Agreement relating to Malaysia between United Kingdom of Great Britain and Northern Ireland, Federation of Malaya, North Borneo, Sarawak and Singapore/Annex J

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Agreement relating to Malaysia between United Kingdom of Great Britain and Northern Ireland, Federation of Malaya, North Borneo, Sarawak and Singapore

by
Government of United Kingdom of Great Britain and Northern Ireland,
Government of Federation of Malaya,
Government of North Borneo,
Government of Sarawak and
Government of Singapore

Annex J:
Agreement between the Goverments of the Federation of Malaya and Singapore on Common Market and Financial Arrangements


Common Market.

1. (1) The Federal Government, in order to facilitate the maximum practicable degree of economic integration of the territories of Malaysia, while taking account of the interests of the entrepot trade of Singapore, Penang and Labuan and those of existing industries in Malaysia, and the need to ensure a balanced development of these territories, shall progressively establish a common market in Malaysia for all goods or products produced, manufactured or assembled in significant quantities in Malaysia, with the exception of goods and products of which the principal terminal markets lie outside Malaysia.
1. (2) Where the same protective duties or revenue duties are applicable throughout Malaysia in the case of any class of goods or products, then no tariff or trade barrier or trade restriction or discrimination shall be applied to such goods or products in regard to their circulation throughout Malaysia.
1. (3) The provisions of the preceding sub-paragraph shall not be construed to prevent the imposition of—
(a) any special production tax on producers in a low-tariff State which would offset the cost inequalities arising from the differential import duties ; or
(b) any export duty or export restriction on primary products where the principal terminal markets lie outside Malaysia.


Tariff Advisory Board.

2. (1; The Malayan Government shall take steps to establish by law before Malaysia Day a Tariff Advisory Board to advise the Federal Government generally on the establishment of the common market as defined in paragraph 1 above, including the establishment and maintenance of a common external tariff for the protection (where required) of goods for which there is to be a common market.
2. (2) Appointments to the Board shall be made by the Federal Government but until five years from Malaysia Day the appointment of the Chairman shall require the concurrence of the Singapore Government ; the first Chairman shall be appointed as soon as possible after the conclusion of this Agreement. During the first five years, there shall be three Deputy Chairmen, one of whom shall be nominated by the Singapore Government. In appointing members of the Board regard shall be had to the areas and interests involved.
2. (3) The Board shall sit in public to receive evidence except where the Board deems it necessary to receive evidence in camera. Within six months after their receipt the Federal Government shall publish the reports and recommendations of the Board other than those of which publication is not in the public interest.


Protective Duties

3. (1) For the purposes of this Agreement a protective duty shall be defined as a duty which is levied in respect of a class of goods or products which are or are to be produced, manufactured, assembled or prepared and used or consumed in the Federation in significant quantities, or which are used or consumed in the production, manufacture, assembly or preparation in the Federation of goods or products of such a class or which are of a description providing a substitute for or alternative to goods or products of such a class. All other duties shall be defined as revenue duties. A duty shall be regarded as imposed in Singapore, if it is imposed on goods imported into Singapore for use or consumption there and not otherwise.
3. (2) Except hi cases where it deems preventive action to be urgently necessary, the Federal Government shall not in Singapore make any class of goods or products subject to a protective duty or vary any protective duty before receiving the advice of the Tariff Advisory Board. In cases where a duty has been imposed or varied without prior reference to the Tariff Advisory Board, the Federal Government shall seek the advice of the Board thereon as soon as practicable thereafter.
3. (3) For a period of 5 years from Malaysia Day the Singapore Government shall have the right to require a delay not exceeding 12 months in the imposition in Singapore of any protective duty on the grounds that the duty would significantly prejudice the entrepot trade. In any enquiry by the Tariff Advisory Board on a proposal to impose such a duty, the Singapore Government shall inform the Board of any item on which it may wish, in the interests of the entrepot trade, to avail itself of this option. In regard to such items, the Tariff Advisory Board shall consider the possibility of anticipatory action in Singapore and shall, if necessary, include hi its recommendations proposals to prevent such action. During the period of delay, the Singapore Government shall not grant any licence, concession or inducement to any industry which may be affected by the proposed protective duty without the concurrence of the Federal Government.
3. (4) The Tariff Advisory Board shall be required within six months after Malaysia Day to make its first report as to what protective duties should be imposed. For this purpose it shall consider any proposals made to it by the Federal Government or a State Government.


