A Cautionary Tale of KTM Land

December 18, 2010

A Cautionary Tale of  KTM Land: The Devil is in the Details

By Ambassador Dato Deva M Ridzam*

KTM Land in Singapore

Malaysians and Singaporeans want to see forward and positive momentum in bilateral relations between the two countries. There is no doubt that the planned swap agreement concerning KTM (Keretapi Tanah Melayu) land in Singapore can potentially be a landmark diplomatic milestone for the relationship.

Inside KTM Tanjung Pagar Station--Singapore

It is important by how much the deal improves bilateral relations between the two governments is important. However, public reaction to such a deal is equally, if not more important. To avert any possible backlash, full disclosure of details on the proposed deal would be most helpful, if not even more crucial.

It is natural for Malaysians to want to know more details because the agreement reached by  prime ministers Datuk Seri Najib Razak and Lee Hsien Loong as reflected in the joint statements issued at the end of their meetings on May 24 and September 20 this year did not contain details.

The bottom line is that the deal must bring the bilateral relationship to a new level of mutual trust and mutual benefit. Let us hope that this apparent lack of transparency does not lead to one side or the other messing up the final package.

On the surface, differences over the deal being worked out between the parties do not seem that broad, but on closer examination it appears that differences are or, might become, fairly deep.

KTM Bukit Timah Station

Channel News Asia, Singapore, and BERNAMA carried reports that the latest meeting between Malaysian and Singapore officials to discuss the implementation details of the agreement reached by the two prime ministers was held on October 20 and 21 in Kuala Lumpur.

The joint press statement by the Foreign Offices of both countries dated October 21, 2010 stated that the implementation team will complete its work by December 31 this year.

Following the decision of the two prime ministers, another meeting, in a series, among officials of the two countries took place just November 29 and 30, 2010, in Singapore and again the Joint Statement revealed little.

These talks must have surely involved tough negotiations, not simply implementation discussions. While several matters must have been discussed, it seems obvious to all concerned, including the public, that the big issue centers only on one subject: the fate of all the land owned KTM in Singapore.

The first time Malaysians heard about a new breakthrough was via the joint statement of the two prime ministers on May 25. There must have been prior negotiations at lower levels before the new deal was announced. The question is who carried out these negotiations? Were they between the Foreign Offices of Malaysia and Singapore, or were they between Khazanah National Bhd of Malaysia and Temasek Holdings Ltd of Singapore?

The Malaysian public have the right to know these and other details because their country is

Tanjung Pagar KTM Station

about to part with some very valuable strategic national assets which it had owned in Singapore for almost exactly 100 years. These assets consist of the railway line, railway land, the Railway Station in Tanjung Pagar and other support facilities in Bukit Timah, Kranji and Woodlands.

The KTM railway line, which physically divides the island of Singapore into two halves, stretching from Woodlands in the north to Tanjung Pagar in the south, will soon be scrapped. The KTM land will revert to Singapore in accordance with the deal signed by the two prime ministers in May and September this year.

A Bit of History

In 1918, the British colonial authorities sold to the Government of the Federated Malay States the properties and estates previously owned by Singapore Railway for Straits dollars 4,136,000. The railway was renamed the Federated Malay States Railway, which finally became the KTM, as a corporate entity.

In 1990, Tun Daim Zainuddin, at that time the minister of finance, signed the Points of Agreement (POA) with Prime Minister Lee Kuan Yew (LKY) – one day before the latter relinquished his position as prime minister of Singapore to his successor Goh Chok Tong.

The 1990 POA provided for joint development of certain pieces of land in Tanjung Pagar, Kranji and Woodlands. But prime minister Tun Dr. Mahathir did not allow the POA to be implemented as such.

It is said there were two reasons why Tun Dr. Mahathir refused to implement the POA. The first was because the many parcels of land in Bukit Timah belonging to KTM were not included in the provisions for joint development. The second – perhaps, the bigger reason – is that all Malaysian Railway lands not identified for joint development or not used for railways purposes would revert to Singapore free of charge, that is at no cost to the island State.

