ECONOMIC SCENE : Singapore's Competitive Neighbor 
International Herald Tribune
January 27, 1996
Michael Richardson 

When a group of Singaporeans bought burial lots costing up to 250,000 ringgit ($97,790) in a new cemetery just across the border in Malaysia recently, Malaysian officials stepped in to halt the move.

Abdul Ghani Othman, chief minister of the southern Malaysian state of Johore that is linked to the main island of Singapore by a road and rail causeway, said that by law burial land could not be sold to foreigners either as a final resting place or as a speculative asset.

The clampdown was the most recent sign of increasing business friction and economic rivalry between the two neighboring countries, despite cooperative ties in many areas and friendly relations between their governments.

After years of being in its neighbor's shadow, Malaysia has signaled that it is determined to cut its dependence on Singapore as a regional shipping, financial and aviation center, and compete for business in these and other areas, such as communications and the media, with the island-state.

Many Malaysians cross the causeway each day to work at better-paid jobs than they can find at home. Although its economy has been expanding quickly, Malaysia's per-capita income is only about $4,000, about one-sixth of Singapore's $24,000

Singaporeans, using their strong currency, increasingly take vacations and weekend breaks in Malaysia, investing in holiday homes, golf course memberships and other property assets there — including the new Perpetual Memorial Park cemetery.

Land is in such short supply and so expensive in Singapore that most people have to settle for cremation, not burial, despite a traditional preference for the latter.

To curb speculation and rising property prices blamed partly on Singaporean investors, Malaysia imposed in October a 100,000 ringgit government levy on foreign purchases of Malaysian real estate. It also increased the capital-gains tax on property and said foreigners would be restricted to purchasing homes costing a minimum of 250,000 ringgit.

Malaysia "poses a real challenge" to Singapore, said Song Seng Wun, regional economist for HG Asia Securities, because the Malaysian authorities had "realized that the trick to catching up is developing infrastructure."

Malaysia now has a modern national highway network and telecommunications. Its seaports, railways and power supplies are being upgraded.

A new international airport near Kuala Lumpur, due to open in 1998, is designed to match or surpass Singapore's airport.

Prime Minister Mahathir bin Mohamad of Malaysia blames British colonial rule for concentrating development in Singapore and giving it a head start as a commercial center. Singapore was once part of the Malaysian federation, but was forced to leave in 1965 to become a sovereign state because Kuala Lumpur feared the island-state would become politically dominant.

Noting that about one third of Malaysia's trade still passes through Singapore, Mr. Mahathir said earlier this month that Malaysians must make full use of Port Klang, the country's chief port near Kuala Lumpur.

He said that the government would do "some mild arm twisting" to make sure that exporters and importers sent and received their goods through Port Klang, which has a large and modern container terminal.

Ling Liong Sik, the Malaysian transport minister, said the government was seriously considering doubling the handling charges at Port Klang for containers destined for ports in neighboring countries that would be later transhipped to other foreign countries.

The government had earlier introduced a levy of 100 ringgit on cargo vehicles entering Malaysia from Singapore, and doubled the levy to 200 ringgit on those leaving Malaysia.

Such levies "may force many manufacturers in Malaysia who currently export to the world through Singapore to reroute to Malaysian ports," said Graham Hayward, executive director of the Singapore International Chamber of Commerce.

Last year, a Malaysian-led consortium announced plans to build an oil pipeline and upgrade road and rail links between the Penang Port, on the Malaysian coast at the northern entrance of the Strait of Malacca, and Songkhla in Southern Thailand.

The group said that the "land bridge" project, which has Malaysian government backing, would enable international shippers to bypass Singapore — which has one of the world's largest ports and a huge oil-refining capacity — and cut the sea voyage between Indian and Pacific oceans by more than 1,000 kilometers (620 miles).

Malaysia is also actively promoting an international offshore financial center on Labuan island off Borneo to reduce reliance on Singapore-based banks, fund managers and insurance companies.

Analysts said that Malaysia wanted to bring down its current-account deficit, projected to increase to more than 18 billion ringgit in 1995 from 10.9 billion ringgit in 1994, by cutting its dependence on foreign shipping, banking, insurance and other professional services — many of which are based in Singapore.

Copyright © 2006 The International Herald Tribune