of the package by his letter of 7th October, without informing Prime Minister Goh when they met on 8th October that he had written to Prime Minister Goh the day before to have the water issue dealt with separately. By taking current water out of the package, the Malaysians wanted to get this price revision without any commitment to give future water supply in exchange. They have changed the package deal Prime Minister Mahathir first offered to Senior Minister Lee in KL in August 2000, and then followed up in a letter dated 21st February 2001, where he named 60 sen as what Johor considered a "fair price". But the Malaysians know, as they have repeatedly acknowledged, they could not under international law unilaterally revise the price or other provisions of the Water Agreements. Mdm Deputy Speaker, on our part, we have tried our best to accommodate Malaysia's successive new positions. Even though Malaysia had repeatedly shifted their goalposts, Singapore has not walked away from negotiations. In fact, we attended the Johor Baru meeting in October 2002 in good faith just six days after the Malaysians had unilaterally discontinued the package approach. Members should also note, I think, that four out of the six items in the package - current water price, POA variation, CPF and the bridge - were to benefit Malaysia. Singapore was not legally obliged to pay more for current water, we are not obliged legally to vary the Points of Agreement, or to make special arrangements for West Malaysians to withdraw their CPF monies early. And we also had no interest in demolishing the Causeway and to build a bridge in its place. Singapore's overriding interest in the package was future water. We were prepared to agree to the items which Malaysia wanted, including a current water price revision, only in exchange for Malaysia agreeing to provide us a long-term supply of water beyond 2061, and RSAF access to Malaysian airspace. Let me also say that these concessions to Malaysia would have been at a considerable cost to us. They have to be seen in the context of the overall package deal being negotiated and, as we have said before, in an MFA statement on 2nd February 2002, "the total amount of money that Malaysia will receive when other items in the package are factored in will be over 1.5 billion ringgit." This did not include the cost of over S$500 million, cost to us, for building our half of the bridge and a new Customs, Immigration and Quarantine (CIQ) complex. But, we thought that all these would be justified if we could secure future water. This was why when Prime Minister Mahathir proposed the package approach in 1998, Prime Minister Goh agreed. We tried to meet their demands as long as future water supply was on offer as the quid pro quo. As negotiations went on, we became aware that they did not want to sign an agreement on future water supplies. All they promised at the final meeting in Johor Baru was to discuss the matter in 2059, two years before the 1962 Water Agreement ends. Members will understand why I say that this has pushed us to prepare for a negative outcome, one that requires us to develop our capability for NEWater and desalination. These are no light tasks for us to undertake. We will need many years to build up the know-how, keep abreast with technological advances and, just as important, we must prepare psychologically our people for it. Having unfolded the story of how the negotiations went, and I hope Members will be able to see how reasonable Singapore has been, now let me reflect on the way forward. Notwithstanding our efforts to reach an agreement, we clearly find ourselves at an impasse. So, Members naturally may ask, what next? Prime Minister Mahathir and Foreign Minister Syed Hamid had spoken about referring the water issue to international arbitration by the Permanent Court of Arbitration (PCA). On 28th December 2002, when our media asked me about this, I said it was a great pity that we have not been able to reach agreement on the package, but Singapore, obviously, could not force Malaysia to the negotiating table if it chooses not to do so. Hence, I said that if Malaysia proposes to submit the water issue to PCA arbitration, Singapore would have to agree, albeit reluctantly, in the interest of overcoming the impasse. To my surprise, their Berita Harian (30th December 2002) reported Foreign Minister Syed Hamid as responding that the option of referring the water issue to PCA for arbitration did not arise, although they were quoted as suggesting this in the first place. Well, if Malaysia does not wish to send the matter for arbitration to the PCA, a world organisation which is renowned for its impartiality, then what is the next best solution? It is to have recourse to arbitration in accordance with the provisions of the Water Agreements. The provisions in Clauses 21 and 19 of the 1961 and 1962 Water Agreements respectively provide for the settlement of disputes arising under the Agreements. Those provisions stipulate that where disputes cannot be resolved, the matter shall be referred to arbitration "in accordance with and subject to the provisions of the arbitration law at the time of such dispute existing in the State of Johore". Indeed, Mdm Deputy Speaker, the Johor State Secretary had sent letters to the PUB dated 14th August 2002 seeking to give Notice of price review under Clause 17 and Clause 14 of the 1961 and 1962 Water Agreements, respectively. As Singapore's position was that as Malaysia had lost the right of review, the PUB replied on 9th October 2002 that it did not accept that the Johor State Government was still entitled to serve notice to seek a review of the charge of raw water under the two Water Agreements. Now, if I may interject here, on this business of the price review of current water, Members will recall that I told the House on the 31st October sitting, that the Malaysian leaders had publicly said that it was not an oversight or mistake that Malaysia did not review the price of current water in 1986/87, but it was a deliberate move. Dr Mahathir said Malaysia did not revise the water pricing when it was due because they thought Singapore would also revise the price of treated water supplied to Malaysia. (Bernama, 11th October 2002). Johor State Assembly Speaker Zainalabidin Mohd Zain also said that the Johor Government had not made a mistake in not pressing for a review in 1986 and said "there was no point in doing so because Johor was dependent on Singapore for its treated water supply, and Singapore would have also increased its price of treated water sold to Johor" (New Straits Times, 3rd July 2002). At the Second Ministerial Meeting in September 2002 in Singapore, Foreign Minister Syed Hamid pointed out that the Notice of price review which Johor had sent to PUB "made references to Clauses 17 and 14 of the 1961 and 1962 Water Agreements respectively as well as to arbitration in the event that both countries fail to reach agreement." These Clauses 17 and 14, the price review clauses, provide that "in the event of any dispute or differences arising under the provisions of this clause the same shall be referred to arbitration as hereinafter provided." In other words, Malaysia, through these formal notices, has effectively taken steps towards referring its water dispute with Singapore to arbitration. At that time, we were reluctant to go along this arbitration route because we still hoped for an agreement on a package deal including future water. However, now it has become clear that we cannot expect renewal of future water supply. As this removes the basis for further negotiations, we are ready to have the dispute resolved through arbitration according to the laws of Johor. The question as to whether there is still a right of review, as well as the quantum of the price revision, can both be resolved through the legal process as provided for in the two Water Agreements? In other words, this is the way that we are also resolving Malaysia's claim over Pedra Branca. If, in fact, Johor has not lost the right of revision by not exercising it in 1986/87, then the arbitrator tribunal's award on the price revision will take effect from the date when Johor gave its Notice to PUB as provided for in the two Agreements. As Malaysia has commenced this process, then I say, let the matter be settled through arbitration. Mdm Deputy Speaker, indeed, I want to stress that peaceful and amicable settlement of disputes has been Singapore's consistent approach. For the Pedra Branca issue, we had proposed, and they have agreed, to refer it to the ICJ. I am as concerned as Mr Steve Chia about the loose talk by the Malaysian leaders in the Malaysia media about "war". Bernama reported Foreign Minister Syed Hamid on 31st December 2002, saying, "Singapore has two choices. If it refuses to compromise ... go to war". In his New Year message, Prime Minister Mahathir said "we promise that if anyone violates our freedom, they will get what they call a `bloody nose'" (New Straits Times, 1st January 2003). Asked by reporters the following day, Prime Minister Mahathir did not specify which country he was referring to, but neither did he categorically rule out Singapore. This further encouraged the Malaysian media to play up Singapore's alleged forward defence strategy and link it to Singapore's "arrogance" in the conduct of its bilateral relations with Malaysia. This was quickly followed by remarks by various Malaysian leaders publicly emphasising their military capability, the MAF's capability, in defending Malaysia from external threats. For instance, Defence Minister Najib Tun Razak said that the MAF had experience fighting in a real war and that sophisticated weaponry systems were not the yardstick to measure whether a country could win a war (Bernama, 7th January 2003). Amidst all the bellicose talk of war, the Malaysian media created a furore over Tim Huxley's book "Defending the Lion City". Now, this book, based on academic research on the SAF's capabilities, was actually published by a British academic from Hull University more than two years ago. Back then, the Malaysian media did not pay any attention to this book. So, one can only speculate why the Malaysian media have chosen to do their book reviews only now. In the same vein, there were almost daily articles in the Malaysian Malay language press playing up Singapore's alleged aggressive intentions. On 18th January 2003, Berita Harian (Malaysia) recklessly alleged, and I quote, - I think Members should note this because this is not in English, readily available to all - "Singapore has stealthily embarked on a bioterrorism defence program, and that it has set aside more than RM201 million specifically to carry out R&D to build up its bioterrorism defence system. History has proven that every country that undertakes R&D in biodefence will also end up by doing R&D into weapons for biological attacks. Singapore is no exception to such thinking." Without any evidence to substantiate their allegations, they accuse the Singapore Government of breaching its obligations under international conventions it has signed against the possession of Weapons of Mass Destruction (WMD). Such war-mongering articles, it should be noted, are found especially in the Malay language press, which can only be designed to stir up animosities in their Malay population against Singapore. Mdm Deputy Speaker, such loose talk of war is both irresponsible and dangerous. It whips up emotions that could become difficult to control. In such an atmosphere, the Malaysian navy and marine police vessels have escalated their intrusions into Singapore territorial waters off Pedra Branca in the past one month. Such provocative actions are not only senseless, but dangerous. Why senseless? Senseless, because both sides have agreed to refer the dispute to the International Court of Justice, and such actions cannot in any way affect the outcome or the decision of the international court. Dangerous, because of the risk of accidents that may not only cause loss of life but also cause serious damage to naval vessels with unforeseeable consequences, and the Malaysian Government would have to bear responsibility for the consequences caused by the aggressive and repeated intrusions of its vessels. As Members know, Singapore has exercised exclusive control, ownership and sovereignty of Pedra Branca since the 1840s without any protest from any country until Malaysia published a map in 1979 claiming it as part of its territory. This was, and is, the status quo. Until Malaysia's claim is decided by the ICJ, the status quo must remain, consistent with Malaysia's own position which it has taken in the case of Sipadan/Ligitan. There, in that case, Malaysia adopted the position that as they were in possession of the islands, the status quo should prevail. For example, this is what they said in a diplomatic note to Indonesia on 3rd January 1994, a diplomatic note which they filed together with other documents in the International Court of Justice, and that note said: 'The Government of Malaysia reiterates that since Sipadan and Ligitan are parts of Malaysia, any and all activities undertaken by Malaysia on or pertaining to those islands and their surrounding waters constitute legitimate exercise of its sovereignty and jurisdiction.'

And note this part: 'The continuing acts of intrusion by Indonesian naval vessels and aircraft in Malaysia's territorial waters and airspace around Sipadan and Ligitan similarly cannot in any way, advance Indonesia's claim over the two islands.'

But, having taken that position for Sipadan and Ligitan, Malaysia now disregards the status quo in the case of Pedra Branca by intruding into Singapore waters around the island which has belonged to Singapore for more than 150 years. I believe it is in the overwhelming national interest of both countries to avoid such escalation of tensions and conflicts, as the consequences will be costly for both countries. Prime Minister Mahathir said that Malaysia would respect international law on territorial disputes and avoid any confrontation with Singapore on Pedra Branca. And let me say that this is also Singapore's position. In concluding, Mdm Deputy Speaker, I want to assure this House that it is Singapore's desire to have good, not strained, relations with Malaysia. We believe that there is much that both countries can gain by working together. And our common interests definitely exceed our bilateral differences. But we must ensure a firm and level basis for conducting state-to-state relations. Whenever the Malaysians run out of arguments on bilateral issues, they accuse Singapore of being unreasonable, legalistic, sticking to facts and the law. As I have said to the House before, how else can any country, especially a small country like Singapore, deal with other countries other than on the basis of international law and the sanctity of agreements voluntarily entered into by governments? If we were ever to yield on this basic position, we would suffer grave and permanent consequences. Singapore cannot afford to be intimidated into allowing this to happen. Singapore's relationship with Malaysia will be difficult from time to time. But what is important is that we stay calm and rational through these periodic cycles of ups and downs. And I close by reminding ourselves of what Prime Minister Goh Chok Tong said in his speech to the Singapore Institute of International Affairs on 27th November 2002: `We must manage these swings with a certain psychological equanimity; not lapsing into complacency or euphoria when things go smoothly, nor becoming unduly alarmed or despondent when things go bad'. [Applause].

Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 1.55 pm. Sitting accordingly suspended at 1.35 pm until 1.55 pm. Sitting resumed at 1.55 pm

We have heard the Minister for Foreign Affairs make his Ministerial Statement which has dealt with the Questions on the Order Paper. He has also distributed fuller details as an Annex. I shall allow Members to raise questions addressed to the Minister on the statement he has delivered.

Mdm Deputy Speaker, first, I want to thank the Minister for his most comprehensive and full answer on Malaysia/Singapore relations. It is clear from the statement given this afternoon that Singapore is most reasonable, most accommodative and most patient in our negotiations with Malaysia. I want to ask the Minister whether the Malaysians understand and know the sanctity of international agreements made by them with other countries. Or do they deliberately choose to ignore this? And, if so, what is their motive? With Malaysia chopping and changing its position time and time again, how would Singapore engage meaningfully in negotiations with Malaysia? We would like to know, although the Minister has mentioned, what is next. Is there any date or time-table in mind or is it going to be just a vacuum? In particular, I would ask the Minister to comment on the announcement that Johor would cease to buy treated water from Singapore from mid-2003 onwards, after their own water treatment plant has been completed. What would be our response to this?

Dr Ong Chit Chung asked several questions, whether they know of the importance of the sanctity of the water agreements and so on. From my statement, Members will realise that I have given enough quotations - some old ones, like what Mr Ariff, the Malaysian representative to the Vienna Conference on the Law of Treaties said in 1968 - he was telling the representatives of the whole world that the Separation Agreement and the Water Agreements were very good examples of how agreements or special agreements that could not be suspended or terminated for any political reason - to what Foreign Minister Mr Syed Hamid said last year that they would continue to honour the agreements. But you have to contrast these statements with some of the other statements which I mentioned in early 2002. What is the motive for making all these statements? I think that is in the realm of speculation. What is important, not so much speculation, is for us to state what are the implications, which I have done, and what is Singapore's position, which is what we have done. That is, we cannot allow treaties solemnly entered into to be lightly disregarded or contravened. And if we allow Malaysia to unilaterally change or alter important provisions of an agreement so critical as the Separation Agreement, then where will all this end? Are we expected to quietly accept any other revisions of critical provisions of the Separation Agreement or any other agreement? So, that is why we have to state our position very clearly. On his other question, that Johor would be having its own water treatment plants and they may not buy treated water, that is entirely their right. The Water Agreements provide for them to purchase a certain amount of treated water from Singapore. In fact, they have been purchasing water well beyond the amounts stipulated. But if they choose not to, then it is their right, and we cannot compel them to purchase treated water from us.

