Arbitration the ‘sensible way to move ahead’

SINGAPORE — Noting that having an international arbitration tribunal decide on whether a Malaysia-Singapore joint venture firm should pay the land tax on three former Malayan Railway (KTM) parcels of land here is the right way, Foreign Minister K Shanmugam said the Republic accepts the ruling and will move on.

He also stressed that with Malaysia and Singapore being such close neighbours, the governments have to find sensible ways of moving ahead.

“The process and the way we did it is the right way to do these things,” said Mr Shanmugam, who is also Law Minister. “We are doing so many other things together ... We have developments now and joint ventures in Iskandar. They have (projects) here, all being done together, and it encourages people-to-people movement, more commercial activities.”

The minister’s comments came days after the release of the international tribunal’s ruling that S$1.47 billion in development charges sought by Singapore for the three former KTM sites at Tanjong Pagar, Kranji and Woodlands will not be payable.

The land tax issue was one of the unresolved issues holding back implementation of the Points of Agreement that both countries signed in 1990.

Under a land swap deal struck in 2010, the three parcels of land in Tanjong Pagar, Kranji and Woodlands, as well as another three in Bukit Timah, would be swapped for four pieces of land in Marina South and Ophir-Rochor.

Both countries set up a company, M+S — with Malaysia’s Khazanah Nasional holding a 60 per cent stake and Singapore’s Temasek Holdings being in possession of the remaining 40 per cent share — to handle the joint development of the new plots.

But Malaysia and Singapore could not agree on whether development charges were payable by the company for the Tanjong Pagar, Kranji and Woodlands sites. The two countries submitted the matter for arbitration in January 2012. Under Singapore law, development charges are a tax on the enhanced value of land, resulting from the Government approving a development of higher value.

Referring to the impasse over a number of details in the agreement, Mr Shanmugam, who was speaking to reporters on the sidelines of a community event yesterday, said: “For Malaysia and Singapore to move forward, we needed to settle this and there are so many things we can do together ... But there will be no confidence to do those things until and unless that agreement has been signed.”

He added: “The arbitral tribunal ruled it. We accept the decision and will move on.”

Responding to the ruling last week, Prime Minister Lee Hsien Loong had said the full and successful implementation of the POA has paved the way for joint development projects and closer collaboration between Singapore and Malaysia. These include links in transport connectivity and trade and investment.