Malaysia Scraps Half-Bridge to Singapore, Ends Talks 
Bloomberg – 12/4/2006
Malaysia scrapped plans to push ahead with its half of a bridge to Singapore and pulled out of negotiations to win consent for the $610 million project, a setback to efforts to improve ties. Malaysia , which decided in January to proceed with building its 1.1 billion ringgit ($300 million) half of the link, scrapped the project because of public opinion about demands made by Singapore in the talks, Prime Minister Abdullah Ahmad Badawi said in a statement today. Singapore 's government said it was surprised by the ``sudden decision.'' 
The countries, which were united from 1963 to 1965, have had disputes over issues such as the price of water supplied by Malaysia and the location of railway links. Malaysia argues the bridge is needed to relieve congestion on the existing causeway. Singapore has said the bridge isn't cost effective. ``From the onset, it seems that it was set to fail,'' said Jason Lee, who helps manage the equivalent of $1 billion in stocks and bonds at JMF Asset Management Sdn. in Kuala Lumpur . In terms of relationship, he added, ``I don't think it could get any worse.'' 
Singapore is Malaysia 's second-largest export market, accounting for about 16 percent of Malaysia 's export sales last year. Trade between the two reached S$96 billion ($60 billion) in 2005 from S$88 billion a year earlier, Singapore government statistics show. Singapore is also Malaysia 's biggest source of tourists, with 9.6 million visitors last year, making up 59 percent of total arrivals. 
`Surprised' 
``We are surprised at this sudden decision when negotiations for a full bridge were still ongoing,'' Singapore 's Ministry of Foreign Affairs said in a statement in response to Malaysia 's announcement today. Before the bridge dispute this year, the Southeast Asian nations had been stepping up efforts to resolve differences since Malaysia's Abdullah became prime minister in October 2003, and Lee Hsien Loong became Singapore's leader the following year. Both settled a dispute over land reclamation in the straits separating them in April last year and their stock exchanges agreed to form an alliance. Singapore government investment units bought stakes in companies such as Telekom Malaysia Bhd. and Malaysian Plantations Bhd. 
  ``We don't think this development reflects a U-turn in the warming of ties between Malaysia and Singapore under the current administration as the reason quoted for the scrapping of the bridge project appears to be domestic politics,'' said Suhaimi Ilias, an economist at Affin Securities Sdn. in Kuala Lumpur. 
Conditions 
Singapore wanted permission to use Malaysian airspace and a sand sale agreement in exchange for helping to build a bridge linking the two countries, state-owned Bernama news agency reported in February, citing Malaysian Foreign Minister Syed Hamid Albar. Prime Minister Abdullah said the public objected to those demands and that talks would end. Officials from both countries have met five times to discuss details of the bridge across the Straits of Johor, which would be a huge cost for Singapore with ``no significant benefits,'' Singapore's Second Foreign Affairs Minister Raymond Lim said on April 3. Singapore had agreed ``reluctantly'' to demolish its causeway linking the northern end of the island to south Malaysia for a new bridge on the condition that its neighbor continued to supply water, S. Jayakumar, Singapore's foreign affairs minister at the time, said in Parliament in 2004. 
Water 
When Malaysia 's former Prime Minister Mahathir Mohamad withdrew his offer of future water supply in October 2002, Singapore decided not to pursue its S$500 million share of the new bridge, which Jayakumar said wasn't cost-effective. Yahya Jalil, managing director of Gerbang Perdana Sdn., the developer of the bridge, was out of the office and couldn't be reached for comment, his secretary said. The company, set up in 1998 by automotive and construction group DRB-Hicom Bhd. and two other shareholders, was awarded a 1.1 billion ringgit contract to build the bridge in 2003 and had been told to resume preliminary work on the bridge earlier this year. 
Giving up the bridge project may help Malaysia free up funds for other developments. The link had been one of the projects under a five-year development plan unveiled by Abdullah on March 31. 
``Maybe they didn't really have the money to build the bridge,'' said Lee. ``Part of the strategy in the Ninth Malaysia plan was not to build all these huge infrastructure projects, but more agriculture or any other project to boost the economy.'' 
Resources 
Abdullah, in his first five-year plan since taking office in 2003, announced an 18 percent rise in public development spending to 200 billion ringgit in the 2006 to 2010 period from the previous five years. The budget included 10.2 billion ringgit for Johor, the closest state to Singapore , to expand an airport, build a new administrative hub and construct the bridge to replace the 82-year-old causeway. 
``It's not a setback to the Ninth Malaysia Plan,'' said Suhaimi. ``It frees up the government's financial resources to attend to urgent matters, like education and training, rural development, urban public transportation and basic public infrastructure.''
Source: Bloomberg | www.bloomberg.com