What is the next step?

As for the next step, we have to wait and see. We have stated our position that the way forward is through peaceful, amicable settlement of disputes. What does that mean? In normal diplomatic practice, countries discuss, talk and negotiate to try to find an agreement. I have outlined in the chronology that we have tried that. We have been reasonable, but there is an impasse. What do we do after the impasse? Then, I pointed out either the Permanent Court of Arbitration or we have to follow the provisions of the agreement, which provide for arbitration, and I contrasted this with the loose talk of war, which is certainly not the way forward.

Mdm Deputy Speaker, notwithstanding the fact that we are developing alternative sources of water such as NEWater and desalination - and we know that, today, there even exists equipment that allows us to extract drinking water even from air - and in spite of the fact that we are dealing with a party that is bent on shifting the goal post frequently in the negotiations, does the Minister agree that it is still in the interests of both sides to reach an amicable solution to the issues and that the successful conclusion of the Water Agreement is still our aim? As such, an agreement, besides being critical to our survival, serves also to symbolise the inextricable links between our two countries, and that the issues before us should not be allowed to hinder other areas of bilateral cooperation. Secondly, does the Minister agree that the current climate of frenzy and agitation that has been whipped up by the Malaysian media overlooks the larger interests of both countries and serves only to undermine the efforts to broaden other areas of bilateral cooperation, and it, in no way, contributes towards enhancing foreign investors' confidence in the region at a time when we are faced with many other important challenges, such as economic competition from North Asia and the threat of terrorism, all of which require our joint efforts?

As to the first part of Mr Tan Soo Khoon's question, whether it is possible to have any room for further negotiations and talks, I would agree with that - let us continue to talk. That has always been my position. It has always been the position of Prime Minister Goh and of the Government. And I hope that I have sufficiently demonstrated by taking Members through, in some detail, the chronology that we have taken that position because, if we can have a win-win deal, that is good for both countries. After all, it would deal with our future water supply situation. But, as Prime Minister Goh said, we must also bear in mind that, because we do not want the water issue to be a thorn that bedevils our relationship, we will have to develop our own alternative supply of water. But in response to his specific question, if we can have a deal, is it not worth to continue talking? I say, yes, of course, and that is precisely why we have continued our discussions. But for the reasons I have pointed out, they have, through the many changes of positions and, finally, discontinuing the package and not wanting to talk about future supply of water till 2059, made further negotiations impossible. The second part of his question is related to the media frenzy. Does it not hinder cooperation and undermine efforts between both countries? The answer is, yes. It does not make sense for the two countries to be in this state of ups and downs, particularly on the water issue. But there are so many issues where allegations have been hurled at us. Rather than this state of affairs where accusations have been hurled at us, it really makes sense for us to cooperate in many areas. And, indeed, there are many areas which we have cooperation in the past, and we continue to have areas of potential cooperation, such as in the area of economic cooperation. Both sides are important to each other for trade and investments. I think Members are aware of the figures. We also have to cooperate in the area of terrorism, as the former Speaker has mentioned. And I would add that both Malaysia and Singapore are also well positioned to work together to advance the cause of ASEAN. So, there are many areas where Malaysia and Singapore could work together to advance our mutual bilateral interests and work together for the advancement of the interest of our region.

Mdm Deputy Speaker, first, could I ask the Minister why does Singapore maintain that Johor has lost the right of review when the Water Agreements provide for the review after 25 years, but does not specify exactly when such a review should take place? Second question, could the Minister explain why Singapore is not insisting that the price review be referred to the ICJ or the Permanent Court of Arbitration?

On his first question, Mr Ravindran is a lawyer, and also a few other Members, I do not think this is a place to engage in a detailed legal analysis of the Water Agreement provisions. I have mentioned before that if you look at the Water Agreements which are in the bundle of documents, both have clauses on price review, which provide that the rates can be reviewed after 25 years. We can have a legal argument as to whether it should be on the 25th year, or at any time after 25 years, or within a reasonable period after 1986-87. Now, we have legal advice which said that Malaysia has lost its right of review. Well, that is a legal issue which will have to be debated at an appropriate forum, and I have said that it is a matter that can also be put through the process under the Water Agreements. It is important to also note, in this context, that the Malaysian leaders have said that they chose deliberately not to review at that time when they were entitled to because they feared that the price of treated water supplied by Singapore would also be reviewed. Because the review clauses cannot apply only to raw water, it must also apply to treated water. Another factor that I should mention, which we pointed out to the Malaysians, is that if they had exercised the right to review then, it might well have caused different decisions on our part as to the amounts of money that we have invested in Johor on various kinds of works, which actually have come to more than a billion Singapore dollars - water works, pipe lines, ancilliary works, the Linggiu Dam. So this is a question which will have to be decided at an appropriate time, but we have taken legal advice. While we are on the subject, even though we took the legal position, we told the Malaysians, "We know this is important to you. So, we are prepared to discuss this in the context of the package; in other words, on a without prejudice basis. But if you take it out of the package, shelve future water to 2059 and insist on discussing just existing water, then we will have to go by the terms of the provisions of the Agreement." And they have a legal view, we have a legal view. His second question is: why not international arbitration and adjudication? I would say that, as a general principle, if you ask me as a Foreign Minister and someone who has taught international law, when countries have disputes, it is always preferable to have international adjudication or international arbitration. But as Mr Ravindran knows, that is not something that you can compel another side. It requires consensual basis. Both disputing parties must agree to that international arbitration process. And in this case, of course, it is better for international credibility and transparency and the signals we are giving to the international community that even this dispute is referred to, say, the PCA. But they have said, no. How do we resolve it amicably? So, we have to fall back on the provisions in the Agreement. And the provisions provide for arbitration by that particular mode, and we are parties to the Agreement, and we have said, OK, we follow the provisions in the Agreement.

Just to follow up on that point. Can we not insist that the more proper forum would be the PCA? It is a more neutral body. If we go according to the laws of Johor, it might not be as neutral as we would like it to be. And I would think that if Malaysia is confident of its case, as it has said it is, it would be prepared to take it to the PCA. My second question is also on water. Given that it is no longer realistic to hope for future water from Malaysia, can the Minister assure all Singaporeans that we are well prepared to be self-sufficient for all our water needs, present and future?

On the first part of Ms Irene Ng's question, why shall we not insist, and so on, I have just answered Mr Ravindran's question that PCA requires the consent of both sides. We can insist, but it requires their consent. It is preferable. That is my view. But we deal with the situation as it exists. We cannot compel them. So, we fall back on the provisions of the Water Agreements. On her second question as to whether we can assure the House, Members have heard both Prime Minister Goh and my colleague, Minister Lim Swee Say, inform the House in detail of all the efforts being done to develop our capability for alternative sources of water - NEWater, desalination - and we will press on with them. But we do not know when and how fast that capability can come about. Therefore, in the meantime, what is important is that the obligations under the Water Agreements must be complied with. And that is why I have said that it is very important. It is not only important from the theoretical principle of observance of international agreements, it is also critical for our existence and survival.

Mdm Deputy Speaker, I would like to go back to the question of the sanctity of contract which, unfortunately, Rais Yatim does not seem to have a basic understanding of. Can the Minister comment on the Malaysian accusation that Singapore has failed to abide by the agreement which was made at independence, offering the right of the Malaysian military to maintain facilities in Singapore? And related to that question, I understand that there was an issue on revised rental. Is there no contradiction when Singapore raised the rental of land for KD Malaya to reflect market rates while objecting to the revision of the price of water to reflect to market rate?

Perhaps, during the break, Members have not had time to read the written answer to the question on KD Malaya in the Annex which I had circulated. But if I may just sum up, I will make two points which were further elaborated in my Annex. The first point is this. While there was a rental increase for KD Malaya, it was not targeted at KD Malaya. It was part of Singapore's policy to adjust rentals on properties towards market rates. And that policy applied to others, including voluntary and welfare organisations. So, that is the first point I want to stress. The second point I want to stress is: far from wanting to chase them out of KD Malaya, Malaysian leaders were told by Singapore leaders - both the then Defence Minister Dr Yeo Ning Hong and Prime Minister Goh himself - that we wanted them to stay in Singapore, and we made several proposals and alternative suggestions which would have enabled them to stay on, including staggering and phasing in of the new rentals. And our proposals also included an option of our building, at considerable cost to us, of a camp for them at a much lower rental. I forgot the figure. It is in the Annex. But they decided on their own volition that they would leave. And, in fact, in the passing-out ceremony in 1997, their then Defence Minister - and now Foreign Minister - thanked Singapore for these facilities. The quote is in the Annex, and he said that they had no problems with or complaints about Singapore. The other part of the question as to whether this was a breach of the Separation Agreement, the hon. Member was probably referring to some statements made that, under the Separation Agreement, they had a right to stay in Singapore and so on. Perhaps Members ought to look at the terms of the Separation Agreement, which is also in the bundle of documents. Members will find in the provisions of the Separation Agreement a reference to the right of Malaysia to maintain bases and so on in Singapore. But that was envisaged, together with other items, as part of an agreement to be concluded by both countries on mutual defence, which never materialised. In other words, it was not a substantive provision of the Separation Agreement. It was part of the points indicative of what our future mutual defence agreement could be, and it was never concluded. In other words, from 1965 to 1997 when they left, they stayed here not on the basis of any treaty provisions, but because we wanted them to continue having those facilities. I hope I have answered that question.

Mdm Deputy Speaker, with reference to the proposal by Malaysia for the ASEAN+3 Secretariat to be located in KL, may I ask the Minister whether there were other members of ASEAN besides Indonesia, as mentioned in the Statement, who were opposed to this proposal? My second question is: how and when did Singapore express its support to the EAEC proposal, and why is there a confusion on this?

On ASEAN+3, I can inform Members categorically that I was present at all the ASEAN meetings where this topic had been discussed, including at some retreats of Foreign Ministers. And I can assure the House that many countries in ASEAN, not just Singapore, but Indonesia and a few others, such as Thailand and Vietnam, also had discomfort and reservations about this proposal. On the EAEC, I shall not repeat what is in the written answer that I have circulated in the Annex, but Members will find there chapter and verse, quotations from speeches that Prime Minister Goh and others had given, which expressly supported the concept and the idea enunciated by Prime Minister Mahathir on the EAEC.

Mdm Deputy Speaker, I would like to seek some clarification from the Minister on his speech, and also to follow up on the questions on NEWater. From what he said regarding the chronological events in the negotiation of water, it would appear to me that the major turning point is the letter from Dr Mahathir to Senior Minister Lee dated 4th March 2002, which led us to a major decision to ramp up our NEWater programme to replace the 1961 Water Agreement when it expires in 2011. I would like to ask the Minister whether he could clarify or elaborate on what is so unattractive or unreasonable in the Malaysian Prime Minister's letter that led to our major decision like this.

The full text of the letter is in the bundle. It is a short letter, and the proposals are attached to the letter. As to why I said in my speech that they were totally different proposals, they came about after Dr Mahathir's various statements that maybe the real price of water ought to be RM8. What were the differences in this new proposal? Let me recap. Under Malaysia's new proposal that he tabled, 60 sen would apply not only from 2002 for five years to 2006, but also be backdated. Backdated to when? Backdated to 1st September 1986 and 29th September 1987, in respect of the two Water Agreements. And from 2007 to 2011, the price would be RM3 per 1,000 gallons. That was another change. And from 2011 until the expiry of the Water Agreements, the RM3 would be raised annually, based on average inflation rate, as I mentioned in my speech. The other major change is the way they dealt differently with the question of treated water. As far as treated water is concerned, they proposed to fix the price of treated water, which we were selling back to them under the 1961 and 1962 Water Agreements at RM1, from 2002. There are two points worth noting here. First, there was no backdating to 1986 and 1987. Raw water, revised - backdated to 1986 and 1987. Treated water, no backdating. Second, under this proposal, raw water from Johor is worth RM3 per 1,000 gallons. So, having raised it, after processing, our revised treated water will still be only RM1. In the same letter, they proposed to supply 100 mgd of treated water in 2011, which was in response to our earlier proposal for the supply of 100 mgd raw water after the expiry of the 1961 Water Agreement. Based on the formula that they proposed, do you know how much we would have to pay? We would have to pay about RM10 per 1,000 gallons of treated water. At this price, treated water from Malaysia would be much higher than the cost of NEWater. It is also much more than desalinated water.

I have a few questions for the Minister arising from certain facts that the Minister has put forward. We know that Singapore has exercised sovereignty over Pedra Branca since the 1840s. We know that we had separation in 1965, and the first time that the Malaysians had made a claim to Pedra Branca was in 1979 in a map, which means 139 years after we exercised sovereignty and 14 years after Separation. Have the Malaysians given any explanation why there has been this deafening silence on their part in relation to assertion of sovereignty for 139 years or 14 years? More specifically, is it their case that they did not know in 1965 and they suddenly knew in 1979? Or is it that they knew in 1965 but forgot until 1979? Or is it the case that they neither knew nor forgot and suddenly decided in 1979? And, if so, is it a principle of international law that they can suddenly decide that they have sovereignty over their neighbour's property?

These are questions which should be directed to the Malaysians. But the pointed way in which Ms Indranee asked those questions, maybe we should include her in our team to argue in the International Court of Justice! But, really, 1979 was the first time that they published a map. I have looked at some of the maps prior to 1979. And prior to 1979, Malaysian maps showed "Pedra Branca (Singapura)". After 1979, it was shown as being within Malaysian waters, and the "Singapura" was taken out. Is it a principle of international law that they can suddenly claim ownership, out of the blue, after 130 years, and 14 years after our independence? I do not think one has to be an international lawyer to know that that is not the case. Although, as I have said, we have been in possession, control and ownership of Pedra Branca and the surrounding waters for more than 150 years, can somebody spring this and claim that they are owners? And they also claim that they have the right to come and patrol our waters? In international law, in our view, that proposition is not tenable. Let me ask hon. Members to imagine this. You have a compound house with a garden. You have lived there all your life. Your parents have lived there all their lives. Your grandparents had lived there all their lives. Nobody has ever challenged your ownership or your forefathers' ownership of that property. You have lived peacefully there and suddenly one of the neighbours says, "Hey, your house belongs to me." And he says he has found some ancient document in his attic and this house belongs to him. You maintain your legal rights, of course, and he says he is going to go to court. And instead of coming to blows, you say, "Go ahead. Take legal action." You get up one morning and, lo and behold, you find your neighbour climbing the fence, wanting to pitch a tent in your garden, and saying, "Look, since I am now challenging it, there is a dispute, I am entitled to pitch a tent and help you safeguard your property." You will, of course, say no, won't you? So, we have to maintain observance of international law, and observance of international law is that the status quo has to be maintained. And the status quo is that Singapore has always been in sovereignty and ownership of the territory and of the waters, and that continues to be the case, and will continue to be the case, until and unless the International Court were to rule otherwise.

