Singapore: The Cost of Inter-Dependency

1998

Alison Broinowski

Through no immediately apparent fault of its own, immaculately managed Singapore's aim of taking over from Hong Kong as the commercial and financial hub of the region is being deflected. Claims to cultural hub status, too, were made in the early 1990s, as a paternalistic government sought to enrich the spirits of its hard-working citizens as well as to improve their income, education, housing, and filial piety. Singapore's current worries seem to be undeserved. While its ASEAN neighbours failed to develop their rural hinterlands, Singapore had none to speak of. While they sought to compete in sophisticated export manufactures without significantly raising the education level of the majority, Singapore led the region in production of semi-conductors. When they used Singapore as their export/import entrepot, Singapore's port and shipping services performed with the best in the world. When they came to Singapore to shop and invest, Singapore's retail, tourism, and financial sector thrived. The finger of blame for inadequate regulation by central banks of financial institutions, that has been pointed by commentators at other ASEAN countries, could not be directed at Singapore. If anything, the opposite was the case: the Monetary Authority of Singapore has always been a strong and vigilant regulator. The Authority sets monetary policy, regulates the financial industry, and has for years protected local banks by limiting the access of foreign competitors. To their credit, Singapore's entrenched leadership moved quickly to appoint a new head of the Authority in December 1997. Since then, reforms have progressively been introduced, among them the disclosure of Singapore banks' exposure to Indonesian borrowing, the revelation of the provisions arrived at by Singapore banks and the Authority to manage non-performing loans. In other words, Singapore has come to see the value of slogans adopted in the 1980s by an unlikely mentor: 'glasnost' and 'perestroika', openness and reform. But in spite of these moves, local bank earnings for 1997 in Singapore are expected to show a fall of 30 per cent. And although the six largest banks on the island have more than adequate capital reserves, Moody's credit agency in March 1998 reduced their outlook to a negative rating. No matter how needy their hinterlands, other Southeast Asians can at least rely upon them for food as Singapore cannot. Singapore is discovering that for all its pride in good management, it is dependent upon its neighbours in ways it cannot control. Tensions between the leaders in Singapore and Malaysia have emerged already; Singapore is cracking down on illegal immigrants from Indonesia, reminding them that, ASEAN brotherhood or not, their punishment will include three strokes of the rattan. The harmony between the Singaporean hub and the ASEAN spokes is not what it was in more prosperous times.

WATCHPOINT: Opportunities for foreign entry to Singapore's financial sector should grow as regulation diminishes.

 

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