Singapore, 21 June 1963
343. Confidential Priority
Malaysia Financial Talks
Reference our memorandum 1308,2 and Savingram 19.3
2. Lee Kuan Yew has now returned to Singapore and Cabinet is discussing Federation’s latest set of ‘final’ terms this afternoon. These terms differ very little from those set out in paragraph 5 of our memorandum 1308.
3. Unless Lee has last minute change of mind or is subject to strong Cabinet pressure to compromise—neither of which we consider likely—he will adhere in the main to views he expressed in Federation which remain similar to those set out in paragraph 10 of our memorandum under reference.4 He is likely to obtain Cabinet backing for insistence on satisfactory Common Market guarantee and on loan of 150 million to Borneo Territories rather than grant of 50 million. Lee has compromised slightly on division of federal revenues in Singapore and only one percent now separates positions and this would be negotiable if agreement reached on Common Market.
4. Lee says Federation Ministers admit they have not applied themselves to full study of R.U.E.F.F. Report and now say there is insufficient time to go into details required by Lee’s stand.
5. In the circumstances, it seems likely that final attempt will have to be made to resolve deadline in London where United Kingdom (presumably Duncan Sandys) will be in the chair rather than a visage on the sidelines. United Kingdom has decided to let the date for initialling of agreement slip from 27th June to about 6th July in the hope that agreement might yet be reached before the parties go to London, or, if not, to allow a few days in hand there for talks prior to initialling (neither Federation nor Singapore Governments know of this yet, although they will have to find out shortly). British are anxious that they do not exploit situation. Please therefore, protect in meanwhile.
6. Selkirk seems fairly confident agreement will be reached in London before revised deadline for initialling, but I have the impression that Lee will attempt to stand firm even in London, at least on time guarantee on the Common Market.5
[NAA: A1838, 3006/10/4 part 3]
1 Richard Woolcott, Acting Commissioner in Singapore.
2 7 June. It provided DEA with an account of the financial talks between Singapore and Malaya held earlier that week in Kuala Lumpur. It included the terms that the Federation had offered as ‘final’, making it ‘clear that these terms were a package deal and that they would have to be accepted or rejected as a whole by Singapore’ (see footnote 1, Document 76).
3 15 June. It advised DEA that Lee Kuan Yew had departed for Kuala Lumpur to resume talks on the financial arrangements for Malaysia with the Federation.
4 As Woolcott reported them, Lee’s views, at the time, were that the authority in respect of the collection of customs and excise duties and income conferred on Singapore must not be revoked; all Singapore taxes should be paid only into the Singapore branch of the Central Bank; Singapore’s contribution to Federation should not be more than 38%; and Singapore’s contribution to development in the Borneo territories should be 150 million dollars in loans over five years rather than the proposed 50 million dollar grant over the same period (cf., paragraph 2, Document 76).
5 A reference to Lee’s insistence that the main details of common market arrangements should be worked out by 31 August.