Mdm Deputy Speaker, back to the issue of water. From all the facts that the Minister has presented to us, obviously, we know that the Malaysians are insincere. They are not sincere in resolving this issue. When the Minister talked about "shifting of goal-posts", I think there are no longer goal-posts now in this whole game. The Malaysians have also, unilaterally, from time to time, changed their positions, eg, taking the water issue out of the package of issues. Do we not think that we have wasted enough time with the Malaysians? Maybe it is about time the Minister took the position that water is an issue that we are no longer interested in discussing with them and focus on building our own sources of water, rather than to waste the Malaysians' time and our time, and also to bring us all back on a Saturday to discuss issues like this. I think it is about time that we just put our foot down and said that the water issue is no longer for discussion. We have an agreement. If they want to sue us, go ahead and we will settle it in a court of law.

Well, I hope the Member is not complaining that his Saturday golf game or whatever has been spoilt. It is a matter of grave importance, whether Saturday or Sunday, it is necessary to meet. I think it must be clear from my speech that we have been as reasonable as we can. Why? In order to achieve a win-win solution, and we thought it is possible. But, I think we have come to the end of the road, not on account of our intransigence or rigid positions, but because of, as the Member has said, the "shifting of goal-posts", and finally discontinuation of the package by the Malaysians. That is why I say we are at an impasse and we have got to think of how to move on. It is not Singapore's intention to be fixated on this issue because, as I answered Mr Tan Soo Khoon's question, we have to move on and do not let this issue so affect the sum total of our relations, because there are many other issues that we need to focus on, both domestically our economic and other problems, as well as bilaterally, and in the region. So, we need to move on, and I have outlined to Members how we can move on.

It was claimed that Singapore made huge profits by selling water to ships, and the water supplied by Johor should be for domestic consumption. Could the Minister comment on this accusation?

This matter - that we buy water from them at 50 cents and we sell at exorbitant rates to ships and therefore we are profiteering - has been answered several times in this House by Prime Minister Goh, as well as myself. So, let me restate the position that this is really without basis. It is an absurd allegation. Yes, PUB sells water to ships at the maximum rate of S$21 per thousand litres. But, as Prime Minister Goh said in this House on 5th April, the sale of water to ships is less than 1% of Singapore's total water demand, or one mgd. And why do we do this? It is deliberately done to price it at such a high rate to discourage demand, not to make a huge profit. But, more important, is this: Malaysia also does the same at their ports. For instance, the Port of Tanjong Pelapas in Johor sells water to ships at the maximum rate of RM455 per thousand gallons for volumes of 50 thousand litres and above. This is obviously substantially higher than the rate charged for domestic consumers, and I presume they do so for the same reason, to discourage demand. So, it is not a question of profiteering. It is less than 1%.

Thank you, Mdm Deputy Speaker, finally, you caught my eye! I would like to join my colleague, Dr Ong Chit Chung, in expressing our appreciation to the Government for its very level-headed and rational approach to this very important issue, in contrast to the Malaysian style, which seems to be twisting and turning all the time. I have four questions for the Minister. First, I note in the Minister's statement that the Malaysians now want to review the second Water Agreement only in 2058. This seems to be a bit late in the day because, as he said, there would be only two years left before the expiry of the actual Agreement. I want to ask whether in the formal Agreement itself, is there a timeframe for an earlier form of consultation or discussion because, obviously, two years is not enough for us to prepare ourselves. If it is true that there is not enough time for us to review until 2058, what are we going to do about our own water provision plans before that? My second point is that the Minister said that the Malaysians always have this cycle in their relations with us - there are ups and downs, and now it seems like we are in the low end of the cycle. Maybe the Foreign Minister could enlighten the House on whether there are reasons behind their more agitated behaviour now, eg, domestic reasons or other reasons that cause them to want to always use Singapore as a whipping boy on this water issue. My third point is that we also read in the papers that the Malaysians now want to have their own water processing plant in Johor. In future, they would not need to get processed water from Singapore any more. But we know that Singapore has spent a lot of money; in fact, $1.5 billion on our own water processing plant, which can also cater for Johor. Should we not talk to them about the possibility of this spare capacity to be used for their own water processing, instead of spending their money on building new plants for their purposes? In the process, there is mutual benefit. We can put it in the terms for discussion, so that we can find it mutually beneficial for us to help them to process their water and become part of the agreement. Because the water processing plant can be very expensive for the Malaysians to build themselves. Finally, on Pedra Branca, I want to ask the Minister what really is the economic or real value of this piece of rock, so to speak, for the Malaysians? For Singapore, we know it is our sovereign right, because we have been owning this piece of island for the last 150 years. But I am surprised that the Malaysians suddenly took a stand and want to claim it. Is there any particular economic, or maybe touristic, reasons for Malaysia wanting to make a claim on this island?

First, of the four questions, is that 2058 or 2059 is rather late in the day. I think that is a real under-statement. On this, he asked two questions: is there any provision in the Water Agreements which provides for review and so on. The answer is no. The Water Agreements are self-contained. They do not have built-in provisions which provide for trigger mechanism for a review process. So, the legal position is that - and we are not taking any other position - both Agreements, when they expire, unless both sides have agreed to extend, will lapse. That is the position. So, when we are talking about agreements, we are talking about agreements which will be separate from the Water Agreements for the supply of water after the expiry of the Agreements. On the second part of his question, since it is late in the day, what should we do and so on. I think the answer is, as Mr Lim Swee Say and others have said, we have to ramp up our capability and capacity to develop our alternative sources of water supply. That is one very important task that we have in Singapore and as Members know, we are taking it seriously. The second question he asked is what could be the reasons behind all these ups and downs and bashing of Singapore. I think Members are used to my style in answering questions, ie, I try not to speculate. It has really reached a point of diminishing returns. Your speculation is as good as mine. I prefer to answer questions and make statements based on hard facts. Third, they want to have their own water treatment facilities and so on. Should we engage them and say, "Look, why are you guys doing this?" I think if they want to have their own water treatment plants and be self-sufficient in their treatment of water, let them do so. It is not necessary for us to tell them that they should not do so. On Pedra Branca, it is partly speculative. I do not know how many tourists that rock can take. I have been there. Again, I do not want to speculate. But, obviously, one answer to his question is, if they take away the rock, it would reduce Singapore's space. Let me say this. For every country in the world, whether big or small, political independence and sovereignty over land and territorial waters is of paramount importance. This is a key attribute of nationhood. When we became independent on 9th August 1965, the territory of Singapore consisted of our main island and several smaller islands, including Pedra Branca, as Ms Indranee has pointed out. When we became independent on 9th August 1965, this is what we have. If territorial integrity and sovereignty is important for all nations, it is very important for Singapore as a small country. We are one of the smallest countries in the world. But our size has been determined on independence on 9th August 1965 and we cannot change it. Although we are one of the smallest countries in the world, every inch of our territory or of our waters is of paramount importance, and we will have to safeguard our territorial sovereignty and preserve it. If anybody challenges us, it has to be resolved by reference to an international body. And until any international body, like the World Court, decides otherwise, that sovereignty and territorial integrity must be preserved by Singapore at all costs.

Mdm Deputy Speaker, the Minister has taken a somewhat unprecedented move in releasing correspondence between the leaders of Singapore and Malaysia, as well as other communiques at the diplomatic level. His reason has been that the hope for a win-win outcome on the issue of water, in particular, is now not realistic. May I ask why he has come to this conclusion at this stage, because most Singaporeans and this House certainly are very familiar with the rhetoric coming from across the Causeway on the issue of water, and the noise levels have a cyclical nature? This time, the noise levels have gone up again. But we have arrived at a very major decision, it would appear, on this matter, in wanting to set the record straight publicly, and I would appreciate it if the Minister could clarify the thinking behind such a move. Secondly, we have taken a move of great gravity on a matter that has been at the centre of bilateral ties between Singapore and Malaysia for some time. I think Singaporeans would want to know and appreciate how is this going to repercuss on the broader bilateral ties between our two countries. Because we have stated that we want to move on from the issue of water on to other matters, and find resolution. I would appreciate some clarifications from the Minister on that.

The first part of Mr Iswaran's question was about the release of these documents, exchanges and diplomatic notes. I think it would have been clear from my speech that I have done so with reluctance. But why are we doing this? If I may sum up the reasons again: first, we did not want to release all these documents because there was still hope that the negotiations could continue and there would still be a door open for talking. But, alas, that was not the case. If it had been just that, it would have been all right. We have been painted as the unreasonable party, the intransigent party, the party to blame for all this. And accusations and allegations have come forth with that line. It is important that these accusations have to be countered. Otherwise, repetitions of untruths, and repeated incantations of these untruths might be taken to be the truth. It is important for Singaporeans particularly, to know the facts. To do that, should we just say, "That is not true", and sit down? I think we have to come out with all these facts so that the facts and the documents will speak for themselves. It is important that all concerned have a clear idea of where we are, what we are and how we came about. The second part of his question was, since this has been a central issue, whether it will impact on other areas of cooperation. In answer to an earlier question, I have made it clear that there are many other areas of cooperation which both Singapore and Malaysia can gain to benefit by focusing ourselves on them. And that is precisely why we should not let this be such a spiky thorn in our relationship, that its non resolution continues to affect the sum total of our relationship. That is why I pointed out that we are in this impasse. Let us find a way out of the impasse. If talks are not possible, then arbitration - and let us try to move on. There are many more urgent things at stake.

Given the history of their habit of changing their minds ever so often, does the Minister foresee that they might decide to go back on the package route again? If so, what is our response to that? Secondly, now that the package has been dismantled, can the Minister explain how the other bilateral issues, apart from water, are going to be resolved?

Members somehow do not believe me when I said that I would not like to speculate. If a proposal comes back and they say, "Let us resume the talks", I would take it a step at a time and deal with it when that happens. The other issues are unresolved and they would have to be dealt with separately on a stand-alone merit. I think that is very clear. They are no longer linked.

Mdm Deputy Speaker, the Minister must be aware that the Malaysians have no intention to settle the various issues. To the Malaysians, no solution is also a solution, and we have to remember this. They have their own domestic politics to play to. If they were to settle all the issues, I think they have a difficult way of winning their ground. So, we must have this behind our heads when we go and negotiate. Therefore, I ask the Minister to see whether there is an easier version of what he has given to us as our ground. I think our ground is very important. Let us concentrate on our own ground, ie, we must convince Singaporeans, for example, that we are not unreasonable, that we are always sticking to the 3-sen price negotiation, and that we have actually been the more reasonable party. And that we are also prepared to up it to 45 sen, but it is always changing at every negotiation table. Therefore, I believe that the Malaysians have no intention to sell us water in the coming years. Let us face the truth. For Pedra Branca, let the ground know that it belongs to Singapore. It is not a disputed territory and that if Malaysia wants to challenge us, they have to do so through the International Court, and that their navy cannot come and patrol our waters. And I think we should tell them very seriously that we really mean business.

I thank the Member for his speech. He asked whether I could give an easier and simpler version of my speech. I thought his summary itself is excellent and maybe we should distribute it to the Members. The point that Dr Tan Cheng Bock made is right - that the process of getting Singaporeans to know the facts cannot just be done by the Foreign Minister making this one-hour speech in Parliament, and people reading it the next day. I think the thrust of his point was that Members of Parliament, in turn, will have to explain to residents and constituents. And I hope that it would not be just the Government MPs. It has to be a collective effort of all the MPs in this House. Whatever assistance they may need from my Ministry, of course, we will be at their disposal.

Mdm Deputy Speaker, could the Minister enlighten this House on the possible reasons why the Malaysians are using the word "war" so loosely? Can they be seriously considering waging war on Singapore? Do they not realise the catastrophic and destructive effects of war on both countries? How can they be treating war so lightly? And how can they be so irresponsible?

Dr Lily Neo is absolutely right that such talk of war does not make sense, and the sooner it stops the better, because it is provocative and it heightens the temperature which makes bilateral relations very, very tense and spiky. Not only that, as another Member alluded to, it is also not good for investor confidence. So, I agree with her that such talk is both senseless and dangerous.

Mdm Deputy Speaker, I have two supplementary questions. One, the Minister's statement has been a watershed development in more ways than one. In other words, it is no goreng pisang matter for anyone to take it lightly. It is, in a way, a matter of our lifeline. My question is: how does the Minister intend to get the message across the Causeway to the Malaysian people when the Malaysian media and leaders are bent on giving misrepresentations? Secondly, having bared the facts - and Singapore needs to do that - how does the Minister ensure that it does not add unnecessary heat to the important bilateral relations which are already emotionally charged in Kuala Lumpur and with the word "war" being bandied around irresponsibly?

The Member is right that the Malaysian media does not portray the Singapore side of the story either sufficiently or accurately, or sometimes not at all. We will do our best to present our facts. As I mentioned before, all these will be on the website of MFA and also on the Kuala Lumpur Mission's website (embassy's website), and we will find other ways. But I hope that both the people and leaders in Malaysia will read the statement carefully because it is not intended to add heat, as Mr Zainul has mentioned. Rather, I have carefully drafted my statement in a measured way to present the facts. And facts sometimes not only can elucidate but they can also dispel rumours and false allegations, but the facts must be able to speak for themselves. And bringing up the facts cannot be said to be motivated by wanting to up the temperature.

Mdm Deputy Speaker, I have two supplementary questions. Firstly, I understand that while we operate a lighthouse at Pedra Branca, we also operate a lighthouse at Pulau Pisang. But while we say that Pedra Branca belongs to us, we do not have a similar position as regards Pulau Pisang. My first question is: what are the differences in Singapore's position as regards Pedra Branca as opposed to Pulau Pisang? Second question, to borrow my colleague, Ms Indranee's terms, has Malaysia decided or realised or in any other way taken any steps to claim any other island that belongs to us, besides Pedra Branca?

