Tue, 15 Dec 2009
From: Reuters
By SINGAPORE, Dec 15 (Reuters) - Singapore is widely seen as
one of Asia's least risky investment destinations, a key
ingredient in its success as a regional trade and investment
hub.

Following is a summary of key Singapore risks to watch:

* SECURITY

Militants have long had Singapore in their sights -- a
Jemaah Islamiyah plot for multiple attacks was uncovered in
December 2001. Internal security and policing are far ahead of
neighbouring states, but the escape of al Qaeda-linked militant
Mas Selamat Kastari from prison was a lapse that showed
security is not infallible. The port remains a key potential
target, and an attack on it could cause global disruption.
There is also the risk Singapore will see the emergence of more
home-grown militants who would be better able to evade internal
security. [ID:nSP519268]

Key issues to watch:

-- Assessments of strength and tactics of Jemaah Islamiyah
and its offshoots. Most analysts believe the main JI movement
has abandoned attacks on civilian targets, while a violent
splinter group was badly weakened after the death of its leader
Noordin Mohammad Top. If this changes, the threat could rise.

* TRANSPARENCY

Singapore is regularly rated as one of the least corrupt
countries in the world, but has sometimes been criticised for a
lack of transparency in some areas, such as freedom of the
press and secrecy in the financial industry. Following pressure
from the G20, the country amended its tax law in October to
help fight cross-border tax evasion, and last month was taken
off the OECD's "grey list" of countries not implementing
international disclosure standards.

Key issues to watch:

-- Impact of changes to banking secrecy laws. Analysts say
Singapore's move towards greater transparency in the financial
industry is unlikely to impact its status as a key banking hub
-- other countries with strict secrecy laws such as Switzerland
have been moving in the same direction. However, rich
businessmen from the country's neighbours, particularly
Indonesia, have long parked funds in Singapore, and might seek
to remove them if they see a risk that they will be affected by
new disclosure rules. If Singapore strikes deals with countries
like Indonesia, Malaysia, Thailand or Taiwan, that would worry
banks and clients, but the prospects of this are small in the
near term. Overall, the impact on fund flows from greater
transparency is expected to be positive for Singapore for the
moment [ID:nnSP436002]

* POLITICAL CHANGE

As Singapore evolves, calls for a more open political
system with greater diversity of views are likely to intensify.
Singapore's restrictions on opposition activity and freedom of
speech will also come under increasing scrutiny. Markets will
be watching whether the ruling People's Action Party can manage
the transition to greater openness smoothly, and find the
appropriate balance between greater openness and continued
stability.

Key issues to watch:

-- Any sign of growing social pressure for political
change, and the government's response. The government says it
will amend the constitution ahead of the next general
elections, due by early 2012, to allow more opposition
representation. But the change is not expected to have a
significant impact.

* RELATIONS WITH NEIGHBOURS

Singapore-bashing is a sure-fire way to win political
capital in many regional countries. Relations with Indonesia,
Malaysia and Thailand in particular are often thorny, and are
further complicated by Singapore's heavy investment in regional
economies and its reliance on neighbours for some key
resources. As the debacle over the purchase of Thailand's Shin
Corp showed, careful management of relations with neighbours is
necessary not just for Singapore's security but also for its
economic prosperity.

Key issues to watch:

-- Any signs of a fresh flare-up in tension with
Singapore's unruly neighbours.

* DEMOGRAPHICS AND RACE RELATIONS

Singapore saw deadly race riots in the 1950s and 1960s, and
while considerable progress has been made in achieving racial
harmony, some tensions remain. The issue is complicated by
demographic issues -- the majority Chinese population is
growing at a lower rate than minority Malays and Indians due to
different birth rates, and the government has made repeated
efforts to encourage citizens to have more children. Labour
shortages mean the country has to rely on immigrant workers for
many jobs.

Key issues to watch:

-- Any sharp rise of racial tensions or unrest. This is
considered extremely unlikely.

(Compiled by Andrew Marshall and Nopporn Wong-Anan)



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