Malaysia-Singapore joint venture firm need not pay development charge on former railway land, says tribunal

Tanjong Pagar Railway Station in 2011. An international Arbitral Tribunal has decided that the Malaysia-Singapore joint venture company, M+S, need not pay a development charge on three parcels of former railway land, bringing to a close a dispute bet
Tanjong Pagar Railway Station in 2011. An international Arbitral Tribunal has decided that the Malaysia-Singapore joint venture company, M+S, need not pay a development charge on three parcels of former railway land, bringing to a close a dispute between the two countries over the tax. -- PHOTO: STEPHANIE YEOW 

SINGAPORE - An international Arbitral Tribunal has decided that the Malaysia-Singapore joint venture company, M+S, need not pay a development charge on three parcels of former railway land, bringing to a close a dispute between the two countries over the tax.

The Foreign Affairs ministries of Singapore and Malaysia announced the news of the award – delivered by the tribunal on Thursday – in a joint statement on Friday.

They said that both countries were satisfied with the arbitral process, and agreed to abide by and fully implement the tribunal’s decision.

A development charge is a tax levied on the enhancement in land value when planning permission is granted.

Prime Minister Lee Hsien Loong, in a statement on Friday morning in response to media queries, said that Singapore fully accepted the tribunal’s decision.

“It allows us to put this matter behind us. I am happy that Singapore and Malaysia have been able to resolve this dispute in this impartial and amicable way,” he added.

“The full and successful implementation of the Points of Agreement (POA) in 2011 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.

“I look forward to making progress on them, and working with PM Najib bilaterally, and in Asean to benefit both countries.”

The matter was left over from the POA signed in 1990 by Singapore’s then prime minister Lee Kuan Yew and Malaysia’s then finance minister Daim Zainuddin. Under the pact, the Malayan Railway station would be moved from Tanjong Pagar to Woodlands.

But the POA was not implemented at the time, due to differing interpretations of a few clauses.

However, in 2010, a landmark land swop deal negotiated between Prime Minister Lee Hsien Loong and his Malaysian counterpart Najib Razak broke the 20-year impasse.

Under the swop, 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.

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.

These developments resulted in the last train pulling out of Tanjong Pagar station in June 2011 as part of the implementation of the POA.

The land 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 three parcels of former Malayan Railway land in Tanjong Pagar, Kranji and Woodlands.

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.

They also agreed to accept the arbitration award as final and binding, and submitted the issue to the Court, which acted as the registry, in January 2012.

The arbitration proceedings were conducted in line with the procedural rules agreed to by Malaysia and Singapore, and before a three-person arbitral tribunal appointed by the countries.

In a recent report, Malaysian regional publication The Edge Review reported Malaysian government sources as saying that the closed-door hearings in London ended in August, and that Singapore’s former foreign minister George Yeo and Malaysia’s former second finance minister Nor Mohamed Yackop had testified.

The Edge Review also put the development charge at some S$1.4 billion. But the amount has never been confirmed.

In their joint statement on the award on Friday, both the ministries said the tribunal decided that M+S would not have been liable to pay development charges on the Keppel (formerly Tanjong Pagar), 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.

The ministries added that by resolving the matter through third-party arbitration, “both countries have demonstrated our common commitment to settling disputes in an amicable manner, in accordance with international law”.zakirh@sph.com.sg