Indonesia and Singapore signed an extradition treaty and defence cooperation agreement in the last week of April ending the diplomatic war. These treaties were held up earlier with respect to the issues of the export of sand to Singapore from Indonesia and the extradition of tainted business executives to Indonesia. Sand, imported from Indonesia, is crucial to continue Singapore's reclamation of land from the ocean and to support its construction activities. Indonesia has been a major supplier of sand and granite to Singapore but banned all exports of these items owing to differences on the extradition treaty and the defence cooperation agreement. The extradition treaty which has been under negotiations for more than 24 months came to a conclusion along with the signing of the defence cooperation agreement for 25 years. The defence cooperation agreement would give training facilities to Singapore and would thus save on its offshore training and logistics costs. The defence cooperation is meant to develop confidence between the two neighbours as well. A special emphasis for both these countries of late is their weapons acquisitions and modernisation of armed forces. Singapore has one of the most advanced forces in the region while Indonesia is looking to modernise its armed forces.

With regard to the extradition treaty, it is still to be seen how Singapore provides the account details of the white collar criminals who have deposited their money in the Singaporean banks. Now these funds constitute a majority of the assets held by the Singaporean banks and Singapore would not like to take any steps to mar its credibility as a financial centre. Indonesia, on the other hand, wanted the defence cooperation agreement between the two countries tied to the extradition treaty while Singapore wanted to keep the two issues separate. Because of these differences Indonesia banned the exports of sand and granite to Singapore despite it suffering losses to its shipping industry and employment sector. In this milieu, the most interesting part was that during the visit of the Singaporean foreign minister to Myanmar, the ruling Junta offered to supply sand to the island state. Singapore has been adversely affected by the ban of sand exports. Sand, although not a costly commodity in the construction business has become the foundation of the diplomatic row between Indonesia and Singapore. The island state also relies on Indonesia oil and energy supplies. The sand has led to the delaying of many projects in Singapore, the most popular being the opening of a Casino in Sentosa Island.

Indonesia has taken a strong disposition with regard to the extradition treaty because during the Asian financial crisis and also in the aftermath of the Chinese riots in 1998, many Chinese businessmen resorted to the shifting of funds from Indonesia to other off-shore financial centres, Singapore being one of them. Indonesia has perceived this flight of capital as a factor in delaying its recovery from the financial crisis. Ethnic Chinese comprise only about three percent of the total population but command substantial portion of the economic assets in Indonesia. Singapore being majority ethnic Chinese, the links between the ethnic Chinese in the region have become more pronounced due to flight of capital to Singapore.

Singapore is a stable and competent nation state but has to rely on both Indonesia and Malaysia on oil and water supplies respectively. The question arises whether Singapore should take steps to diffuse the crisis which would act in its favour. The issue of extradition might become a complicated issue as Indonesia has given the name of 15 business executives who have fled to Singapore and have docked their money in Singapore banks. The legislature of both countries are still mulling over judicial processes of the other country. The treaty needs approval from the legislatures of both Singapore and Indonesia. The bigger problem is that most of the business executives who fled Indonesia during the financial crisis have changed their nationality. Indonesia might also face problems with regard to strictures put up by Singapore on the testimonials required prior to deportation of those executives.

The unresolved sand crisis showed a more participative role of Myanmar in Southeast Asia when it offered sand exports to Singapore though it might not be as cost effective to Singapore as that of Indonesia. Myanmar did show that rather than defending its posture it would engage with its neighbours in a more constructive way rather than being an isolated state in the Southeast Asian region. It is still not clear when the sand issue will be resolved but it is true that it has not yet snowballed into a major diplomatic issue between the neighbours. Only time will tell how much and how far the two countries are going to address each others concerns.