Water under the bridge? I wish.

Has Malaysia (as our Minister for Foreign Affairs puts it) "lost its right to review" the water agreement?

Minister Vivian B. rebutted Dr Mahathir's assertion that Singapore has gotten rich from buying water from Malaysia at an unreasonable price. I'm paraphrasing and I may not have captured the gist of Dr Mahathir's ramblings because he doesn't make sense and trying to make sense of it is a futile exploration of the meanderings of senility. This was what was reported:

Speaking at the Johor Government Retreat with the Federal Cabinet in Putrajaya on Thursday, Dr Mahathir said Singapore has grown rapidly because of Malaysia’s supply of water to the Republic.

Right. It was all because of Malaysia's magical water and ONLY because of Malaysia's magical waters. That is why Malaysia is such a developed country today!


Anyway, SG's and our MFA's position has been

"...that Malaysia lost its right to review the price of water under the 1962 Water Agreement in 1987... 
[and that] Malaysia had itself acknowledged previously that it had consciously chosen not to ask for a review in 1987 “because they benefitted from the pricing arrangement”." 

Let's look at the exact wording of the agreement (from Clause 14):

"14 The provisions of paragraphs (1) and (2) of the foregoing clause of these presents shall be subject to review after the expiry of twenty-five years from the date of these presents and shall be reviewed by the parties and the facts that are to be taken into account upon such review shall include inter alia any rise or fall in the purchasing power of money and any rise or fall in the cost of labour, power and materials for the purpose of supplying the water. "

"Paragraph (1) and (2)" refers to the preceding clause (clause 13) which states that SG will pay 3 cents per 1000 gallons of raw water, and Johor will pay 50 cents per 1000 gallons of treated water.

Clause 14 goes on to say that those two paragraphs (cost of raw and treated water) "shall be subject to review after the expiry of twenty-five years..." BUT it does not say that the review MUST take place in the 25th year or in 1987, or by any date. 

Any good lawyer will be able to argue that "after the expiry of twenty-five years" simply means that it shall not be reviewed within the first 25 years, and there is NO deadline for when the review can take place as long as it is after 25 years.

So, our Minister for Foreign Affairs, is... MISTAKEN that Johor has lost the right to review. Or rather, SG is wrong that Johor cannot review the water agreement.

BUT, the review cannot be done any how. Not the way Mahathir tried to do in the 90s - first 45 sen, then 60 sen, then RM6.25. Which (according to the wise old man) was a bargain as China sells HK water at RM8.

Again, the agreement spells out exactly what facts should be considered in the review: "... and the facts that are to be taken into account upon such review shall include inter alia any rise or fall in the purchasing power of money and any rise or fall in the cost of labour, power and materials for the purpose of supplying the water. "

Not simply raising it to 45 sen, or 60 sen or RM6.25 or even RM8 because some old goat wants it at those prices. 

So how should the review be done? What should be considered?

1. "rise or fall in the purchasing power of money". From Jayakumar's verbal reply in Parliament (31 OCT 2002, and in his memoirs 2011), This would mean 12 sen per 1000 gallons of raw water. But that's in 2002. Now it's 2019. Let's say the new price based on changes in purchasing power is DOUBLE that of 2002 - 24 sen. 
2. "...any rise or fall in the cost of labour, power and materials for the purpose of supplying the water. " OKAY. 

• Cost of labour on the part of Johor to supply raw water to SG? Zero. 
• Cost of power and materials incurred by Johor to supply raw water to SG? Zero. 
• Cost of labour, power, and materials to treat and supply water to Johor at their request? Well, in 2003, the figure quoted was RM2.40. BUT, Johor's BAKAJ sells treated water to their residents at RM3.95. And I am sure that they are not profiting from their residents. So somewhere between RM2.40 and RM3.95? In 2003 prices. Let's just say RM3 and ignore any possible  inflation. 

So, if the prices for the water agreement were to be reviewed today, we COULD be paying 24 sen for 1000 gallons of raw based on the changes to the purchasing power of money. Or an 800% increase in the price of raw water.

AND Johor will need to pay about RM3 per 1000 gallons of treated water based on cost of labour, power, and material. Or a 600% increase in treated water. A bargain compared to the 800% increase!

So MY hasn't lost the right to review the price of water, but it may be a Pyrrhic victory for them. 

The point is, yes by (IMHO) a correct interpretation of the terms of the water agreement, Malaysia has NOT lost the right to review. BUT, also strictly according to the terms of the agreement, any review is limited to the pertinent facts, such as the change in the purchasing power of money. Which means that Malaysia cannot pull any number out of Mahathir's arse and decide that will be the new price of RAW river water. By one estimate (in 2002), the revision of the price of raw water would be 12 sen. Assuming there has been some changes since then, I would estimate an upper bound of... 24 sen.

AND, by strict adherence to the terms of the agreement, the price of TREATED water would probably be closer to RM3. Maybe even RM4 or more. Thus it is NOT in Johor's interest to review the price of the water agreement, and Putrajaya DOES NOT UNDERSTAND that. 






Or maybe it does and this allows Mahathir to kill two birds with one stone. 

Birds? I mean cat.

Mahathir famously said (of SG) that there are more than one way to skin a cat.

True. But step one of any of the ways is: First catch the freaking cat!

This is just Malaysia sabre-rattling. They, or rather Mahathir, does it to distract from his incompetence and impotence.

But sometimes, when you rattle your sabre, or in this case, your keris, it might drop out of the scabbard. Why? Because old. Then what? From another post:

And if they choose to respond militarily, we have two choices.

1) React rapidly giving them NO TIME to counter our gambit, or
2) Sit back and watch Johor secede from the Federation.

We can do (2) because we have sufficient water production capacity to withstand a "water siege".

NEWater production can provide 170 mgd. Desalination capacity is 130 mgd. Our daily requirement is about 430 mgd. Local catchment can easily meet the the other 130 mgd required, even if Johor vacillates and takes time to decide if they will secede.

However, our intelligence analysis MUST be quite clear as to whether Johor will secede. If there is a good chance that it will, then it behooves us to treat them as a potential ally, and not invade them. 

War is the last resort. If we can help Johor to secede, if we can secure our water by other means, it may be a better option.

However, this is an outside fantasy and speculation. I would LIKE to see Johor secede from the Federation, and begin negotiations to join with SG.

We can fantasise.