Revenue Duties

4. (1) In formulating its policy relating to the harmonisation of revenue duties, the Federal Government shall pay due regard to any représentations made by the Singapore Government on the economic, financial and social implications of such harmonisation.
4. (2) Revenue duties in force in Singapore on 1st July, 1963, and the corresponding duties in force in the Federation of Malaya shall be harmonised as soon as practicable.
4. (3) Until 31st December, 1968, no revenue duty shall, except at the request or with the consent of the Singapore Government, be imposed in Singapore by the Federal Government in respect of any class of goods or products not chargeable with such a duty on 1st July, 1963. Such consent shall not be withheld except on the grounds that the duty would significantly prejudice the entrepot trade of Singapore.
4. (4) Before 31st December, 1968, the Tariff Advisory Board shall review the revenue duties in force at that time in Singapore and in the remainder of Malaysia and shall make recommendations regarding the amendment of such duties or the imposition of additional duties. As from 1st January, 1969, the Singapore Government shall be entitled to withhold its consent to the imposition in Singapore of any revenue duty in respect of any goods or products referred to in sub-paragraph (3) for any period up to 31st December, 1975, on the grounds that it would significantly prejudice the entrepot trade, and, in the absence of such consent, no such duty shall be imposed provided that the Singapore Government shall pay to the Federal Government annually compensation equal to the loss of revenue suffered by the Federal Government as a result of the withholding of such consent.
4. (5) For the purposes of this agreement, the entrepot trade of Singapore means trade in goods and products imported into Singapore from outside Malaysia and primary products imported into Singapore from other parts of Malaysia, which goods or products, whether further processed or not, are subsequently re-exported from Singapore to destinations outside Malaysia.


Tax Collection.

5. Subject to the provisions of the Annex to this Agreement, executive authority in respect of the collection in Singapore of customs duties and excise and income tax shall be delegated to the Singapore Government. The Federal Government may revoke this authority if the Singapore Government fails to comply with any direction properly given to it by the Federal Government for the collection or protection of these taxes or shows itself unwilling or unable to discharge these functions efficiently. This authority may extend to customs duties and other charges collected in Singapore on goods exported from or to be imported into Malaysia outside Singapore.


Division of Revenue.

6. (1) All revenues collected in Singapore, with the exceptions specified below, shall be paid into a separate fund in a branch of the Central Bank to be established in Singapore and the fund shall be divided between the two Governments and paid to them at least once hi every year, in the proportion of 60 per cent, to the Singapore Government and 40 per cent, to the Federal Government. The exceptions are—
(a) the revenues specified in Part III of the Tenth Schedule to the Federal Constitution, including property tax in lieu of rates (to be paid into the State Consolidated Fund) ;
(b) customs duties and other charges (including excise not in force at the date of this Agreement and any production tax imposed in respect of goods to which a protective duty is applicable) collected in Singapore on goods to be exported from or imported into Malaysia outside Singapore (to be paid into the Federal Consolidated Fund) ;
(c) income tax collected in Singapore and attributable to income derived from the States of Malaya (to be paid into the Federal Consolidated Fund).
6. (2) 60 per cent, of income tax collected in the States of Malaya but attributable to income derived from Singapore shall be paid to the Singapore Government.
6. (3) Income tax attributable"*to income derived from Singapore and collected by an Agent outside Malaysia shall be paid into the separate fund referred to in paragraph 6(1) above.
6. (4) From the beginning of 1964 paragraphs 6(l)(c) and 6(2) shall apply as if references to the States of Malaya included references to the Borneo States.
6. (5) The provisions of Article 109 and Clauses (3), (3A) and (4) of Article 110 of the Federal Constitution shall not apply in relation to Singapore.


Federal projects in Singapore.

7. The Singapore Government shall pay to the Federal Government the cost of capital development of Federal projects in Singapore other than projects for defence and internal security. The two Governments shall agree together on projects to be covered by this paragraph which do not provide predominantly local services.


Financial Review.

8. The arrangements specified in paragraphs 6 and 7 above shall remain in operation until 31st December, 1964. The two Governments shall then review these arrangements and shall decide upon any amendments to be made to them in respect of the two year period commencing 1st January, 1965. There shall be a similar review in respect of each subsequent period of two years. In default of agreement between the two Governments, any issue in dispute shall be referred to an independent assessor appointed jointly by the two Governments. In default of agreement between the two Governments on the choice of an assessor, the Lord President of the Federal Court, after considering the views of both governments, shall appoint an assessor from among persons recommended by the International Bank for Reconstruction and Development as being persons enjoying an international reputation in finance. The recommendations of the assessor shall be binding on both governments. Such reviews shall have regard to all relevant factors.


Finance for Borneo territories

9. To assist development in the Borneo territories the Singapore Government shall make available to the Federal Government :
(a) a 15-year loan of $100 million, bearing interest at current market rates in the Federation, subject to the proviso that the loan shall be free of interest during the first 5 years after drawing and that if, having regard to the economic growth in Singapore, it is so recommended in the financial review in respect of the period of two years commencing 1st January, 1969 under paragraph 8 above, the loan shall be free of interest for a further period of 5 years ; and
(b) a 15-year loan of $50 million bearing interest at current market rates in the Federation.
The above loans shall be drawn in equal annual instalments over a period of 5 years, commencing in 1964.


10. Any dispute between the Federal Government and the Singapore Government as to the interpretation or application of this Agreement may be referred by either Government to the Federal Court for determination by that Court in exercise of the jurisdiction conferred upon it by Article 128 of the Federal Constitution.


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