Singapore: Moving Strategically Amidst Uncertainty


Eugene Tan

The early days of 2003 give an indication of the challenges ahead for the Island State. The stridency of its disputes with Malaysia over water, territory and other issues reveal the unhealed wounds arising from their acrimonious separation in 1965. With the Malaysian Prime Minister, Dr Mahathir, due to step down this year after 22 years in power, the polemics and the bilateral squabbles are likely to continue unabated.

For its part, Singapore will not allow itself to be distracted from its economic agenda as it, too, prepares for a transfer of leadership from Prime Minister, Goh Chok Tong, to Deputy Prime Minister, Lee Hsien Loong. Although Singapore's gross domestic product grew 2.8 per cent in 2002, economic recovery remains uncertain. A possible US war with Iraq — with its uncertain impact on the Muslim populations of South East Asia as well as the heightened risk of terrorist attacks - make the region relatively unattractive to investors. Already, the Economic Development Board expects a 22 per cent drop in foreign investment commitments in 2003 to around S$8.2 billion.

Much hope lies with the Economic Review Committee, which has just released its final report, and which is expected to chart a sustainable path for the Singapore economy over the next fifteen years. The Goods and Services Tax (GST) increase from 3 to 4 per cent has proceeded with little fanfare even though it is likely to have a constraining effect on consumer spending. In 2004, the GST will be further increased to 5 per cent.

Singapore has also shown a renewed interest in India, reviving its former enthusiasm of the mid-1990s. This has been in tandem with India's interest in non-resident Indians and the Indian 'diaspora'. Singapore and India have launched a study to explore closer economic ties through an India-Singapore Comprehensive Cooperation Agreement (CECA). The Singapore strategy continues to reflect an openness to trade and investment as well as a cultural affinity with both China and India.

US-Singapore Free Trade Agreement discussions have settled the last outstanding issue of the free transfer of capital and the avoidance of capital controls. The agreement should be sealed later this year and may catalyse similar agreements between the US and Singapore's South East Asian neighbours as well as with dialogue partners such as India. For Singapore, it is also another measure to ensure its geopolitical relevance as well as an ongoing American engagement with the region.

Inter-racial relations will continue to be high on the agenda. The recent release of the government's White Paper, 'The Jemaah Islamiyah Arrests and The Threat of Terrorism', emphasises the importance of shielding the local Muslim community from foreign extremist ideologies. There is a call to develop a self-regulatory system to monitor religious education and this will be the focus of the government's efforts in the immediate term. For the system to be inclusive, a less top-down interventionist approach is crucial so as to avoid the further alienation of Muslims in Singaporean society.

WATCHPOINT: Singapore’s vulnerability will be emphasised in the year ahead in nation-building endeavours. There will also be strategic maneuvering in the ongoing process of economic restructuring. The war against terrorism will be capitalised upon to recalibrate race relations.


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