What is the difference between Pedra Branca and Pulau Pisang? Let me, first, say upfront that Pulau Pisang belongs to Malaysia. We have never disputed Malaysia's sovereignty over Pulau Pisang. But our Maritime Port Authority (MPA), however, has a right to operate the Lighthouse on Pulau Pisang and the plot of land on which the Lighthouse stands as well as the roadway leading to the Lighthouse was granted in perpetuity to Singapore, so long as Singapore operates the Lighthouse. And this was in an indenture between the Johor Sultan and the Straits Settlement's Government in 1900 and we became successor to that. So, for Pulau Pisang, we have never contested their sovereignty. As for Pedra Branca, we have sovereignty over it. It is ridiculous to say - as the Malaysians have said - that Singapore can only operate the Lighthouse for Malaysia. I might add that, in 1968, the Malaysians objected to the flying of the Singapore flag over the Lighthouse in Pulau Pisang. They objected to the flag and we took it down. But they never objected then, or later, to the flying of the Singapore flag on Pedra Branca. Are they making any other claims? I think the Member is asking because there were some press reports, I believe, in March last year where Berita Harian carried a report from some Malaysian lawyer. That might be the report where it said that Pulau Tekong Kechil was part of Johor. But this is important. The very next day, Malaysia's Foreign Minister publicly denied the claim on Pulau Tekong Kechil. Foreign Minister Syed Hamid said, Malaysia had "no wish to create new problems for Singapore by staking new claims" and that "as far as Singapore was concerned, the only outstanding territorial matter with Singapore was over Pedra Branca."

Mdm Deputy Speaker, may I ask the Minister whether Singapore has considered using mediation, instead of arbitration, to resolve this matter?

The difference between mediation and arbitration is this. A mediator would listen to both sides and suggest a solution which will not be binding, and it is up to both sides. Arbitral tribunal or court will listen to both sides' facts and evidence, and give an award or decision which will be binding. Is mediation possible? I will not rule out anything. But after so many years of discussions at such high levels between officials, between Ministers and between Prime Ministers, and even involving Senior Minister, and we do not reach an agreement - and I have shown you what their attitudes have been - I am not sure whether mediation would produce better results. But in line with my position of amicable settlement of disputes, I would not rule out any form of amicable settlement of disputes.

Two supplementary questions, Mdm Deputy Speaker. First, I would like to have the Minister's views as to how he sees what has happened between Singapore and Malaysia, how has that impacted upon the relationship in ASEAN. Because many outside ASEAN look upon ASEAN as being not a very strong organisation, particularly in this era of multi-lateral organisations where people get together in order to put up a great supposition of strength. How has this impacted ASEAN? My second question is whether the Minister considers that there is a need or possibility to develop a channel for dispute settlement among the ASEAN countries itself because, up to now, there appears to be no channel for such a settlement of disputes, if such disputes develop within ASEAN? And whether this would be something useful for ASEAN to consider, particularly, since the ASEAN countries like Singapore and Malaysia are very important countries in the grouping?

On the first question of whether the difficulties in our bilateral relations will affect ASEAN, I would give a mixed answer, yes and no. No, in the sense that, fortunately, the way ASEAN has developed over the years, it has had a very good tradition of ASEAN meetings continuing among officials and Ministers, and the Ministers of the 10 countries meeting on ASEAN projects without letting bilateral differences impede cooperation. So, if Members look back in the history of ASEAN, the members of ASEAN have had, at different times, their ups and downs in their relations, not just Malaysia and Singapore, others too. Indonesia and Malaysia had problems over illegal immigrants, Philippines and Malaysia had other problems, and so on. But the laudable feature of ASEAN is when you go to meetings, whether at leaders' level, Foreign Ministers' level, or other Ministers, not only do we sit down and discuss, but there is also the personal camaraderie that continues. For all the differences we have with Malaysia, Foreign Minister Syed Hamid and I are able to meet and talk and discuss at ASEAN meetings. So, in that sense, I would say the answer is "no". The "yes" part of a mixed answer is that, while it has not affected cooperation within ASEAN, obviously, questions would be asked by commentators outside ASEAN as to why some countries are bickering, and so on, and the impression may be given that ASEAN countries are in a disarray. So, I think it is important for ASEAN countries to try to resolve these disputes among themselves. Her second question was whether it would be useful for ASEAN to have a mechanism for dispute settlement. Actually, the answer to the question is that there is a fairly high level dispute settlement procedure provided for in the ASEAN Treaty of Amity and Cooperation. It is known as the TAC. That is a very high level mechanism which will involve the high council in ASEAN. It involves the leaders of all the ASEAN countries. But that envisages a very grave kind of situation and that dispute settlement procedure mechanism has not taken place and, I think, on the understanding that most countries should be able to work this out amongst themselves.

In view of the twists and turns of the issues and the tendency for the Malaysian media to play up on some of these issues, I would like to ask the Minister whether, in his assessment, there could be a possible danger for terrorist groups to exploit the issues, and this becomes the Achilles' heel in our bilateral relations. If so, what can we do to overcome this and not let the seriousness of the way the situation is developing to actually add to the danger we are facing from global terrorism?

Of course, both countries will always be mindful of that. But I would like to allay the fears of the Members that, amidst all this, one of the silver linings, if I may say so, is that the professionals in our law enforcement agencies on both sides - our intelligence, our narcotics, police, CID - have an excellent record of close cooperation. And this record of close cooperation continued in the past and continues even during the ups and downs in bilateral relations. And I can say so from personal knowledge because, for some years, I was Minister for Home Affairs, and there is excellent cooperation. In fact, only a few days ago, one of our highest awards was bestowed by President Nathan on Malaysia's Inspector-General of Police - I turned up at the Investiture Ceremony - and that cooperation will continue. It has to be so. We are so close to each other and that there is so much movement of people at the borders that, if we were not so, both countries will suffer in dealing with not just terrorism, but law and order, narcotics and so on. So this is one aspect which I should highlight.

Mdm Deputy Speaker, the Minister has just now referred to the furore by Malaysia on Singapore over defence strategy, and also Tim Huxley's book. I would like to ask the Minister if he could give us an insight why this is so, particularly when Singapore is a small island and the strategy is probably the most meaningful. And, secondly, the book was written by an academic, not in Singapore, but really in the UK.

Again, I do not know. It did not make sense. The book was published two years ago. It is not a book which was written or published by the Government, but by an academic. When it was published two years ago, there was no fuss, and now, out of the blue, it is used as a peg to stir up emotions. I would not be able to tell you why. But I will tell you, as I did, that such fanning of emotions is, to put it very bluntly, dangerous.

Mdm Deputy Speaker, at least, now we have heard something more positive. The Minister has said that there is good cooperation between the civil servants of Home Affairs Ministry and their Malaysian counterparts. When the civil servants could strike such a cooperation with their Malaysian counterparts, I wonder why are our Ministers not able to. In fact, Mdm Deputy Speaker, I was quite surprised to hear about the chronological sequence of negotiations that the Minister and the Prime Minister had with the Malaysians. It seems to me that our Ministers are being pulled around by the Malaysians, going up and down, and changing the goal posts here and there. To me, I thought this is quite uncharacteristic of the PAP Government, which is always talking about no nonsense and being tough. So, I am quite surprised that, in the bilateral relations and negotiations, it seems that Singapore is being pulled around. Secondly, Mdm Deputy Speaker, I understand that we have a non-speculative Foreign Minister, always based on facts, very diplomatic and very accommodating and, I think, in the negotiations, was even prepared to dance with the Malaysians from 45 sen to RM3 and so on, for water supply. But I wonder whether up to this point in time, with the approach that has been taken, we have reached the point where there is a need to open up everything to the public and to tell the public that perhaps there is no return to negotiations. With the way of Singapore's approach to the negotiations - so accommodating, so diplomatic - could the Foreign Minister comment on whether this has been the correct approach so far? If so, why is it that we end up in such a situation?

That is a good question, because it causes us to pause and reflect. As he said, why have we reached this position? Have we reached the position because of some "incorrect" approach of the Foreign Minister and the correct approach of their Foreign Minister? These are not personal whims and fancies of a Singapore Minister dealing with personal whims and fancies of a Malaysian Minister. These are negotiating positions and national positions taken in the conduct of negotiations. Yes, we have been accommodating and very reasonable in the negotiations. But if the hon. Member had listened to me, and as it would be clear from the documents, he would have seen how the Singapore side - not just the officials or the Foreign Minister, but leaders - the positions we have articulated at every turn, what has been uppermost in our minds has been the national interest of Singapore. And in pursuing the national interest of Singapore, in the negotiations we have had certain markers, and those markers have not been compromised. What are the markers that have not been compromised? First, observance of agreements solemnly and willingly entered into. On observance of the Water Agreements, the guarantees in the Water Agreements, we have always insisted on and never departed from them. Second, we were prepared to have the issues resolved in a package, in return for future water. That would have been in Singapore's national interest. That has been a central point in the negotiations. Have we conceded on that? We have not conceded on that. Third, when they discontinued with the package and insisted on the price of current water, our position has been another marker - that we are prepared to discuss the price of current water in the context of the package. If they take it out of the package, push future water to 2059, it is off. Fourth, when it is off, we cannot be bullied and intimidated into agreeing to unilateral revision of the Water Agreements. There are clear provisions in the Water Agreements, and they cannot do it at their whim and fancy. It has to be resolved in accordance with the law. And, in accordance with the law, we say they have lost the right to review. They disagree, then there is a process. So, at every stage, I think it should be clear that Singapore's negotiation position has had, uppermost, the overriding interest of Singapore.

Mdm Deputy Speaker, both Singapore and Malaysia have agreed to sign the special agreement on the 6th of next month to refer the Pedra Branca matter to the International Court of Justice. May I ask the Minister how long will the ICJ take to resolve this problem and, during this period, what is Singapore's stand on the management of this small island?

I wish I could give the hon. Member a specific deadline as to when the Court will decide after the signing of the agreement, but I am unable to do that. There are certain timelines. After signing the agreement, within so many months, each side must submit certain kinds of documents. And after a particular date, each side must reply to the other's documents, and so on, in what is known as the pleadings. Then, a date is set for hearing. When a date will be set for hearing depends on the workload of the court, how many other cases there are in the queue, and so on. So, I am unable to give him a precise answer, but I think it will take at least about two years. In the meantime, what happens? Nothing happens, because we are in ownership, control and possession, and exercising sovereignty over the island. And that continues. That is the status quo. And that will continue until the Court has decided, and it will change only if the Court decides otherwise.

In the Minister's concluding remarks on the Pedra Branca matter, he said that the consequences for both countries would be costly. Could he clarify what exactly is meant by that statement? In terms of our navy and air force around the Pedra Branca area, I think they face continual agitation from the Malaysian forces. Could the Minister enlighten us on what are the instructions given to them in such instances?

I think the closing part of my statement on Pedra Branca must be quite clear. In other words, we have intrusions. As I have said, there will be incidents, there will be accidents, and we have a high risk of loss of lives, damage, and there will be a lot of consequences. I do not have to spell this out. As to her second question, what are the instructions given, I have no doubt that the Defence Minister, Dr Tony Tan, would have given whatever instructions that are necessary for us to maintain our territorial integrity and sovereignty.

The Minister said that our common bilateral interests exceed our bilateral differences. Can I ask the Minister how does he see the two countries cooperating and increasing their cooperation, especially given the present atmosphere?

I hope Ms Irene Ng will understand. I do not want to repeat. I think I have answered the question posed in a different form by Mr Tan Soo Khoon. I answered that there are areas for economic cooperation and, in answer to Prof. Ngiam, I talked about cooperation in security and law enforcement areas, cooperation in the wider area in ASEAN and so on. So, I think there are areas for cooperation, and we should endeavour to continue in those areas and try to resolve these issues in a way that does not mar such cooperation.

Mdm Deputy Speaker, Dr Tan Cheng Bock has observed that, to the Malaysians, no solution is their solution, and I believe Dr Lily Neo has alluded to the loose talk of war. The situation of no-peace no-war is not good for both sides. There may be an accident and a war can happen. In 1914, hon. Members would know that the First World War was started by just the shooting of one man. So, in our case, I think we should not allow this kind of a situation, where there is no-peace no-war, to exist. In this light, I would like to know whether or not Singapore is willing to make a standing offer to Malaysia to have the outstanding matters arbitrated or to go before the International Court of Justice, since the Minister has said that it needs the consensus of both sides to go to the help of a third party. The other question is: has the situation at Pedra Branca improved since the recent statement of the Minister for Defence, Dr Tony Tan, with regard to intrusion of Malaysian naval vessels in our Singapore territorial waters?

The answer to the first question on whether we would make a standing offer, is yes.

Have we made the offer?

Yes, because we offered to go to the Permanent Court of Arbitration, and they said no. And, as is clear from my speech, since they have said no to that, to resolve the impasse, we said, "Look, let us follow the provisions in the Water Agreements." But, actually, that is a move that they have already commenced by issuing a notice. So, we have commented and we have said that we are prepared to take that route. Has the situation on the ground at Pedra Branca improved? My understanding from my discussions with Dr Tony Tan is that the situation has not improved.

I shall take one last clarification. Mr Chandra Mohan.

Mdm Deputy Speaker, perhaps we may need to consider alternative forms of discussion to try and resolve the problem or, at least, minimise the problem. Would this House consider alternatives? For instance, if it is possible, let us disseminate information as much as possible in Singapore - which is being done now by the Hon. Minister, which is a positive point. Let the mass media disseminate that and perhaps on the Internet. Let the Malaysian press be told to disseminate there too, because this is a serious problem. I cannot understand why human beings need to have this kind of problems when the citizenry, the people, just want to carry on with life. And if there is a problem and an impasse between Ministers or Cabinet, I think let us look for alternatives. I would even suggest ---

Order. Mr Chandra Mohan, can you please ask your question?

Yes. Would the Minister consider a group of parliamentarians from Malaysia to appear before the Parliament in Singapore, and vice versa, to present our cases to each Parliament and present the facts? And by having this kind of dissemination of information, would it somehow minimise the problem, and the Ministers with powers would know what their responsibilities are in trying to resolve the problem? And the people's power would sort of override and say, "Let us resolve the problem." Because we are not finding a solution. And, over the years, this has happened.

