On the fast track to a Singapore–Malaysia economic union?

Author: Yang Razali Kassim, RSIS

The recent announcement of a high-speed rail link between Singapore and Kuala Lumpur, with a commute of only 90 minutes, has raised the prospect of closer economic integration between the two cities.

A train moves past the Petronas Towers in Kuala Lumpur, Malaysia. The prime ministers of Singapore and Malaysia have announced a new high-speed rail link between the Singapore and Kuala Lumpur (Photo: AAP).

It has even raised speculation about whether the project could eventually lead to an economic union between Singapore and Malaysia.

Singapore’s prime minister, Lee Hsien Loong, and his Malaysian counterpart, Najib Razak, spoke of a ‘virtual urban community’ when they disclosed their in-principle agreement to complete the high-speed rail link by 2020. It is the most exciting and promising joint project to have come from the two countries in many years.

Both leaders conjured up the image of ‘twin cities’ linked by a high-speed train in which people ‘can go up there, do business, meet friends, have a meal — and come back all the way at the end of the day’. The relationship between Singapore and Kuala Lumpur could even come to resemble the way London and Paris interact, linked as they are by the Eurostar train across the English Channel. The Eurostar brought about increased tourism and economic integration between the United Kingdom and mainland Europe, and reinforced Europe’s cohesion politically, economically, socially and culturally.

We can imagine the same effect when the Singapore–Kuala Lumpur high-speed train gets moving by 2020 or thereabouts, even though the route, costs and systems details are yet to be finalised. But the very idea is already triggering high hopes within the two societies, as well as business and industry. We can expect a surge in tourism in Singapore and Kuala Lumpur, and even to other cities in Malaysia, simply because of the ease of travel.

The rail link promises to be a major bilateral project, as the benefits of improved ties will trickle down to the level of everyday people. The high-speed rail link will allow Singaporeans and Malaysians to enjoy unprecedented interaction as they move more swiftly between the two cities. This is what ASEAN leaders mean when they talk of ‘connectivity’: borders become seamless as societies and communities are connected by land, air and sea. In the long run these physical connections will also have a positive effect on political, economic, social and cultural ties.

In particular, the rail link has huge potential economic benefits for both countries. Greater individual mobility will lead to growing ease of doing business, in turn opening up a host of economic opportunities. There will be other business, economic and cultural spinoffs, with the multiplier effects spreading along the train route, for example to the Iskandar region in Johor, as well as Malacca and Negeri Sembilan. The property and hospitality sectors will also grow. Singapore’s labour shortage may ease as employers engage Malaysians to commute to Singapore for work.

By 2020, Singaporeans and Malaysians, as well as business executives and tourists from ASEAN and the rest of the world, will even be able to travel seamlessly by rail to other parts of Asia when the ASEAN connectivity grid is in place. The vision of the ASEAN Community is due to be realised by 2015, with rail links extending all the way to Kunming in China by 2020, and possibly toward western Asia further down the track.

It is, of course, premature to talk about an economic union between Malaysia and Singapore arising from the high-speed train project. Still, the consequences for economic integration cannot be ignored, particularly with the establishment of the ASEAN Community just two years away, promising a region interconnected not just physically but economically through the ASEAN Free Trade Area.

The idea of an economic union between Singapore and Malaysia has long been in the consciousness of scholars and politicians, even though it has not been seriously pursued. In 2000, when Singapore’s then opposition leader, Chiam See Tong, revived in Parliament his proposal for an economic union with Malaysia, the foreign minister at the time, S Jayakumar, quoting former prime minister Goh Chok Tong, said the ‘economic logic’ of his proposal was ‘correct’ but ‘cooperation takes two willing parties’.

In other words, the idea of an economic union was never completely ruled out. Now that there are willing parties on both sides of the Causeway to kick-start economic integration between Singapore and Malaysia — beginning with the high-speed rail link — will there be the political will to bring about a mutually beneficial economic union?

Yang Razali Kassim is Senior Fellow with the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University.

A version of this article was first published here as RSIS Commentary No. 038/2013.

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