Singapore: Consolidating Regional Supremacy


Dr Garry Rodan

Singapore's exposure to regional economic problems is counter-balanced to some extent by the fact that over half its domestically-generated exports go to the United States and the European Union. This currently sustains a significant demand for manufactures. However, instead of setting their sights increasingly beyond the region, the island-state's planners are busily trying to consolidate and extend Singapore's economic supremacy within ASEAN. Major public infrastructure projects are being funded which not only boost the local construction sector but also raise the economy's technological sophistication. Extensions to the Mass Rapid Transit (MRT) network and the implementation of a global communications satellite system, which will be completed by the end of the year, stand in sharp contrast from the cutbacks to public expenditure programmes elsewhere in ASEAN. Huge foreign reserves, officially and conservatively reported at nearly S$120 billion, could sustain further projects well into the future. Singapore is already ASEAN's only capital exporter, but with the Singapore dollar appreciating between 10 and 30 per cent against regional currencies in the last year, local companies are well placed to expand in the region. Government-linked companies in particular have abundant cash. Singapore Telecom, for example, boasts S$4 billion in cash on its balance sheet and domestic deregulation will soon exert competitive pressures to increasingly go off-shore. The Development Bank of Singapore (DBS), which last year took majority stakes in Thai Danu Bank in Thailand and the Bank of Southeast Asia in the Philippines, is currently also on the lookout for more investments in Asia. The centrepiece of the government's strategy to utilise the present crisis to strengthen Singapore's regional role is reform of the financial sector. The Monetary Authority of Singapore (MAS) announced in June a 5-point plan to make Singapore the premier banking centre in Asia. In the forthcoming months, according to the plan, the MAS will: raise bank disclosure standards; adopt a risk-focused approach to its bank inspections; reduce banks' minimum cash balances from 6 to 3 per cent; open the sector up to more foreign competition; and strengthen local banks. Yet while some initiatives towards greater commercial transparency are under way in the banking sector, there is scope for much wider reform. Official Singapore-Indonesia trade figures, for example, are not published, and access to public information about the investments of powerful government-linked companies could be significantly improved.

WATCHPOINT: Further moves to consolidate Singapore's advantage over its neighbours' economies, while publicly stressing the problems Singapore faces.


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