Numerous negotiations were held between Malaysian and Singapore officials after 1990 to seek a revision to the lop-sided terms of the original POA. These negotiations lasted many years but failed in the end.

Fresh attempts were made to reopen negotiations during the premiership of (Tun) Abdullah Ahmad Badawi (2003-2009) but they too were not conclusive. Najib seems to have had more success having secured agreement to settle the problems related to the POA within 17 months of taking office.

He agreed, according to the Joint Statement of September 20, 2010, that the three parcels of KTM land in Tanjung Pagar, Kranji and Woodlands and three pieces of land in Bukit Timah (making a total of six pieces) would be exchanged for four land parcels in Marina South and two land parcels in Ophir-Rochor.

The large pieces of land in Tanjung Pagar, Bukit Timah, Kranji and Woodlands were exchanged for small pieces in Marina South and Ophir-Rochor on the basis of equivalent values. The joint development of these pieces of land will be carried out by a Malaysia-Singapore joint venture company, to be called M-S Pte Ltd.

Najib, during his joint press conference with his Singapore counterpart, Lee Hsien Loong, on

Durian Diplomacy

September 20, 2010, said that the latest deal reflected an enhanced POA.  Those familiar with past and on-going negotiations confirm that the “enhancement” consists of the agreement to swap all the six pieces with better located pieces of land in Marina South and Ophir-Rochor, while the original 1990 POA provided for joint development on site in Kranji and Woodlands except for the land in Tanjung Pagar.

Lee Kuan Yew, apparently, wanted to keep the large piece in Tanjung Pagar because of its high value – being near Keppel Harbour – which has long been slated for redevelopment. He had, it is understood, offered at that time another piece of land in a different location in exchange for Tanjung Pagar.

The inclusion of some of the many pieces of land in Bukit Timah as part of the new deal is also an enhancement over the 1990 agreement (the original POA.) In short, the latest deal is a noticeable and palatable improvement compared to the original POA of 1990 in the sense that all the six pieces of KTM land will be swapped with six pieces in better locations, instead of being jointly developed on site in their respective original locations.

The joint statement of May 24, also said that the KTM Railway Station in Tanjung Pagar will be vacated and moved to Woodlands by July 2011, where some space will be provided for the station’s purposes inside the existing Singapore CIQ building in Woodlands. This means that, on that date, all KTM land south of Woodlands will revert to Singapore. KTM would then be left with only some land along the short distance between Woodlands and the Causeway in the north, which consists mainly of railway tracks.

Now, how much land is actually involved that will finally revert to Singapore as a result of the latest deal? In a Statement made in the Malaysian Parliament on 28 June this year, the Deputy Foreign Minister Kohilan Pilly, said that in total, the KTM owns 434.26 acres (173.7 hectares) of land in Singapore; of which 352.52 acres (141 hectares) was to be held by the Federal Land Commissioner for a period of 999 years while 81.74 acres (32.7 hectares) in perpetuity. The land held in perpetuity were those sold in 1918, while the rest on lease had been purchased by KTM subsequently when the railway services in Singapore expanded and needed more land to support its operations.

Wisma Putra Ministerial Team

However, Kohilan did not give Parliament details on the monetary value of the 434.26 acres of land, which belonged to KTM in Singapore. Neither did he cite the value of the six pieces of land in Marina South and Ophir-Rocher that Singapore exchanged against the KTM pieces in Tanjung Pagar, Kranji, Woodlands and Bukit Timah.

In a nutshell, a huge amount of land is actually going back to Singapore without compensation except for the so-called swap.

Currently, the narrow strips of land hosting the KTM railway line may not have much value while the railway line remains in place.  However, their commercial value will definitely increase significantly once the north-south line is removed, and the surrounding space open for development in an east-west configuration.

