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Singapore has been dependent on Malaysia for nearly forty percent of its water supply, and water has been a source of dispute between the two countries. This paper examines the water issues between Singapore and Malaysia.The paper describes the water agreements signed in 1961 and 1962. It discusses some of the important aspects of the dispute between Singapore and Malaysia, including the debate on pricing, the right to revise prices, and the guarantee of supplies after 2061. It analyses the economics of water, in particular, the water demand and supply situation in Singapore in 1960-2000. The paper also examines the contention that the Malaysian state of Johor is making losses by selling raw water to Singapore and buying treated water from Singapore.Finally, the paper explores the potential for alternative sources of water supply, such as through desalination and recycled water.The paper finds that:Singapore is seeking to diversify its water supplies to include supplies from IndonesiaNewater (recycled water) can be produced in sufficient quantities to replace water that Singapore is currently purchasing from Malaysiabased on an analysis of costs and prices, it does not seem that Johor has been losing money by buying treated water from SingaporeSingapore has weaned itself from a condition of extreme water dependency to one of near self-sufficiency. However, self-sufficiency would only occur by 2011.Overall, the paper concludes that the "water threat" is less than what it seems to be.The paper recommends that Singapore should source its water requirements domestically if the price of raw water in Malaysia is increased beyond a certain level. At the same time, the paper suggests that the Singapore government should consider the social and economic impacts of sourcing of water by desalination and recycling (NeWater).However, even if it becomes self-sufficient, the paper notes that the Singapore government has said that it would continue to purchase water, under fair terms, from Malaysia or any other country willing to be its long term supplier. If Singapore continues to source for water elsewhere, the paper recommends that there should be a framework to facilitate the purchase and supply of water between countries in the region.In terms of the current water disputes between Malaysia and Singapore, the paper suggests that an appropriate negotiation mechanism is required to resolve the current deadlock, and find an equitable pricing structure that maximizes monetary benefits for both countries.
