In ensuring sufficient water supply in the rapidly modernising colonial city of Singapore in the 1920s, in 1927, the municipal leadership of Singapore and Sultan Ibrahim of the state and territories of Johor in neighboring Malaya signed an agreement that allowed Singapore to rent land in Johor and use its water for free. The Municipal Water Department of Singapore, under David J. Murnane, began importing raw water from Gunong Pulai in 1927 and filtered water on 31 December 1929. Since then, several water agreements had been signed between two countries.
The first water agreement was signed between Sultan Ibrahim II the Sultan of Johor and the Municipal Commissioners of the Town of Singapore on 5 December 1927, under the Legislative Council of the Straits Settlements. It is no longer in force.
On 1 September 1961, the Federation of Malaya signed an agreement giving Singapore the right to draw up to 86 million imperial gallons (390,000 m3) of water per day collectively from the Tebrau River, the Skudai River, the Pontian Reservoir, and the Gunung Pulai Reservoir, with effect through 2011. On 29 September 1962, a further agreement was signed providing Singapore the right to draw up to 250 million imperial gallons (1,100,000 m3) per day from the Johor River, with effect until 2061. Both agreements stipulated the price of 3 Malaysian cents per 1,000 imperial gallons (4,500 L).
In 1994, Linggiu Reservoir was built upstream of the Johor River and collects and releases rainwater. This pushes seawater back into the sea, ensuring that the river water is not too salty to be treated. It is operated by the Public Utilities Board (PUB) of Singapore.
The Malaysian government has stated[when?] that the agreements were signed in a different time and that the price should increase. It cites the example of water sold by China to Hong Kong in the past, which was approximately US$5.8 per 1,000 imperial gallons (4,500 L). However, this price comparison is not directly applicable because while Hong Kong has borne the cost of constructing the infrastructure and China has borne the cost of maintaining to provide water to Hong Kong, Singapore paid for all the costs of the reservoirs in Johor, the dams, pipelines, plant, equipment, etc., and Singapore paid all costs of operating and maintaining the infrastructure.
On 31 August 2011, the 2011 water agreement expired, and the waterworks and facilities were handed over to the Johor state government. The handover included the Skudai and Gunung Pulai water treatment plants, which were built by the Public Utilities Board and managed by them for 50 years, as well as two pump houses in Pontian and Tebrau.
On 25 June 2018, Malaysian Prime Minister Mahathir Mohamed stated his intentions of renegotiating the agreement with Singapore as he views the low price at which water is being exported to Singapore has resulted in Malaysia losing a significant amount of revenue.