In fact, analysts quoted in the website of Channel News Asia have confirmed that in the future – beyond the value of the large parcels of KTM land located in Tanjung Pagar, Bukit Timah, Kranji and Woodlands – Singapore will also gain from the potential value unlocked in the areas surrounding these sites. In addition, the land which is currently adjacent to the railway track will realise their full market potential once they are amalgamated with other pieces, thus allowing for greater flexibility in their redevelopment.

Channel News Asia confirmed this when it quoted the Singapore Ministry of National Development as saying that the parcels of KTM land which revert to Singapore will be put to optimal use by Singapore to realise full commercial value.

The joint statement of May 24 stated that M-S Pte Ltd will be established as soon as practicable but not later than December 31, 2010; that Malaysia’s 60% will be held by Khazanah Nasional and Singapore’s 40% will be held by Temasek Holdings.

Points to note

Khazanah Nasional must ensure that the articles of association establishing the joint venture company include a provision that the percentage of 60-40 equity holding shall remain unchanged forever.  It would indeed be a great disservice to future generations in Malaysia if the 60-40 ownership formula of M-S Pte Ltd. is subjected to the vagaries of the market place instead of being guaranteed by a written undertaking.

The May 24 joint statement further gave KTM the option to relocate once again from Woodlands to Johor Baru sometime in 2018.  However, in view of the very uncertain status of occupancy of the KTM station at the Singapore CIQ in Woodlands, there is great possibility that the final departure of KTM to Johor Baru might take place even much earlier than 2018.
Is Singapore’s insistence on arbitration a trap?

When that happens, the KTM chapter in the history of Singapore will finally be closed forever – a dream come true for Minister Mentor Lee Kuan Yew, who conceived and signed the POA in 1990 with that objective in his mind.

The removal of KTM railway line would be like pulling out a sword stuck in the heart of Singapore – indeed, a big pain to their psyche and a huge obstacle to their development. Singapore ought to appreciate this friendly gesture on the part of Malaysia.

There is a footnote to the story of KTM land ownership in Singapore. In 1968, the Malayan Railway Administration and the Jurong Town Corporation signed an arrangement which included the lease of 99 years of a track of land connecting Bukit Timah to Jurong.  KTM then constructed a branch line from Bukit Timah to Jurong, to facilitate the export of Malayan products, mainly rubber and tin in the early days, through the port in Jurong.

However, the Jurong Spur Line (as it was called) came into disuse when Malaysian exporters stopped using the Jurong Port in the 1990s, and KTM stopped operating the railway service to Jurong Port. Singapore had since repossessed the land associated with the Jurong Spur Line. Little is known about this matter. It, however, remains part of the story of KTM land in Singapore.

There is also another caveat hovering over the implementation talks between Malaysian and Singapore officials. Najib and Lee Hsien Loong could not reach agreement about certain development charges.  What this is all about is still very unclear, including exactly which pieces of land are supposedly liable for such development charges.

The joint statement of September 20 merely states that both countries have different views relating to the development charges, and that both leaders have agreed to settle this issue amicably through arbitration under the auspices of the Permanent Court of Arbitration.

In preparing for the arbitration, our negotiators must learn from Malaysia’s own past experiences when we went to the International Court of Justice (in the case of Pedra Branca, Middle Rocks and South Ledge) and the International Tribunal for the Law of the Sea (in the case of land reclamation by Singapore).  The form of words to be used in the question or subject matter to be decided upon by the arbitrator is absolutely critical. This calls for skillful negotiations of the highest order. We hope the Malaysian officials responsible for this task will be really well prepared when they meet their Singapore counterparts.

The Malaysian public might also want to know why a political deal on the issue of development charges, like those done on other issues, was not possible. Arbitration could very well end up a zero sum game.

Is Singapore’s insistence on arbitration a trap being put in place so as to be cited as a precedent when the time comes for both countries to resolve the water agreement issue? In other words, is Malaysia being set on a slippery slope?

*Datuk Deva M Ridzam is a former ambassador to the European Union, Belgium and Luxembourg and Cambodia. The Fifth Round of the Malaysia-Singapore Joint Implementation Team meeting starts on December 22.  This article appears on December 20-26 issue of The Edge.

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