Background to the development charge issue on three parcels of Malayan Railway land

SINGAPORE – In 1990, Singapore’s then prime minister Lee Kuan Yew and Malaysia's then finance minister Daim Zainuddin signed a Points of Agreement (POA) over the relocation of the Malayan Railway station from Tanjong Pagar to Woodlands.

But differing interpretations of a few clauses in the pact meant the move was not implemented until 20 years later, when Prime Minister Lee Hsien Loong and his Malaysian counterpart Najib Razak agreed on a landmark land swop deal.

As part of this deal, three plots of railway land in Tanjong Pagar, Kranji and Woodlands, and another three plots in Bukit Timah, would be exchanged for four parcels of land in Marina South and two parcels of land in Ophir-Rochor.

The Marina South parcels are behind the Marina Bay Financial Centre, and the Ophir-Rochor parcels are next to the Kampong Glam historic district and across the road from the Gateway on Beach Road.

A new company, M+S, was formed to develop these latter plots. M+S is owned by both countries’ investment arms, with Malaysia’s Khazanah Nasional having a 60 per cent stake and Singapore’s Temasek Holdings the other 40 per cent.

The parcels in Bukit Timah were not covered in the POA, and Malaysia had agreed for M+S to foot the development charges for these plots.

But one outstanding issue remained: over who had to foot the development charge bill for the three parcels of former Malayan Railway land in Tanjong Pagar, Kranji and Woodlands.

This charge is a tax that is payable to the Singapore government on the enhancement in land value when planning permission is granted.

Singapore had argued this tax had to be paid, while Malaysia argued otherwise.

Both neighbours agreed to settle the matter amicably through arbitration, under the auspices of the Permanent Court of Arbitration at The Hague in the Netherlands.

In September 2010, Mr Lee and Mr Najib disclosed that both countries had different views relating to the development charges on the three parcels of POA land in Tanjong Pagar, Kranji and Woodlands.

Both leaders agreed to settle the issue amicably through arbitration and agreed to accept the arbitration award as final and binding.

They also agreed the decision would not affect the implementation of the POA, and so the last train pulled out of Tanjong Pagar station in June 2011.

In January 2012, both countries entered into an agreement, submitting the issue to final and binding arbitration, and registered the case with the Permanent Court of Arbitration in The Hague, the Netherlands.

The arbitration proceedings were conducted in accordance with the procedural rules agreed to by Malaysia and Singapore, and before a three person Arbitral Tribunal appointed by the countries.

The Arbitral Tribunal delivered its award on Thursday.

It decided that M+S would not have been liable to pay development charges on the Keppel, Kranji and Woodlands parcels if the said parcels had been vested in M+S, and if M+S had actually developed the lands in accordance with the proposed land uses set out in the Annexes to the POA.