Sunday, January 8, 2012

How the AEC Supports Improved Singapore-Malaysia Relations

Last week the Malaysian and Singaporean prime ministers met in Putrajaya for an annual bilateral summit meeting.   Several economic initiatives were announced, including linking Singapore’s subway system to Johor, the sale of electricity by Malaysia to Singapore, alignment of radio frequency spectrum plans for digital broadcast and mobile broadband services, a proposed ferry service, a new work group on industrial cooperation, and cooperation in aviation and airport services between Senai International Airport in Johor and Changi in Singapore as well as education services.  These initiatives follow up on the Malaysia-Singapore deal last year resolving land and water issues.

All this represents a great improvement. Although Malaysia and Singapore have been close economically, domestic political conditions (particularly in Malaysia) made it difficult to resolve long-standing disputes.  Every so often a dispute would arise (the causeway bridge, sand for Singapore land reclamation, Pedra Branca, airspace for defense training, railway land, water, etc.) and sour relations between the neighbors. 

So what happened to change this?  To some extent, increased reliance on legal mechanisms and agreements to resolve disputes helped. The International Court of Justice resolved the Pedra Branca territorial dispute without acrimony, and the ASEAN regional agreements impose obligations and minimum standards on both Singapore and Malaysia.

The major impetus for better relations comes from domestic politics on both sides of the causeway. 

After the last Malaysian general election, the ruling Barisan National coalition is more dependent than ever on Johor for its parliamentary majority.  In addition, the major plausible threat to Prime Minister Najib Razak comes from Deputy Prime Minister Muhyiddin Yassin, whose political base is Johor.  These and other factors motivate the increased efforts to develop Johor state through the Iskandar Malaysia development project. 

The additional factors come from the Singapore side.  Its own general election last year highlighted social and economic pressures in the city-state.  Singapore strives to be an international center in finance and other services, attracting high net-worth global investors and talent like in London.  Unlike London, Singapore does not have a hinterland to provide a larger market or reduce land and wage costs.  As a result, many Singaporeans perceive increased losses of opportunity in employment and education, along with increased living costs.  Hence some portions of the Singapore electorate vented their frustrations by voting against the government.  Economic development and integration with Johor will thus provide Singapore with the hinterland it lost in 1965, and help Singapore alleviate these social and economic pressures.

This confluence of factors, from both Malaysia and Singapore, thus ensure that Iskandar, unlike previous projects in Johor, will be eventually successful.  The “pull” factors in Malaysia are matching up with “push” factors in Singapore.  What the ASEAN Economic Community does is provide the legal and economic framework for cross-causeway cooperation without bumping up against old strictures of sovereignty.  No doubt there will be bumps along the way, but the AEC will allow Malaysia and Singapore to cooperate on mutually acceptable terms.