If indeed I was in a position to order the Malaysian press to publish my statement, of course, I would do so. But I cannot quarrel with what Mr Chandra Mohan has said about the widest possible dissemination of the facts. I agree with the objective. We shall endeavour to do so, but I hope he will also be part of this process as a Nominated MP. I do know that he has contacts in Malaysia. We should use all possible contacts to disseminate the facts, just as we need to understand what motivates them to do or say what they have done and said. As to alternative forms of discussion, I am not averse to any and every possibility which can aid the process of solving bilateral disputes. And I have never taken the position that the promotion of goodwill and good relations between countries is the sole preserve of the Foreign Minister. It is not. It must involve a whole spectrum of Ministers, officials, non- governmental bodies, and parliamentarians have a role to play. But on the specific suggestion of sending Singapore parliamentarians, Mdm Deputy Speaker, I do not know how we will form such a group to go up to Malaysia and present the facts in the Malaysian Parliament. How different would it be for the Minister and his negotiating team presenting it, face to face with the Malaysian Minister who has the full powers and the direction to decide? If he thinks he can resolve that, then let us consider that. But, as a general principle, and as Foreign Minister, I welcome all suggestions, but they must be practical and workable.

Order for Second Reading read. 3.30 pm

Mdm Deputy Speaker, I beg to move "That the Bill be now read a Second time." The Bill seeks to amend the Road Traffic Act (RTA) for the following broad purposes: First, to revise the penalty framework for weekend and off-peak car offenders. I will refer to them from now on as off-peak car offenders; Second, to require the disclosure of vehicle recalls and rectification of safety-related vehicle defects; Third, to provide a legislative framework for the licensing of taxi companies; Fourth, to enable enforcement action to be taken in respect of jaywalking at bus interchanges, false and misleading statements made in relation to vehicle type-approval and de-registration processes, and indiscriminate parking of heavy vehicles; and Lastly, to formalise existing procedures and to revise outdated definitions and procedures. Let me now highlight the key provisions in the Bill for the proposed amendments. First, the penalty framework for off-peak car offenders. My Ministry has reviewed the penalties for off-peak car offenders who tamper with their supplementary licences. Typically, such offenders are caught with supplementary licences that have torn tabs that are pasted back. Presumably, the offender had pasted the tabs back in order to re-use the licence. Currently, offenders who are convicted of tampering with their supplementary licences are given jail sentences, even though the Road Traffic Act does not require a mandatory jail sentence. As a result, the careers of the offenders are likely to be ruined. The jail sentence is unduly harsh for those who are convicted for the first time. To reduce the severity of the penalty for first-time offenders, clause 13 amends section 129 of the RTA to remove the custodial sentence provision for first-time offenders. However, to emphasise that it is a serious offence to tamper with a supplementary licence, the maximum fine will be raised from $5,000 to $10,000. Repeat offenders who tamper with off-peak car supplementary licences will face stiffer penalties. They will now be fined up to a maximum of $20,000 or face imprisonment for a term of not more than 12 months or both. This represents a substantial increase in the maximum fine from $5,000 to $20,000. My Ministry has also taken the opportunity to rationalise the penalty framework for some of the other off-peak car related offences. Currently, offenders who drive off-peak cars without valid supplementary licences are liable to a fine, which is subject to a minimum pegged to the road tax of a normal car in the same category. This means that the minimum fine quantum varies according to the engine capacity of the car, even though the savings derived from the offence are the same, regardless of the engine capacity or road tax of the car. Hence, clause 3 amends section 11A of the Act to de-link the penalty framework for the offence of driving an off-peak car without a supplementary licence from the value of the road tax. It also aligns the penalty framework for this offence with other off-peak car offences, by setting a maximum rather than a minimum fine. Under the new provision, first-time offenders will face fines not exceeding $5,000 while repeat offenders will be subject to fines not exceeding $10,000. Section 11A(4) deals with offenders who falsify the number plates of off-peak cars, so that their vehicles can pass off as normal vehicles. The Government takes a very serious view of these offences. Clause 3 enhances the penalty for such offences by replacing the current fine, which is based on a minimum of 24 months of road tax, with a more definitive penalty which carries a maximum fine of $20,000 and a provision for a jail sentence. This new penalty for this offence is in line with that proposed for repeat offenders who tamper with off-peak car supplementary licences. To sum up, the amendments serve to rationalise the penalty framework for off-peak car offences and make the penalties more reflective of the severity of the offences. The next set of amendments deals with vehicle recall requirements to better protect the interest of vehicle owners. Currently, vehicle recalls by manufacturers for defects due to the design or production process of the vehicle are carried out only through the co-operation and goodwill of motor traders. Clause 5 introduces a new section 23A to make manufacturers and dealers responsible for disclosing vehicle safety-related defects to the LTA and the affected vehicle owners. To ensure the safety of the affected vehicles, manufacturers and dealers will be required to effect the necessary rectification to such defects. Manufacturers and dealers who fail to disclose safety-related defects and effect the required rectification will face heavy penalties. Let me move on now to the amendments pertaining to the taxi industry. A major source of dissatisfaction with the taxi industry today is the mismatch between supply and demand during peak periods, and poor service standards. To address these concerns, clause 11 of the Bill introduces an entire new part to set up a framework for licensing of taxi companies, with a view to raising taxi service standards. The new licensing framework will also pave the way for the further deregulation of the taxi industry. Once we have put in place the rules on how taxi companies can be set up and how they are to be accountable for their service standards, we will lift controls on the number of taxi companies, and the fleet quota imposed on each company. Such a move will allow the market to respond freely to demand, thereby providing a better match between supply and demand. This will complete our move to liberalise the taxi industry, which started with the de-regulation of taxi fares in 1998. Under the new framework, any person who wishes to run a taxi business must apply for a taxi operator licence. Applicants will be assessed based on a comprehensive set of criteria. This would include their financial resources and plans for providing a satisfactory service. Applicants will be required to operate a minimum fleet size of 400 taxis, and will be given four years to achieve this. This will ensure that the new operators will have sufficient economies of scale to provide a good service, for example, by being able to invest in GPS-based taxi booking services. As part of the licensing framework, LTA will impose licensing conditions aimed at improving overall service levels in the taxi industry. These conditions include minimum Quality of Service standards and compliance with audit directions. The taxi companies will also be required to pay a licence fee, which will be based largely on the principle of cost recovery. LTA will formulate benchmark performance standards and track the taxi companies' actual performance. Companies which fail to meet these benchmarks will be subjected to financial penalties, which are capped at $100,000 per contravention. In severe and recalcitrant cases, their licences may also be suspended or terminated. Through the licensing framework, LTA will also be empowered to specify codes of practice and issue directives in several areas, including the preservation and promotion of fair competition in the industry. Together with the introduction of a licensing framework for taxi companies, LTA will be revising the disciplinary framework for errant taxi drivers. Today, LTA handles all disciplinary cases for taxi drivers according to internal procedures and guidelines. LTA will be revising the framework to make it more transparent and to enable the taxi companies to play a role in disciplining their errant taxi drivers. The revised framework will be similar to Traffic Police's Driver Improvement Points System. The details of the offences and the disciplinary framework will be made known to taxi drivers and the public in due course. The revised taxi driver vocational licence demerit points system will complement the licensing framework for taxi companies. Together, they will bring about better taxi services for commuters, and pave the way for a liberalised, competitive and more responsive taxi industry in Singapore. LTA will shortly release details of the licensing framework for the taxi companies and the taxi driver vocational licence demerit points system. The Bill will also enable enforcement actions to be taken in several areas: Clause 12 of the Bill enables the Registrar to empower employees of bus operators to take action against anyone caught jaywalking at a bus interchange or terminus. In recent years, there have been a number of serious accidents where pedestrians were hit by reversing buses while taking short cuts across bus parking bays at interchanges. The bus operators have put up advisory signs and fencing to deter pedestrians from jaywalking within the bus park areas. However, they have been unable to act against persons who ignore the signs. Allowing the bus operators to take enforcement action against jaywalking therefore serves to ensure the safety of the public. Under section 129 of the RTA, false or misleading statements or declarations made in relation to the registration of a vehicle are punishable. However, this provision does not cover similar offences in relation to vehicle type-approval and de-registration applications. Clause 13 extends the scope of section 129 to allow for enforcement action to be taken against vehicle type-approval and de-registration applications. Clause 6 empowers the Minister to make rules to regulate the keeping and the use of heavy vehicles. Currently, owners of heavy vehicles have to demonstrate that they have approved parking places before they are allowed to renew their road tax. They do this by furnishing their Vehicle Parking Certificates (VPCs). The VPCs are issued by the operator of the heavy vehicle park at which they have their designated parking places. There are 39,200 heavy vehicle parking lots island-wide compared to the population of 27,000 registered heavy vehicles. As such, there are more than enough heavy vehicle parking places, an excess of 12,000 additional parking places than there are vehicles. However, despite having their designated parking places, some heavy vehicle drivers still park their vehicles overnight illegally or indiscriminately along public roads and within private housing estates. Usually, this involves drivers or individual owners who were unable to obtain designated parking places near to their homes. I can understand their preference to park their vehicles nearby, so that they can walk in the morning to where their vehicles are parked. Unfortunately, HDB and URA have stopped providing new heavy vehicle parking places within HDB estates. This is because of noise pollution and safety concerns. URA is also not able to allocate new heavy vehicle parks next to HDB estates because in most areas, the currently available large plots of vacant land are usually land that has been reserved for development in the near future. As such, these drivers should, like the other drivers who are parking their vehicles in designated parking places, make the necessary transport arrangements to get to and from their vehicles parked in the designated parking places. The amendment will enable enforcement actions to be taken against indiscriminate parking of heavy vehicles. But before LTA proceeds to take enforcement actions, it will provide a grace period for owners and drivers to be informed about this new regulation. As there are still some vacant parking lots available near HDB estates, LTA will work with URA and HDB to make known to heavy vehicle owners and drivers where these additional parking spaces are still available. In the meantime, I would urge heavy vehicle owners and drivers who are parking indiscriminately at night to make appropriate transport arrangements to travel between their home and the designated parking places of their heavy vehicles. The remaining amendments proposed under the Bill concern the refinement of existing procedures and definitions. Madam, in summary, this Bill contains several amendments aimed largely at supporting new regulatory frameworks, as well as formalising and improving procedures for better administration and more effective enforcement. Madam, I beg to move. Question proposed.

Resolved, That the proceedings on the business set down on the Order Paper for today be exempted at this day's sitting from the provisions of Standing Order No. 1. - [Mr Mah Bow Tan].

Debate resumed.

Mdm Deputy Speaker, I wish to speak in support of this amendment Bill. There are several areas of amendments listed out by the Minister and, in general, I support these amendments. In particular, I want to focus today on this issue of licensing of taxi operators. This is an important feature in this list of amendments, and it focuses mainly on the legislative framework for licensing of taxi operators which will come in place. We have heard a lot of complaints and we read about them regularly in the papers from the public concerning this call for taxis during peak hours or rainy period, and this is one of the issues which I suppose the Bill addresses, ie, service standards of taxi companies. I agree that while there are certain conditions which are attached to this legislative framework for the licensing of taxi operators within the context of more competition, as spelt out in section 111, I am not, however, entirely persuaded that by licensing conditions alone, we can properly and adequately tackle this question of service standards during periods of heightened demand, such as during holiday season or during peak hours and rainy season, and so on. While I can understand public sentiments when taxis do not respond during holiday seasons and the attempts made by the Minister to try and correct them, we can think about issues or instances of airport service standards during Chinese New Year, or shopping centres, and so on, during rainy periods. I remember a journalist wrote a long piece decrying the transport service standards in Singapore when she had to wait for hours for taxis at Centrepoint during the Christmas season or rainy period. I appreciate the frustration of any member of the public waiting at a stand for a taxi which does not turn up. But I suggest that we should try to understand the problem of delivering service to satisfy peak demands in its proper context. This kind of heightened peak demand is not something new. Just a heightened peak demand, epitomises by the long queue outside Centrepoint's taxi stand, cannot be satisfied within that window, especially when the holiday shopping season is coupled with a rainy period. It is the same, whether we are talking about waiting for a taxi in Centrepoint or waiting for a taxi outside Harrods in London. It is the same problem. I am not trying to explain away the problem of taxi operators' service standard. But it is only logical to say that when the demand within the window period is heightened, as is expected during rainy or holiday seasons, some mechanism for rationing and allocation must be allowed to operate, to solve this problem of the frustrated long queue wait. We have to solve such a problem in micro-management terms as best as possible. And it is not fair, I would say, to blast away the overall transport system and decry the world's standard service that we have delivered. Actually, economists have been talking about this and the answer comes from the time of Adam Smith. It is called the price mechanism in allocating of limited resources. Whenever there is a long queue waiting for taxis and the taxis are not available, we should be wondering where they are. If the taxis are fully occupied in servicing all the other parts of the island, and if we are so concerned about that particular belt or shopping point in town that must be serviced, then the answer is to put in a price differential factor through a proper pricing mechanism sufficiently enough to attract the supply. So I wonder whether the Minister, in this taxi operating licence and service standard framework, will also instruct the LTA to think along that line. We should allow for the price loading interesting enough for the taxis to ply into the city, not just to attract the flow of taxis into the city but also to offset the additional cost of coming into the city because of ERP charges. And a price loading must also be sufficiently attractive for taxi drivers to come into town because there are so many other demands for their services in other places at those times. But having said this, it is possible that too many taxis are changing shifts during certain hours. This actually can be adjusted by administrative rules for operators so that they do not change shifts at one time, taking away taxis during a certain time window. The authority can ask operators to actually smooth out the availability within a certain band or plus or minus certain percentage so that the changing of shifts can be actually distributed across a day period. Then you smooth out this aberration in availability of supply during those changing shift periods. Another thing to regulate the supply is actually to require a certain minimum logging of mileage by taxis, which I think is presently being done by the LTA. While I support these new amendments for taxi operators, I would also caution that we should let market forces more play and more room to play, so that choices can be offered to the customers. Customers should also be realistic about service standard at peak times and be prepared to bear with increased charges for delivering services at those hours. These amendments also pave the way for the liberalisation of the taxi industry and the Minister has said that it will probably be the final touch to the completion of this liberalisation effort. I welcome this. However, while deregulation is welcomed, basic standards of deliverables must be set with rules to comply. New sections 111(g) and (h) of the Bill spell out the need for the operators to meet the guidelines on codes of practice, performance standards and fair competition. In the past, I understand there had been half-yearly performance yardsticks by which operators have to fulfill and I would like to ask the Minister whether operators, in general, up to now meet these yardsticks. I suppose these include utilisation rate, the engaged mileage rate, radio despatch rate, and so on. If so, what are the further yardsticks or performance indicators that he has in mind that the LTA will need to target. In developing these performance indices (KPIs), we must not tilt the index list so that the operators in fulfilling them end up giving a buyer's product and output which will not benefit the larger group of consumers. What do I mean? If a KPI list is drawn up for monitoring and it has too much weight given, for example, to measuring booking performance, then operators will play this game. Or the LTA might want to put heavy weight on utilisation rate such as, for example, paid mileage out of a total mileage plied by the taxis. Then, we may end up with most taxis waiting around for calls. If that happens, this would work against the benefit of the public who need taxis for street hire. So the end result is that the poor hirer on the street suffers and taxis will not be available to the people on the street, while meeting the demand for those who want to book. So, in implementing these regulations, I urge the Ministry to apply the light regulatory touch. We should give market forces more play and more room to play. The more regulations we put in, the less room there is for competitive market forces to be at work, and the net result is a loss of consumer welfare. Statutory costs should be minimum so that the consumer does not end up paying for all these. While I am a firm believer in relative pricing mechanism to draw out the allocation, I am not urging for heavy fees to be slapped on in a non-discriminatory way. That way will not allow for the allocation mechanism to work. The price mechanism must give room for differentiation in the price level for allocation. Slapping on additional licensing fees alone is not necessarily the solution. In the same way, any cost of administration or audit, or for compliance, should not be passed on to the operators. This is important. In times like this when we are concerned about the competitiveness in our private and public sectors of the economy, we should not pass down costs from administration, which properly should be part of the bureaucracy, to the private sector. Because the efficiency of the bureaucracy and the public sector must also be subject to the rigours of audit and performance and to the yardsticks of efficiency. Madam, I support the amendments.

