Anwar Ibrahim’s Unity Government May Write a New Chapter for Malaysia-Singapore Relations

Anwar Ibrahim’s Unity Government has inherited challenges from a period of uncertainty in Malaysia-Singapore relations. The return of Dr Mahathir Mohamad as the 7th prime minister (PM) after GE14 made it difficult to table new agendas for collaboration, as longstanding issues like the water agreement and the “crooked” bridge resurfaced. The closure of the Malaysia-Singapore border due to pandemic restrictions, coupled with the instability of the short-lived Muhyiddin Yassin and Ismail Sabri administrations, made it difficult for Malaysia to focus on longer-term bilateral policies. With a more stable governing majority, Anwar Ibrahim’s tenure as the 10th PM heralds a new chapter for Malaysia-Singapore relations where more substantive cooperation can take shape.

The three MOUs signed during Anwar’s first official visit to Singapore as PM on 30 January 2023 provide an early indication that focus will be given to green and digital economy initiatives. Frameworks of Cooperation (FoC) in Digital and Green Economy were signed by the trade and industry ministers, while an additional MOU was signed by both countries’ communications ministers on cyber security and data protection. 

The Green Economy FoC opens the door for future collaborations on Renewable Energy (RE) technologies and projects. Earlier this month, Malaysia’s Minister of Natural Resources, Environment, and Climate Change (NRECC) indicated that the government was reviewing a 2021 decision to ban the exports of renewable energy to Singapore. The initial unwarranted fears that RE sales to Singapore would lead to Malaysia “losing out” on FDI flows have been assuaged. Indeed, RE producers in Peninsular Malaysia and Sarawak will benefit from exporting RE to Singapore, as they are priced higher but still more cost-effective compared to Cambodia and Indonesia.

Under the same FoC, collaborations in developing carbon credit projects and carbon markets were highlighted. Cross-listing of carbon credit projects on the Bursa Carbon Exchange in Malaysia and the SGX backed Climate Impact X (CIX) may improve visibility and pricing. Formal discussions in this area can also ensure that carbon credit projects originating from Malaysia are eligible for purchase by Singapore companies as part of their carbon tax offsets. The Malaysian Ministry of Finance’s recent allocation of RM10 million as seed money for Malaysia-generated carbon credits shows at least an intent to develop carbon trading frameworks. Separately, the Ecological Fiscal Transfer (EFT) allocation of RM150 million to state governments, announced in the recent Malaysian budget, could be tied to carbon credit projects that can generate additional revenues for those state governments.

Given the significant cross-border vehicle traffic between and the growth of the Electric Vehicle (EV) market within both countries, it is only natural that clauses on EV charging standards and charging points were included in the Green Economy FoC. This could result in healthier cross-border competition and cooperation among existing technology providers. In the push towards convergence in EV charge point operators and related applications, it may even spur M&A activities to create EV software and application providers that might even grow to be regional unicorns.

The potential for collaboration in the digital economy space is broad, ranging from electronic payments to investment promotion and facilitation in digitalisation. The implementation of the long-awaited linkage of the DUITNOW (Malaysia) and PAYNOW (Singapore) real-time payments systems, including the mutual recognition of QR codes, will likely lead to more cross-border retail and e-commerce activities, ease tourist transactions, and may catalyse wider digital payments integration with and across other ASEAN countries.

While the separate initiatives in the digital and green economy may be somewhat small when seen individually, when combined, their collective economic impact may be more positive and sustainable than big ticket-items

The expected deployment of expertise and capital through Singapore-based Venture Capital (VC) and Private Equity (PE) funds into Malaysia’s tech start-up scene will have significant multiplier effects. As a specific example, Malaysian companies can work with Singapore counterparts to host green data centres, like the investment scheme announced by YTL and SEA Ltd in August 2022.

The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) and the Singapore Chinese Chamber of Commerce and Industry (SCCCI) also signed an MOU to strengthen collaboration during Anwar’s visit to Singapore. The reciprocal establishment of a Malaysia-Singapore Chamber of Commerce (in Singapore) and a Singapore-Malaysia Chamber of Commerce (in Malaysia) would be impactful, given the magnitude of cross-border investments and the easing of pandemic travel restrictions. In 2020, for illustration, Singapore’s investments in Malaysia as its top investor totalled RM153 billion (about S$46 billion) and Malaysia’s investments in Singapore totalled RM110.4 billion (about S$33 billion). 

While the separate initiatives in the digital and green economy may be somewhat small when seen individually, when combined, their collective economic impact may be more positive and sustainable than big-ticket items like the beleaguered Singapore-Malaysia High Speed Rail project. The Rapid Transit System (RTS) linking Johor Bahru to Singapore, scheduled to be completed in 2026, may be more important in boosting cross-border economic activity, especially if continued increases in the cost of living in Singapore force more companies and workers to look for alternative homes and workplaces.

Anthony Loke, DAP Secretary General, who spoke at the ISEAS – Yusof Ishak Institute’s Regional Outlook Forum (ROF) in January, set the stage for a new chapter by saying that “Singapore should be Malaysia and Anwar’s best friend”. Let the substantive writing of this chapter begin.

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