Singapore, 11 November 1965
1093. Top Secret Immediate
Barter TYade
Kuala Lumpur’s 232.1
It might be worthwhile drawing together some of the main points from earlier reports on the situation as seen from Singapore.
(i) Singapore has never been happy about the stopping of the barter trade. It has meant a substantial loss of income (over dollars 100 million p.a.) and political difficulties from those suffering from the stopping of the trade. With separation there was a sharp increase in pressure for resumption and the case in favour was greatly strengthened by evidence that there was trade on a significant scale between Malaya and Indonesia.2
(ii) With the coming to a standstill of the talks with Kuala Lumpur on economic cooperation, the establishment of tariffs, the indefinite postponement of Singapore’s entry into the common market and Malaysian Ministers’ refusal even to indicate terms on which this might be negotiated, plus statements by the Tunku about developing alternative outlets to Singapore, building a causeway to Penang etc., Singapore Ministers concluded that Kuala Lumpur was determined to make things difficult for Singapore economically.
(iii) Economically and, more importantly, politically there is a strong compulsion on the Singapore Government to resume the barter trade. It is not merely a matter of opening up trading opportunities for a trading city. The Government must show that it can stand up to Kuala Lumpur and provide for Singapore’s survival in the face of hostility from Kuala Lumpur. This is crucial.
(iv) In the foregoing circumstances, the Singapore Government has very little room to manoeuvre. From refusal by Kuala Lumpur to agree to the resumption of barter trade to Singapore’s withdrawal from the combined defence arrangements is only a matter or two or three steps. (Head and Razak apparently envisage an even steeper escalation.)
(v) No treaty or agreement prevents Singapore from resuming barter trade with Indonesia as a unilateral act if it so wishes. It is under no legal obligation to consult with or even inform Kuala Lumpur. Its obligations, which are undefined, derive from its membership of the Combined Defence Council (which in turn gives Kuala Lumpur no clear right of veto). In this respect, apart from Lee’s intervention, Singapore’s conduct has been completely correct. The Singapore representative advised the Council (October 19th) of Singapore’s intention to resume barter trade and Singapore’s plans for handling the security aspect have been submitted to the Council’s machinery for examination and amendment. Singapore has fully cooperated with other members of the committee. (The Government is, of course, anxious to ensure the best possible arrangements for security.) It is true that Singapore initially dithered about the submission of its security plan and sought to have it vetted and cleared by the British first. But once this was sorted out, Singapore ceased to lobby the British and handled the matter wholly within the C.D.C. machinery.
(vi) Lee intervened with a press leak and public statement (October 22nd) that the resumption of barter trade could be expected. This statement much annoyed Lee’s colleagues and the Singapore Department of Defence but Lee justifies it as politically necessary ((iii) above). It is possible that he also sought to bring on a crisis with Kuala Lumpur, calculating that, Kuala Lumpur’s case against the barter trade being so weak, it would either back down or, if it sought to prevent the trade, be forced to back down or at least shown up as an aggressor against sovereign Singapore. Whichever way things went Lee would stand to gain the advantage against Kuala Lumpur, the achievement of which is a fundamental objective of his policies.
(vii) Discussions in the joint defence machinery so far have confirmed Singapore’s view that barter trade will not offer a significant threat to Singapore or through Singapore to Malaya. As to Malaya itself, across the Malacca Strait, the assessment is of no more than a marginal increase to the security threat already existing in some 5000 fishing boats and the Malay/Indonesia barter trade. Kuala Lumpur’s objections to the resumption of trade by Singapore is not considered in defence circles to have any substantial security ground.
2. At the risk of appearing to see only Singapore’s side of the case, I suggest that talk of Singapore forcing a ‘show-down’ (paragraph 8 Kuala Lumpur’s 2312)3 gives the wrong perspective. Seen from here, Kuala Lumpur has chosen the question of barter trade as an instrument in the continuing political conflict with Singapore, or Lee Kuan Yew. This will be the basic cause of any ‘show-down’, though the immediate cause might be, as suggested by Head, action by Singapore to forestall an anticipated attack by Kuala Lumpur, or Singapore’s withdrawal from the joint defence machinery as not worth while anyway, e.g. because of Kuala Lumpur’s stalling. (In this respect I believe Lee now attaches little importance to the remaining ties with Malaysians other than technical ones.)
3. I am afraid I see no scope in Singapore in this issue for a ‘moderate influence’ or any other diplomatic intervention, apart from urging, as I have been doing, that Singapore see the C.D.C. procedures through and abstain meantime from provocative statements. With Razak talking of marching over the causeway, our efforts would seem best exerted with him and the Tungku. If they can be brought to see the weakness of their position and the risks to which they are exposing the entire defence structure, it might be possible to get Singapore to agree to some face-saving arrangement, such as a limitation on the first month’s trading as a trial period and further trading to be reviewed by the C.D.C. at monthly intervals.
[NAA: A1945, 248/10/22]
1 That is, Kuala Lumpur’s 2382 (Document 340).
2 In a discussion with Rob, Goh had alleged that he had evidence of extensive barter trading on the west coast of Malaysia involving corruption. Fenner denied Goh’s claim that the corruption involved Malaysian ministers but admitted there had been ‘minor instances involving corruption of customs officers’.
3 Number transmitted incorrectly—should read 2382 (Document 340).