Mdm Deputy Speaker, I rise in support of the Bill. First of all, I would like to applaud the Ministry of Transport for introducing a legislative framework for the licensing of the taxi industry, which plays an important role in our tourism and transportation development. But I am not sure how this licensing framework is going to address public dissatisfaction with the taxi industry and improve service for the commuters. One of the key issues we have to look at first is whether taxis are considered public transport service or a mode of private transportation. In the Public Transport Council's "Framework of Regulating Public Transport Services", the Land Transport Authority is acknowledged to have the responsibilities of licensing and regulating rapid transit system as well as taxi services. But, in reality, taxis do not enjoy any benefits that are accorded to public transport providers. Be it the ERP charges, vehicle tax structure or the COE, taxis are basically treated no differently from private cars. Yet, taxi drivers have to abide by various regulations and face constraints that are imposed on private car drivers. So, perhaps ERP charges are one of the key reasons for the complaint of mismatch between supply and demand during peak hours. Contrary to what many thought, taxis do pick up passengers inside the CBD at peak hours. But once they drive out of the CBD, most would cruise outside the CBD as there are not many passengers who travel into the CBD during week day evenings. Most taxi drivers would not want to risk driving back into the CBD without a fare, pay ERP charges and put up with the traffic jams in the hope of picking up passengers within the CBD a second time. Naturally, without this turnaround, peak hour demand will always exceed supply. Madam, I then look at the proposed licensing framework again and wonder whether it will solve such service shortcomings and bring about improvements. There are about 19,000 taxis on our roads today. Of these, some 18,000, or 95%, are managed by the big operators - Comfort, City Cab and TIBS. They are either public listed or owned by public listed entities. I would assume that these operators do care about their service standards, are concerned about public complaints and do have the resources to invest in training and facilities to maintain certain performance standards. How would the proposed licensing framework cause taxi companies to improve their service beyond what the existing big operators are already doing? It is not that I do not support the need for taxi operators to be licensed and regulated. My concern is about the big taxi companies passing on the cost of compliance to the 38,000 individual taxi drivers or to taxi commuters who make 600,000 trips daily. There are an estimated 85,000 persons holding taxi vocational driving licence in our economy. With the current poor economic conditions, there is a queue of people waiting to be taxi drivers. The income of taxi drivers has fallen by 10-15% because of the weak economy. Commuters' expectations and pressure on the taxi drivers to meet higher standards continue to rise. Taxi drivers dare not speak up against their operators for fear of losing their rice bowl. In the meantime, the taxi companies are shifting the operational and financial risks and liabilities to their drivers. The taxi licence thus has become a money printing machine, where the licence holder simply sits back and rents out its taxi without much financial risks. There is not much taxi drivers can do if operators decide to shift their cost burden to them, or not to share any increase in revenue with them. For example, LTA recently approved a taxi operator's application to place an advertising panel sitting on top of the back of the taxi boot. The panel covers half of the rear view of the taxi driver. This compromises the safety of the driver, passengers and other road users. If the panel is damaged, the taxi driver would most certainly be made responsible for the repairs. But how much of this advertising revenue does the taxi company share with the driver? Madam, I would like to move on to the revised penalty for off-peak car offenders. Considering that the total number of weekend or off-peak cars registered in the last 10 years is only about 7,000, I am surprised to learn that close to 200 people have received custodial sentences for tampering with their supplementary licences. I fully support the revised penalty framework, as I see this as a necessary move by Parliament to step in and entrench in the law the desired punishment for first-time offenders and to have a higher maximum fine in place of a custodial sentence. With regard to formalising procedures to make manufacturers and dealers responsible for disclosing vehicle safety related defects and rectifying them, this is indeed a good move. This is particularly so when there are now more and more parallel importers. But with the relative ease of setting up a parallel import agency, one would also expect more of such agencies going out of business. Who could the car owner turn to in the event that his dealer has gone bust? And instead of requiring notice of the defects to be given in the form of newspaper advertisements, would it not be more effective if media releases were issued and carried by the local news networks? The dealer can then be charged a fee based on the number of defective vehicles he has sold which needed to be recalled. Madam, this Bill also deals with the indiscriminate parking of heavy vehicles. I believe the solution to illegal parking of heavy vehicles is not just in beefing up enforcement and introducing more regulations and fines, but to couple strict enforcement with the provision of more lots for such vehicles at more accessible parking areas closer to the housing estates. I would like to strongly urge the Ministry of Transport to work closely with the Ministry of National Development to solve this problem. Heavy vehicle drivers play an important role in our development as a logistics and transportation hub. For example, a port driver has to be on call and get up at odd hours of the night and morning to move containers and keep our port bustling around the clock. I believe we owe it to them to provide them with some transportational and infrastructural support, to help them in their work duties. We cannot just leave them to tackle their own problems and inconveniences, while we take pride and applaud when our port is ranked the world's best or busiest. Let us not forget the individuals and the nuts and bolts that help drive our success. Madam, I support this Bill.

(In Mandarin): The Road Traffic (Amendment) Bill authorises the Minister to punish the drivers of heavy vehicles for indiscriminate parking. Instead of parking their heavy vehicles in the designated places, these drivers chose to park their buses and lorries near the HDB estates or in the private housing estates, resulting in a lot of complaints from the residents there. The owners of these heavy vehicles have actually purchased the licences to have their vehicles parked at the designated vehicle parks. Yet, the drivers choose to park these vehicles in the housing estates. I think there must be a reason why they are doing so. I have spoken to some of these drivers and I now understand their problem. There are two important factors. Most of the drivers of these heavy vehicles, including lorries and buses, are living in HDB estates. They belong to the lower middle income group of people. Their working hours are irregular, having to leave home early and return home late every day. Naturally, they would prefer to park their vehicles at proper parking places near their flats. But parking lots for heavy vehicles are not readily available near the housing estates. According to the rules of the Land Transport Authority, if an owner wants to renew the road tax for his heavy vehicle, he must produce a Vehicle Parking Certificate (VPC) to prove that he has a proper place to park his vehicle. Since such parking lots are not available near their HDB estates, he would have no choice but to purchase a VPC for parking at a designated vehicle park at some remote industrial estate, just to satisfy the requirement for the renewal of road tax. As these parking places are far away, private bus drivers would have to leave home before 5 o'clock in the morning to ferry the students to school and lorry drivers too have to leave home early to avoid the morning peak hours. More often than not, public transportation such as MRT and buses are not available in the early hours of the morning. In the circumstances, they decide to park their vehicles somewhere near their HDB estates, and risk being booked for such parking offences and incur heavy fines every month. In 1998, some 2,000 parking lots for heavy vehicles were allocated in Jurong East, Jalan Bahar, Choa Chu Kang, Bukit Panjang and Bukit Gombak. The needs of drivers in the western part of Singapore are basically satisfied. But such parking facilities in the eastern and northern parts of Singapore, particularly in the newer HDB estates in Sengkang, Woodlands, etc, are still lacking. I hope that the Minister would understand the plight of these drivers. Just now, the Minister mentioned that the total number of available parking lots exceeds the number of heavy vehicles registered in Singapore. But most of these parking lots are situated at industrial estates and remote places which are impractical for the drivers to use them. Yes, there are parking lots, but the drivers just cannot make use of them. Therefore, I urge the Minister to liaise with the HDB and URA to open up or develop more parking lots for heavy vehicles in order to meet their demands. Lorries and bus drivers have played a great role in our nation building and economic development. We should do something to help them. With advanced IT, can LTA dispense with the need to produce the VPC when renewing the road tax for these heavy vehicles, just like the way we renew our radio licence with the road tax of our motorcars? This would save the owners the trouble of having to go personally to LTA just to physically produce the VPC.

Mdm Deputy Speaker, on the Road Traffic (Amendment) Bill, I will touch mainly on clause 11 which refers to the new Part VA of the Bill that sets out the framework for the licensing of taxi operators with the aim of bringing about better taxi services for commuters. In putting a licensing framework in place, the amendments will provide a direction for further possibilities in deregulating the taxi industry, such as allowing it to respond to market forces that determine the supply of taxis. The new section 111A defines a person who operates a taxi service as one who owns more than one taxi and leases them to individual drivers for the purpose of providing taxis for hire or booking. The insertion of Part VA is timely for the taxi industry. This is especially so in view of NTUC Comfort's plans to merge with Delgro to form a huge transport company with the potential to monopolise the market. With the merger, NTUC Comfort will be the market leader with 17,000 taxis, or 90% of the market, leaving TIBS taxis as the other operator with only 2,000 taxis to compete. This Bill will then allow other players, be it big or small, to enter the market to compete. However, I wish to highlight that, while the legal framework allows players to compete within the rules, it must not be stifling to participants who are comparatively of smaller organisation sizes. We must try to create an environment for competition to be fair, irrespective of the size of market participants. Competition should be based not only on cost but also on services. New section 111D(1)(g) states that the Ministry must specify codes of practice and standards of performances in connection with the preservation and promotion of fair competition. An industry that merely consists of two players is certainly not healthy for our public transport system. Perhaps, the Transport Ministry may, as a start, promote a scheme to encourage successful taxi drivers to band together to form their own corporations to hold licences as taxi operators. Next, I would like to raise some concerns relating to taxi drivers. Taxi drivers are the frontline faces of the industry. How they carry out the services to commuters will determine the success of the taxi operators that rent the vehicles to them. Collectively, they are a potent force in promoting goodwill to tourists and a conduit for the latest news in town. They work long hours and, most of the time, in heavy traffic conditions under wet and hot weather. It takes stamina and endurance to drive a taxi for eight to ten hours a day. As such, regulations must be in place to monitor the taxi operators' house rules, which have to be observed by the taxi drivers and which may, at times, be onerous to the taxi drivers when these rules are taken in addition to the usual regulatory obligations of the industry. Such monitoring would go a long way in making sure that the taxi operators give due consideration to the taxi drivers in their pursuit to provide better and competitive services. New operators who are successful should also be encouraged to provide assistance schemes to taxi drivers. NTUC Comfort has a retirement scheme which has begun this month. Taxi drivers with at least ten years of service will receive a lump-sum ranging from $300 to $1,400. They will also receive annual amounts ranging from $100 to $400. TIBS taxis also has an incentive and progressive bonus of up to $1,300 every year for its drivers. The Land Transport Authority, which I assume will continue to regulate the taxi industry, should take into account new incentives to encourage taxi drivers to be proud of their vocation, in which this new legislation has not taken into account. Provisions, such as relief packages for taxi drivers in the event of an economic downturn, can be mandatory for taxi operators to set aside. This safety net provided for by the industry players will be more and more crucial when commuters have more choices of transport to choose from, causing the earnings of taxi drivers to fall heavily during bad times. As an illustration, a taxi hirer pays about $100 per day as hirer's fee, which is usually borne by the hirer and his relief driver. In addition, diesel cost per day comes up to about $15, after discount. This means that, each day, a taxi driver has an overhead cost of at least $115 to recover before seeing any profits. In order to make a decent income each month, a taxi driver has to drive long hours to earn more, in order to cover his fixed overhead costs. This may be at the expense of maintaining a safe level of concentration for themselves and other road users. A relief package during poor economic conditions will help in reducing business costs to the taxi drivers. NTUC Comfort, as a responsible taxi operator, has already extended a relief package to taxi drivers since November 2001, which will last till August 2003. This package consists of a monthly rental rebate of $40 in cash and $20 worth of diesel, adding up to a $60 relief package. It has also promised to sell diesel to cabbies at a discounted price. However, I urge the Ministry to monitor such relief schemes, in order to do more to help taxi drivers tide over tough times. This help scheme is even more necessary, as the relationship between drivers and operators is no longer that of a cooperative, where the drivers are shareholders of the cooperative and owners of their cars. Another point which regulators need to note in regulating a robust taxi industry is the taxi operators' way of handling taxi drivers' welfare after road accidents. Let me illustrate. For NTUC Comfort drivers, a deposit of $1,500, excluding GST, has to be paid irregardless whether the driver was at fault or not. Deductions would then be made from the deposit for repairs when he is at fault. However, if the driver is not at fault, it takes up to a year for the refund to be made. The driver is further disadvantaged as he would be out of pocket during the period of repairs to his vehicles. New section 111C(3)(d) of the Bill states that the Ministry will consider "the existence of other taxi services", which is the supply side, "and the demand for taxi services" to determine whether to grant a licence to operate a taxi service. I would like the Minister to clarify what are the considerations the Ministry will take into account to determine the number of taxi drivers and operators in the market, and what are the guideposts that will signal the Ministry that the market may be saturated. NTUC Comfort started with a fleet of 1,200 taxis in 1970, rising to 11,000 in 2002. TIBS taxis started with 50 taxis in 1990 and, in 2000, it released its 2,000th taxi on the road. This steady increase in the number of taxis has been even felt by passengers. A grassroots leader told me that 10 years ago, one has to wait at least 20-30 minutes for a cab. Today, according to a survey conducted by NTUC Comfort, 90% of passengers say they can get a cab within 10 minutes. While this is good news to the commuters, it translates into lower income for drivers, but not necessarily taxi operators. Finally, when regulating the taxi industry, fines and punishments, as stated in new section 111H for both taxi operators and taxi drivers for offences, need not necessarily be made in haste for the sake of efficiency, through imposing heavy fines according to the book. But options must be in place for a dispute resolution and mediation process, which may eventually lead to either a waiver or reduction of the fine. This avenue can help taxi drivers who find that the cost of doing the business in driving a taxi already too high. The Ministry, in planning for a well- run taxi industry, should have a market mechanism, such as a dispute resolution and mediation panel that is fair and unbiased for taxi drivers and operators to turn to for help when faced with unfair practices. Mdm Deputy Speaker, I believe this Bill will provide a foundation for the Ministry of Transport to allow healthy competition in the taxi industry which, in turn, will be more responsive to changes in the transport needs of the commuters.

