Singapore: Hub, Clob, Haze

1999

Professor James Cotton

Attempts to turn Singapore into a Southeast Asian high-tech hub are building upon a promising recovery at home, but are dogged by regional uncertainties.

The Singapore Economic Development Board, through its 'Industry 21' campaign, is presently promoting the city-state as a 'regional hub'. The aim is to turn Singapore into a 'key node of the networked global economy', especially through the fostering of 'knowledge-driven industries'. In keeping with this priority, the Prime Minister reshuffled the Cabinet on 13 May, expanding the role of the Communications Ministry, which was renamed the Ministry of Communications and Information Technology (MCIT), and entrusted it to former Health Minister, Yeo Cheow Tong, who was given the task of consolidating all the IT-related areas of government business in one portfolio. The government is to spend additional monies to foster 'world grade' industry, and make renewed efforts to attract appropriate multi-nationals.

On this score the government and the market are in step. The recovery of the electronics exporting sector is leading Singapore's climb out of recession. In 1999 so far the value of all stocks traded on the Singapore exchange has appreciated by around 30 per cent, continuing the rally begun in the last months of 1998, and property prices are recovering from the slump of 1997. Growth rates for Singapore are expected to return to 4 per cent territory by 2000, though with unemployment at 4.3 per cent complete recovery, even without further regional shocks, will take some time.

But a regional hub, though globally linked, is very much reliant upon its region, and in this area Singapore has suffered some blows of late. Malaysia-Singapore relations remain frosty. There was a new twist in the dispute with Malaysia regarding the suspension of trading in CLOB (Central Limit Order Book) shares as a result of the imposition by Kuala Lumpur of currency controls in 1998, when a Malaysian based business figure offered to buy all those shares held by Singaporean investors at a hefty 58 per cent discount. Despite an agreement signed in September last year, these shares have not been migrated to the Kuala Lumpur exchange, and some investors are concerned that they may lose much if not all of their investment. Neither has an agreement on the part of the two governments, promised last December after a meeting between Mr Goh Chok Tong and Dr Mahathir, actually eventuated. Relations with Jakarta are also uncertain.

Over the past month, Singapore has experienced a return of the 'haze', environmental pollution which caused serious health problems as well as business and tourist losses in 1997-98. With weather conditions in the region now conducive to fire, and much of Indonesia's administrative apparatus paralysed by the economic crisis or immobilised by electoral uncertainty, a recurrence of uncontrolled fires in Sumatra and Kalimantan would be a disaster for the city-state.

WATCHPOINT: : Will Singapore's recovery be impeded by its neighbours' problems?

 

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