Singapore: Terrorist Threat And Economic Woes Continue To Plague The Island State

2003

Professor Carl A. Trocki

Singapore officials have been taking a number of measures to combat the global terrorist threat and to prevent Singapore from becoming a centre for terrorist activities. In addition to signing an agreement with Australia to place air marshals on flights between the two countries and monitoring internet traffic, Singapore’s leaders have been sitting down with members of the Indonesian government to discuss means of cooperating against terrorism.

However, just as Prime Minister Goh Chok Tong was leaving Bogor, Senior Minister, Lee Kuan Yew, ruffled Indonesian feathers by claiming that Indonesia was harbouring over 100 radical Islamic groups intent on creating a Muslim super-state in Southeast Asia to be composed of Indonesia, Malaysia, Singapore and the Philippines. While Indonesians claimed that Lee’s statement was an exaggeration, they acknowledged that Indonesia’s ‘weak state’ situation had allowed a number of radical groups to grow.

Singapore is also dealing with a continuing flow of bad economic news. The jobless rate has jumped again for the fifth quarter in a row and now stands at 4.8 per cent. This has been matched by a growth in the number of long-term unemployed.

The prospects for economic growth have also been scaled back. Earlier projections of a growth rate of 3 to 4 per cent for the year have been reduced to around 2 to 2.5 per cent. The government has been forced to scale down its increase in the GST, which was planned for January, and will now stagger the rises. This will probably result in a budget deficit for the government. Singapore is expected to end up about S$1 billion short with expenditures of S$28 billion. For the first time, the government may need to tap into its piggy bank of accumulated reserves which now total S$140 billion.

To add to the bad economic news, Singapore is now finding its competitive edge to be diminishing. Although Singaporeans have long dismissed the threat of neighbouring Malaysia, it is clear that Malaysia can offer comparative advantages to investors. Recently a number of major international firms have announced their intention to relocate their corporate headquarters for Asia from Singapore to Kuala Lumpur. These include BMW (cars), BHP Steel and Philips Luminaires. Executives have cited lower costs, a good infrastructure and a trained workforce as the reasons for the decision to move.

In order to reduce the cost of doing business for international companies, Singapore has recently announced a reduction in rents for industrial land in the city-state, but this too will add to the budget deficit.

WATCHPOINT: In 2003, expect Malaysia to make further gains as against Singapore’s current comparative economic advantages.

 

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