Singapore, Malaysia no closer to CLOB deal

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SINGAPORE today cast doubt on hopes a dispute with Malaysia over $4.3 billion worth of frozen securities could be resolved with a meeting of prime ministers or through a private-sector deal.

Singapore Deputy Prime Minister Lee Hsien Loong, commenting on a row that began 16 months ago when its neighbour imposed capital controls, said the impasse had to be resolved by law.

``We are not depending on personal arrangements to solve this problem. This is a problem that has to be solved in accordance with the law,'' Lee told parliament.

He had been asked whether an upcoming meeting between Singapore Prime Minister Goh Chok Tong and Malaysian counterpart Mahathir Mohamad would help to resolve the issue.

The meeting, announced by Goh last week, has raised hopes of a resolution among some of the many Singaporeans whose holdings of over-the-counter shares in Malaysian companies were frozen by the imposition of capital controls in September 1998.

Goh had said he would meet Mahathir some time after the lunar new year in February to discuss bilateral issues, including the shares once traded on Singapore's Central Limit Order Book (CLOB).

MALAYSIA FEARS SELL-OFF

Lee told parliament the Kuala Lumpur Stock Exchange's failure to migrate the CLOB shares to Malaysia had implications under trade laws policed by the World Trade Organisation.

``The Singapore government has been advised by WTO legal specialists that the measures taken by Malaysia against CLOB are inconsistent with the most-favoured-nation provision of the WTO General Agreement on Trade in Services,'' Lee said.

Singapore investors, the majority of CLOB shareholders, want Malaysia to shift the shares to Malaysian Central Depository System accounts belonging to individual owners.

But Malaysia fears the investors would rush to sell the shares, driving down the local market.

In Kuala Lumpur, Malaysian Trade Minister Rafidah Aziz said on earlier today that Singapore did not have a case to take to the WTO because Malaysia had never recognised the CLOB market.

``CLOB is not a formal structure and we have never recognised (it) and they know it, so they have no case to bring it to WTO,'' she was quoted as saying by the national Bernama news agency.

Goh said last Monday that Singapore would take the dispute to the WTO if a solution could not be reached.

The private sector has made several proposals to allow investors to reclaim the shares.

But none has satisfied both the Malaysian authorities and Singapore's Securities Investors Association which represents some 50,000 of the 172,000 CLOB investors, mostly Singaporeans.

PRIVATE OFFERS NOT ACCEPTED

Lee said the issue could not be solved by the private-sector proposals because it involved authorities from both countries.

``Private-sector offers cannot resolve the CLOB issue. They do not supersede obligations that are binding in law nor can they absolve the relevant parties from their legal responsibilities,'' Lee said.

Malaysia has extended the nominee status of CLOB market stocks held by Singapore's Central Depository Pte Ltd by six months to June 30, 2000, but said the move was the final extension of its nominee status.

Mahathir has warned the government might take custody of the shares if the share impasse is not resolved.

Singapore's Business Times, Jan 18 reported Lee also disclosed to parliament that Finance Minister Richard Hu wrote to his Malaysian counterpart, Daim Zainuddin, on Jan 13, requesting Mr Daim to ask the Kuala Lumpur Stock Exchange (KLSE) to fulfil its legal obligations under the agreement between Central Depository Pte Ltd (CDP) and Securities Clearing Automated Network Services Sdn Bhd (Scans). Dr Hu is still awaiting a reply.

Under the agreement between Singapore's CDP and Scans, a subsidiary of KLSE, the parties agreed on the migration of Clob shares into individual accounts held at the Malaysian Central Depository. "This is a key agreement whose significance the Malaysian authorities have played down," Lee said. But he stressed that the agreement is legally binding and specifically enforceable in Malaysian courts.

Lee said the Singapore government has been advised by WTO legal specialists that Malaysia's actions on Clob are inconsistent with the most-favoured-nation provision of the WTO General Agreement on Trade in Services, because they discriminate against Clob vis-a-vis other foreign exchanges.

Asked by MPs whether the government has set a deadline for the resolution of the issue before resorting to other actions like going to the WTO, BG Lee replied: "It is not a matter to be dragged on and we will pursue it urgently. But I don't think it is helpful to make a public announcement on deadlines and bind ourselves."

"The SGX (Singapore Exchange) and Singapore government continue to be anxious to resolve the matter bilaterally with Malaysia, and will make every effort to do so. It is therefore premature to speculate on what further steps may be necessary should a bilateral solution not prove possible," Lee said.