PUTRAJAYA - The 1962 Water Agreement is a "fundamental founding document" for Singapore and Malaysia and both countries have to abide by it, Prime Minister Lee Hsien Loong said on Tuesday (April 9).

"It is a basic term on which the two countries decided to manage our relationships," he said. "If you look at it from that point of view, to be able to change that is a very high hurdle."

PM Lee was responding to a question from a Malaysian journalist on whether Singapore believes that Malaysia's desire to review the price of water under the 1962 Water Agreement is reasonable, and what he thought was a reasonable price.

He was at a joint press conference with his Malaysian counterpart Mahathir Mohamad at Perdana Putra after their Leaders' Retreat.

PM Lee said he told Dr Mahathir he can understand his perspective on the political necessity for Malaysia to press hard for a revision of the price of water.

He also explained the Republic's point of view. The 1962 agreement was guaranteed by both governments in the 1965 Separation Agreement, PM Lee noted.

"I can understand Dr Mahathir's perspective," he said. "I hope that he will be able to see Singapore's perspective, why this is such a sacrosanct item.

Related Story All parties must honour terms of water agreement: Singapore

"Therefore, let us try to find a way forward which enables us to talk constructively about this issue, and hopefully be able to make some progress."

PM Lee added that one of the issues to be discussed by both sides is the security of Singapore's water supply from Johor, given concerns over pollution in the Johor River and its long-term yield, to make sure Singapore is able to get the 250 million gallons a day (mgd) specified under the 1962 Water Agreement.

"So on that basis, the ministers will talk. I think to ask me what is a reasonable water price now, is to prejudge the question," he said.

Under the agreement, Singapore is entitled to draw 250 mgd of raw water from Johor at three sen per 1,000 gallons. However, Johor is also entitled to buy 5 mgd of treated water from Singapore at 50 sen per 1,000 gallons, a sum the Republic says is heavily subsidised and a fraction of the true cost of treating the water. In practice, Singapore has been supplying 16 mgd of treated water at Johor's request at this price.

Malaysia's position is that a review can take place any time after 25 years since the agreement began, while Singapore has been clear and consistent in its position that Malaysia had lost the right to review the water price when it opted not to do so in 1987.

In a joint statement issued after the press conference, both prime ministers noted their countries' interest "to identify appropriate and timely measures, including schemes, to increase the yield of the Johor River, and to safeguard its environmental conditions and water quality", to the extent required by the 1962 Agreement.

The leaders also noted the differing positions of both sides on the right to review the price of water under the 1962 Agreement, and have agreed for their Attorneys-General to discuss these differing positions.

"Both sides will seek amicable solutions, including the possibility of dispute resolution through arbitration on a mutually agreed basis," they said.

Read the joint statement below by both leaders.