Mdm Deputy Speaker, please allow me to seek clarification from Mr Andy Gan. Is he aware that Comfort is a publicly-listed company and not a NTUC cooperative?

Yes, I am aware of that.

Mdm Deputy Speaker, I would like to thank the four MPs who have spoken, and Mr Yeo Guat Kwang, the 5th MP, who pointed out that Comfort is no longer a NTUC cooperative. I will address the points brought up by the Members in turn. Some of them may overlap, because they all touch on pretty much the same theme. Mr Chay started by talking about the problems faced by the taxi industry, particularly the dissatisfaction with the taxi industry in terms of supply versus demand - that during peak periods, commuters have to wait for a long time. And he felt that the price solution is really the best mechanism, that when there is a scarce resource and there is a mismatch between supply and demand, the price mechanism needs to come in to make sure that there is a better balance. I totally agree with Mr Chay that this indeed is the case, especially when the demand is not constant throughout the day. The commuters complain about the long queues for taxis at peak periods during rainy weather and that, even when there is fine weather, during the peak periods, there is never enough. But it is not because taxi drivers are not working. It is because demand far outstrips supply. So, the question is: Is the supply of taxis in Singapore inadequate? Mdm Deputy Speaker, the answer is: No, far from it. We actually have more taxis per 1,000 population in Singapore than any other equivalent major city. Let me explain. In Singapore today, we have 4.8 taxis per 1,000 population. This compares with only 2.8 taxis in Hong Kong, 2.9 in New York, 2.6 in London, and 2.3 in Tokyo. If we have almost double the number of taxis compared to other places, and despite the fact that we have a good bus and MRT system, why is there such a strong mismatch between supply and demand during peak periods? The answer, as pointed out by Mr Chay, is the price mechanism. In Singapore, the average fare for a 10-kilometre taxi ride costs about $7, compared to $16.70 in Hong Kong and $20 in New York and London. In fact, with our low taxi fares, 3-4 persons travelling together as a group will find the taxi fare only a little bit higher than if they had taken a bus. But it is not for my Ministry to set taxi fares, as we had deregulated taxi fares already in 1998. Taxi companies will need to strike a good balance between fares that are too low versus raising them too high. Low fares will result in taxi drivers having to work very long hours to earn a decent living, but will generate plenty of consumer demand. On the other hand, higher fares will give the taxi hirers a better income but may reduce taxi ridership. Understandably, the taxi companies have been careful about raising fares in a weak economy. Also, there is no shortage of taxi drivers, as the income is still attractive. But when the economy recovers, the taxi industry will have to compete with other employers for workers and drivers. And what the drivers are able to earn, compared to other jobs, will then be a relevant factor. Nonetheless, even today, it may be useful for the taxi companies to look into, as Mr Chay has pointed out, whether a higher premium should be added for certain places. For example, at the airport. The airport needed to put on a surcharge in order to attract taxis to go there to serve the passengers. So, for certain shopping centres, etc, whether a surcharge may be needed to attract taxi drivers to go there to serve the passengers, that is something the taxi companies will have to look at. Mr Chay also talked about the changing of shifts. Mdm Deputy Speaker, the taxi companies are exploring now the various means to encourage taxi drivers not to perform shift change during the peak periods. LTA also proposes to use this macro approach for a start. With the proposed quality of service standards, one indicator that LTA will be using is the cater rate for phone bookings of taxis. This cater rate is the percentage of calls despatched that are successfully matched with taxis, and this is to be measured during the peak periods especially. In order for the taxis to be available to meet the cater rate, taxi companies will have to explore ways to encourage the taxi drivers not to perform shift change during the peak periods. If this does not work, I am sure LTA will also look into other ways of effecting this. Mr Chay asked about the quality of service standards, whether the operators have met the existing standards, and what the new standards meant to achieve. Mdm Deputy Speaker, in the past, the LTA did not prescribe any standards. What the LTA did was to monitor the indicators of performance captured by the taxi companies themselves, and use the different submissions from the three companies as a comparison and rank them, ie, it was not meant to be a service standard to be complied with, but rather for LTA to monitor how the companies are actually doing. By having the quality of service standards now under this new framework, LTA can therefore proceed to stipulate what are the benchmarks that the taxi companies would have to comply with. As pointed out by Mr Chay, we will make sure that the benchmarks are such that they are not overly biased in any direction. The quality of service standards will comprise a few elements, including performance with the phone bookings, which really must be the guaranteed service. Anyone who wants a taxi very badly, all they have to do is to call up any of the taxi companies, and they should be able to get a taxi within a prescribed time-frame. So, in this way, we are able to assure anyone who needs a taxi badly, that they will be able to get one. However, we would not be able to guarantee that a street hailer would be able to just raise a hand and get one, because this is something which is fully out of the hands of LTA. If they are at the taxi stand or they are waiting somewhere and cannot get a taxi, which company is guilty of not supplying enough taxis? Whereas we can make sure that when a commuter calls in to a specific taxi company, that taxi company must be able to meet the needs of that caller. Mr Chay called for LTA to have a light regulatory touch and to leave to the market enough room to play, and also to make sure that the cost of administration should not be passed on to operators. Indeed, that is what LTA intends to do. LTA intends to implement this new framework with a light touch, and leave the taxi companies to decide on how they want to operate, decide on what fares they want to charge, which they are doing now, as well as what size of the taxi fleet they wish to have. Also, we hope that with the opening up of the market, new players would come in and, therefore, provide additional competition. In terms of the licence fees, LTA will keep the licence fees very moderate, and will only aim to recover cost. Why do they need to recover cost? Basically because this work that they are doing is meant to benefit both commuters and the taxi companies. They will need to do some auditing and they will need to do some administrative work. It will not impose much of a financial burden on the companies and, in fact, in terms of the audit work, LTA does not intend to set up a full-time workforce within LTA. As and when needed, they will farm the auditing work to consultants outside, who then have to bid for the job. So, in this way, we make sure that work is being done in the most cost-effective way. Mr Ong Kian Min asked whether the taxi companies are public or private transport. Taxi is a high-end personalised form of public transport, because it provides fast, convenient, door-to-door service to commuters, without the burden of the commuters having to own a vehicle. As it does not belong to the mainstream public transport, our policy is to treat the taxi service like a private car in terms of the tax structure. Otherwise, it will provide incentives for people to hire taxis and to use it as a private vehicle because the taxi is exempted from all the different taxes and fees. This would be contrary to our policy. Notwithstanding this, taxis still enjoy some form of tax concession, in terms of their road tax and the COE category. In addition, taxi companies get automatic renewal of their COE by just paying the prevailing quota premium instead of having to bid for a new COE. Mr Ong Kian Min also speculated as to whether the ERP is one of the factors why taxis refuse to come into the city centre to pick up passengers. The answer is very simple. Because the demand outstrips supply, taxi drivers who fetch passengers from the city centre to the outlying areas normally do not need to come in because they can find passengers wherever they are, whether it is in an HDB estate or elsewhere. The answer, as Mr Chay has mentioned, is if you want to draw them in, it may be necessary for taxi companies to impose a surcharge to make it attractive for the taxi drivers to come in. In any case, with this new framework, anyone within the city centre, if they require a taxi badly, whether they are in a taxi queue or otherwise, they should just be able to call up and be guaranteed of a taxi within, I think, a 10-minute timeframe. This would be much shorter than having to queue up for half-an-hour in a taxi queue if they need a taxi badly. Mr Ong was also concerned about the welfare of the taxi operators. He is afraid that companies will just pass on the cost of compliance to drivers and not be concerned about the welfare of the drivers. I think the actions of the three taxi companies over the past year or so when the taxi drivers were facing the challenge of the economic downturn show that the taxi companies have actually been very concerned about the welfare of their drivers. And this is for a good reason. They are "employers", in effect, and as "employers", if they do not look after their own employees, I think they are going to have very, very great difficulty recruiting fresh drivers whenever there are resignations. I would, therefore, leave it to the taxi companies and the market place to operate in this area, rather than have the Government intervene in terms of making compulsory or mandate what sort of relief package would be needed. Madam, Mr Ong also said that the taxi licence may be akin to a money printing machine. If it was so, under this new framework new companies can be set up because if the taxi companies are indeed making outrageous profits, I am sure other companies would very gladly come in and set up their own taxi fleet. Mr Ong asked about the vehicle recall. He asked what happens if the dealer goes bust, and he proposes that we require the use of the local news network to publicise the recall. Under the new framework, if there is a recall, the manufacturer and the present dealer will have to make the recall. If the dealer is no longer in existence, we will still go to the manufacturer, through the new dealer, to do the recall. This has been the on-going practice. But, in the past, this was an administrative procedure, and we depended on the cooperation of the dealer and the manufacturer. With the passing of this Bill, we will now have the regulatory powers to do so, if cooperation is not forthcoming. So, it has been on-going and it has worked quite well. The dealers would then communicate directly with the car-owners because they have the details of who bought which model. So, for that particular model they will know exactly who are the owners. And, if they are unable to find or to identify the current owners, LTA will assist them because we have the details of who the current owners are. So, it is unlikely they need to really go to the local news network to reach out to the current owners. Mr Ong and Mr Ang touched on heavy vehicle parks and I will answer them together. As I explained just now, I can understand why the individual owners and drivers would prefer to have their heavy vehicles parked nearby. It is great if we could achieve this but, unfortunately, all the MPs must also have encountered this. If we allow heavy vehicles to be parked within the HDB estates, there are a lot of complaints about the noise level and also about the safety issue. In fact, I had one huge lorry park in my area before when I was in Hong Kah South, and I had no end of complaints from the residents in the area. When HDB closed down the lorry park, all the complaints stopped. So, residents are really concerned about the noise because the drivers of the heavy vehicles tend to begin work quite early, as pointed out by Mr Ong and Mr Ang, quite often 5.00 - 6.00 am, and when they start the vehicles it creates a lot of noise. Because of that, HDB and URA have relocated the heavy vehicle parks out of the HDB estates. There are still some remaining, but I think the majority have already been moved out. The question now is: Is URA able to provide new heavy vehicle parks at sites adjoining HDB estates? We have asked. URA have informed us that most of the large vacant plots available today are earmarked for future developments and therefore they are not able to convert these plots of land to heavy vehicle parks. We will continue to work with URA on this. But, nonetheless, I think it is very important for the minority of drivers and owners who are still parking indiscriminately and illegally, to follow the example set by the majority of the owners and drivers. Most of them, from what I understand, either ride a bicycle or a motor cycle to the heavy vehicle park. In some cases, the companies provide transport or a transport allowance. This is no different from workers who have to work three shifts. When the worker has to work the midnight shift or morning shift, quite often the companies will have to provide private transport or a transport allowance, if the workforce is small. I think this is what is happening for most of the transport companies as well. So, for the minority, we will give them some grace period to understand that the new regulations will be in place soon, and for them to make the necessary transport arrangements to enable them to get to their heavy vehicle in the morning in a very convenient way. Mr Ang Mong Seng also brought up the issue of the owners of heavy vehicles having to bring the Vehicle Parking Certificate (VPC) to the LTA when they renew their road tax. Madam, the VPC is issued to the owners when they purchase their season parking permit from the operator of the heavy vehicle park. Therefore, they already have it. When they go and renew their road tax, it is no additional problem for them to bring along the VPC, just as when we renew the road tax for our cars we need to show the inspection certificate, we bring it along with us as well. It is no additional inconvenience to them. But, if there is anything in addition to that which we are not aware of, I would be very happy to hear from Mr Ang on this. Mr Andy Gan asked that in this competitive environment it is important that we be fair to both the big and small taxi operators. Yes, we intend to do so. And, in fact, for the QOS, LTA will be making sure that for the smaller companies, with a smaller taxi fleet, things like cater rate, where they would not be able to perform in the same way as the bigger companies, they will be given some concession. He also asked whether we have a target figure for the number of taxi companies in Singapore as well as the taxi population. We do not believe that with this framework there is a need for us to arbitrarily establish a number. We will leave it to the market to decide. If there are new companies that are coming in, and they are prepared to invest because they feel that they are able to do a good job, we should not be stopping them. But the provision is there, just in case it is needed in the future. I believe I have answered all the questions, Madam.

I would like to seek a clarification from the Minister. My question is: are there sufficient taxis on our roads today? Based on the comparative figures per 100,000 population, mentioned by the Minister, it seems that there are sufficient taxis, but yet we all agree that during peak periods and rainy days, there is a mismatch. So, how would the price mechanism help? If you impose a surcharge, let us say, for the CBD or any particular area, would it not just shift supply from one area and transfer it to another area? Could it be that demand actually outstrips supply only during peak hours, and that during other hours, there is actually an oversupply, and increasing the supply of taxis would only lead to an adverse impact on the income of all taxi drivers?

I think Mr Ong answered the question himself. During peak hours, the supply is not adequate. But if the taxi companies expand the taxi fleet significantly to meet this supply, they are going to be in deeper problems during the off-peak period. Perhaps there is a case for differential charging during peak and off-peak periods. That is already being done for the midnight surcharge. Perhaps there could be a case for differential charging. In any case, if the taxi fares remain low, so that three passengers will find it more attractive to ride a taxi than to take a bus, there will never be enough taxis during peak periods. So the price mechanism must come in sooner or later to establish a better balance. But where that balance is, we have to leave it to the taxi companies to decide.

Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Mr Yeo Cheow Tong]. Bill considered in Committee.

The deletion of "No. 2" and the change of the citation year from "2002" to "2003", as indicated in the Order Paper Supplement, will be made. Clauses 1 to 14 inclusive ordered to stand part of the Bill. Bill reported without amendment; read a Third time and passed.

Resolved, "That Parliament do now adjourn to a date to be fixed. " - [Mr Mah Bow Tan]. Adjourned accordingly at Ten minutes to Five o'clock pm to a date to be fixed.

asked the Minister for Foreign Affairs what is his Ministry's response to the Malaysian Foreign Minister's remarks that during the economic crisis when Malaysia was looking for a loan from Singapore, the latter had agreed but made it 'very onerous'.

At the height of the Asian financial crisis in early 1998, the ringgit was under speculative attack, and confidence in the Malaysian stock market had fallen. At that time, the Singapore Government was holding substantial funds in ringgit as part of our reserves. We also had investments in Malaysian stocks. Other investors were selling their ringgit and Malaysian stocks, but we held on to ours despite the risk of currency and capital losses. We did not want the ringgit and Malaysian stock market to further weaken. Furthermore, the Malaysian banking system was experiencing a credit crunch. Deposits were being withdrawn from Malaysian banks, to be placed instead in foreign banks. We did the opposite to help Malaysia. At the request of Malaysia, we transferred RM2 billion of our deposits from banks in Singapore to Malaysian banks in Kuala Lumpur. Malaysia also requested a package of financial assistance from Singapore amounting to RM15 billion (US$4 billion). This was to consist of additional ringgit deposits with Malaysian banks in Kuala Lumpur, purchase of the ringgit, and purchase of Malaysian stocks. As these actions involved considerable financial risks for Singapore, we proposed to provide the financial assistance within a framework of wider co-operation between the two countries, which would include the supply of water to Singapore after the expiry of the 1962 Water Agreement. Later, Malaysia requested the RM15 billion package to be converted into a US dollar loan. We offered a medium-term US$4 billion loan at an interest rate which was significantly lower (about 4 percentage points lower) than what Malaysia would have had to pay in the market. Eventually, however, we did not proceed with this financial assistance package. At a bilateral meeting in Hanoi during the ASEAN Summit in December 1998, Prime Minister Mahathir informed Prime Minister Goh that Malaysia no longer needed it. As you can see, Singapore had tried to be helpful to Malaysia during the financial crisis. The terms of our proposed assistance were far from "very onerous", as alleged by Malaysian Foreign Minister Syed Hamid. ANNEX

Pedra Branca (Question asked by Mr R Ravindran) Pedra Branca is not a new issue in Singapore-Malaysia relations. It arose in 1979, when Malaysia for the first time published a new map which claimed the island. Prior to that, Singapore had occupied and exercised full sovereignty for more than 150 years since the 1840s without protest from Malaysia. Previous Malaysian maps, even as late as 1974, showed Pedra Branca as belonging to Singapore. As I had briefed Members on this issue in Parliament on 16th May 2002, both countries had agreed in 1998 to refer the dispute to the International Court of Justice (ICJ) and had settled on the text of a Special Agreement.

For four years between 1998 and the middle of last year, Malaysia made no real attempt to pursue the signing and ratification of the SA. After the 17th December 2002 judgement of the ICJ on the Sipadan and Ligitan case, there was an outburst of wild allegations, made on a daily basis. These came hot on the heels of their Mingguan Malaysia story on 22nd December 2002 which claimed that we were engaged in many kinds of construction activities on PB. They were wrong both in law and facts and we have rebutted these allegations fully in the MFA statement on 26th December 2002. Let me recap the main points.

First, that we were dragging our feet on the signing of the Special Agreement. What are the facts? Singapore had always been ready to sign the Special Agreement at any time and at any place. It was Singapore which had first proposed to resolve Malaysia's claim through the ICJ process, as early as 1989.

We had suggested that the Special Agreement could be signed at the sidelines of the ASEAN-EU Ministerial Meeting in Brussels, on 27-28th January 2003 because Malaysia wanted to sign the Agreement quickly and the meeting in Brussels was the earliest and most convenient time for Minister Syed Hamid and myself to meet. However, the Malaysians later counter-proposed other dates in January and February so that the signing can be done either in Malaysia or Singapore. As I have said publicly, it is absurd to quibble over the location of the signing ceremony as it will not affect the outcome of the case at the ICJ in any way. As Members know, we have now agreed to sign the Special Agreement in Putrajaya on 6th February 2003.

Second, Singapore's so called construction and other alleged "illegal" activities on Pedra Branca. The fact is that there has been no recent construction work on Pedra Branca. The last structures were built in 1991, well over 10 years ago.

In any case, there is no cause to make an issue of this, as it is a well-established principle in international law that acts done by disputing parties to advance their own case after the dispute has already arisen will not be given credence.

To strengthen their allegations, Malaysia claimed that they had never done similar "unfriendly" or "un-neighbourly" acts to Indonesia in their dispute over Sipadan and Ligitan. What are the facts? According to documents filed by Indonesia at the ICJ, Jakarta had in fact protested at least five times about continued Malaysian activities on Sipadan. Malaysia had rejected these complaints, saying that the activities were simply the continuation of actions they had undertaken before the dispute arose. Well, in this light, Singapore's actions on Pedra Branca are no different in law from Malaysia's own actions on Sipadan. To sum up, Singapore's position on Pedra Branca continues to be clear and consistent. Our sovereignty and ownership of Pedra Branca is based on facts and sound principles of law. Nevertheless, we are prepared and ready to work with Malaysia to move forward with the ICJ process. We have always dealt with Malaysia's claim amicably and in the spirit of goodwill, and will continue to do so. Our media has never attacked Malaysia in the way their media has attacked Singapore.

KD Malaya (Question asked by Ms Irene Ng)

This was never an issue. The Malaysian Navy departed from the Woodlands Naval Base on their own accord in December 1997. In fact, then Defence Minister Syed Hamid gave a warm final address at the passing-out ceremony in August 1997, where he thanked the Singapore Government for its "help and cooperation in making it possible to have a recruit centre here for so long". He said that as Malaysia was an independent country, it was timely that its navy had its own training centre. He had also described Singapore-Malaysia relations as "good with no problems or complaints".

It is strange that in 1997 there were "no problems or complaints", but five years later the Malaysian leaders have turned their voluntary departure from Singapore into an issue and an example of how unneighbourly we have been. PM Mahathir said that "they (Singapore) deliberately increased the rate for the lease for the naval base in Woodlands that we were forced to vacate and we vacated without being paid even a sen" (Bernama, 30th December 2002).

They allege that we 'forced' the Malaysian Navy to leave the Woodlands naval base by increasing the rent.

What are the facts? Yes, there was a rent revision in 1991. But the truth is that Singapore Government tried to find ways to help the Malaysians maintain their base and stay in Woodlands when the rent revision was carried out in 1991. When we increased the rental it was part of a government revision of property rates applied to all, not targeted at KD Malaya, but in line with our market-based rental policy to maximise the use of land in land scarce Singapore. This policy applied to all, including voluntary and charitable organisations. The increase of rental from $1.936 million to $6.152 million reflected the difference between the rent that the Malaysian Navy was paying, and the market rental rate of the day. We understood that such a sudden and sharp increase in rental might cause the Malaysian government budgetary difficulties and we went out of our way to be as helpful as possible. So, in the spirit of goodwill and on our own volition, we offered them a 20% discount of the proposed rate of $6.152 million, reducing the rental to $4.8 million, with a phase-in period of five years.

We also offered a second option, whereby Singapore would build a camp on an alternative piece of land nearby in place of the facilities at the Woodlands base, for the Malaysian Navy to occupy at a nominal fee of about S$500,000 for as long as it needed. The new camp would have cost MINDEF about S$50 million to build.

During all stages of the discussions on this matter, Singapore repeatedly emphasised to the Malaysians that we welcomed their Navy to stay at the Woodlands base for as long as it wanted to. In 1981, then PM Lee Kuan Yew told PM Mahathir that Singapore would not seek the return of the land for as long as the Malaysian Navy needed to use it. PM Goh also told PM Mahathir in September 1992 that he would like KD Malaya to stay in Singapore for as long as Malaysia wished. It was our policy to continue our close defence links with Malaysia.

Indeed, after the Malaysians announced that they would withdraw from Woodlands in 1997, we reiterated our assurance that they were welcome to stay and that our offer of the substitute camp remained open. In December 1992, when then Malaysian Defence Minister Najib Tun Razak wrote to us formally to inform us of their decision, then Defence Minister Dr Yeo Ning Hong had replied to convey that PM Goh would like the Malaysian Navy to stay in Woodlands. It was emphasised that the Singapore offer of SAF-built facilities to be placed at the disposal of the Malaysian Navy remained open, if it wished to take it up later. But Malaysia never did.

Despite Singapore's best efforts to offer alternative options to enable the Malaysian Navy to remain in Singapore, then Defence Minister Najib had made a public announcement on 25th November 1992 that the Malaysian Navy would relocate the base from Woodlands to Malaysia after 1997. Until then, the Malaysian Navy will stay at Woodlands "at the rate rental which has been determined by the Singapore Government". Najib explained that Malaysia's decision to leave was "based on economic factors". He also said that "the Malaysian government understands the decision of the Singapore Government to increase the rate of rental on the basis of market principles", and this "will not adversely affect the good relations in the realm of defence between the two countries". It was clear that citing economic reasons, the Malaysians had left Woodlands on their own accord.

That was five years ago. Now, in 2002, we are accused of not having displayed neighbourliness in our dealings with them. But the KD Malaya case clearly showed that we had put in tremendous effort to help them out. We did offer alternatives at our expense. We offered to fork out S$50 million to build another camp near the Woodlands site for the Malaysian Navy to use at a nominal fee. This proposal, which entailed additional capital outlay on the part of Singapore, was made in the spirit of goodwill and to show the Malaysians that we were sincere in keeping our word to them about staying on in Woodlands. It was Malaysia which chose not to take up this offer.

ASEAN+3 Secretariat and Malaysia's proposal on the East Asia Economic Caucus (Question asked by Mr Sin Boon Ann) Let me now turn to some of the other absurd allegations. Mr Sin Boon Ann asked about their claim that Singapore was the country which had opposed the setting up of an ASEAN+3 Secretariat in KL; that (a) Singapore always opposes any initiative from Malaysia and (b) Singapore was the only country to do so. Related to this was the other complaint that we had opposed their EAEC proposal.

Commenting on Singapore's reaction to Malaysia's ASEAN+3 Secretariat proposal, PM Mahathir had said, "Singapore rejects everything that comes from Malaysia. We have problem with the EAEC (East Asia Economic Caucus) before because Singapore rejected (it)," adding that Malaysia had tried to be as friendly as possible with Singapore but that this was impossible (Bernama, 11th October 2002).

In more recent remarks, FM Syed Hamid had accused Singapore of influencing the other ASEAN countries to oppose the proposal. He said "sometimes we find that quietly, they (Singapore) also have given very negative signals to other countries, like in the case of the ASEAN+3 Secretariat. Singapore has objected very strongly and yet they host the APEC Secretariat there, and they go very strongly in trying to belittle Malaysia's efforts and yet they talk about East Asia community" (Star, 2nd January 2003). In a Berita Minggu interview (5th January 2003), Syed Hamid alleged that "when Malaysia proposed the establishment of the ASEAN+3 Secretariat, Singapore was the only ASEAN country to oppose it."

Were we the 'only' country to oppose it? What are the facts?

ASEAN+3 Secretariat: As regards the proposed ASEAN+3 Secretariat in KL, yes, Singapore had reservations about this proposal but not because it was a Malaysian proposal but because of the implications on ASEAN and the ASEAN Secretariat in Jakarta. While Singapore recognises the value of the ASEAN+3 process, we hold the view that it should be allowed to evolve gradually.

Is it true only Singapore had this view? Other countries such as Indonesia were also clearly uncomfortable with the proposal. In a Kompas report (14th August 2002), Indonesian FM Hassan Wirajuda was quoted as saying that "there is no consensus - if we want to speak honestly - ... because most of the ASEAN members do not see the need for the formation of ASEAN+3 (secretariat) yet". More recently, former Trade Minister of Indonesia Arifin Siregar said that Indonesia is not keen on another secretariat for the ASEAN+3 grouping and he said that the Indonesian view is that the ASEAN+3 secretariat could be a unit within the existing ASEAN secretariat in Jakarta (Straits Times, 8th January 2003).

On the EAEC, Singapore was one of the first countries to support, and I stress support, not oppose, Malaysia's proposal to establish the EAEC. Let me give you some examples.

At the dinner hosted by PM Mahathir on 11th January 1991 during PM Goh's first official visit to Malaysia as Singapore's Prime Minister, PM Goh had said:

'I share your concerns about the future of the multilateral trading system. Like you, I hope the Uruguay Round will end successfully. If GATT breaks down, we will all be adversely affected. Your idea of closer economic co-operation among countries on the Asian side of the Pacific Rim has immense potential. It is far-sighted. It is imaginative. I support it. I am in favour of strengthening regional economic co-operation among the Asian countries of the Pacific Region, whatever the outcome of the Uruguay Round.'

In a New Straits Times report filed on PM's visit (12th January 1991), the newspaper said:

'Singapore has reiterated its commitment to support Malaysia's recent proposal for the establishment of an East Asian economic grouping. Visiting Singapore Prime Minister Goh Chok Tong made this "very strong and very clear" statement at a meeting with Datuk Seri Dr Mahathir Mohamad at the Prime Minister's Department today. Briefing the Press on the 90-minute discussion between the two premiers, Foreign Ministry Secretary-General Datuk Ahmad Kamil Jaafar said Mr Goh stated that Singapore would join Malaysia in explaining the concept behind the move to countries that should be invited into the grouping.'

Further, in his Keynote Address at the CSIS-Asia Society Conference in Bali on 4th March 1991, PM Goh said:

'But even as ASEAN becomes more competitive, it may not be big enough a team to be able to insist on a level field. ASEAN may have to play within a bigger team. ASEAN can do this by linking up with other economies in the Asia-Pacific through structures like the East Asian Economic Grouping proposed by Dr Mahathir, and APEC. This way ASEAN will not be side-lined.'

These facts speak for themselves. Volume 1 - Correspondences Volume 2 - Agreements