Neighbors' unrest threatens S'pore<\/p>\n
By Jerry Norton<\/p>\n
SINGAPORE (Reuters): Singapore is experiencing short-term pain
\nbut could see some long-term gain from economic and political
\nturmoil in nearby Malaysia, analysts say.<\/p>\n
Regardless of the ultimate impact, however, the episode is a
\nreminder of the vulnerability of Singapore -- a tiny island 77
\npercent of whose citizens are ethnic Chinese -- to events in its
\nmuch larger Moslem neighbors, Malaysia and Indonesia.<\/p>\n
\"There is a lot of tension involved with the situation in
\naddition to the normal tensions. Going all the way back,
\nSingapore is predominantly Chinese in a region where Chinese are
\nnot popular,\" said Bruce Gale, Singapore-based analyst for Hong
\nKong's Political and Economic Risk Consultancy (PERC).<\/p>\n
In the first half of the year, it was unrest in Indonesia that
\nshook Singapore and its markets, which until then seemed a rock
\nof stability as economic crisis rolled through the region.<\/p>\n
In the last 10 days, it has been draconian moves by Malaysia
\nto batten down its economic hatches against outside interference
\nwhich have spooked markets and sown confusion in Singapore.<\/p>\n
Hundreds queued at brokerages and banks as they sought to
\nclose out or convert Malaysian securities and currency holdings.
\nConcern was compounded when Malaysia Prime Minister Mahathir
\nMohamad dumped his deputy and one-time heir apparent Anwar
\nIbrahim.<\/p>\n
Many Singaporeans faced substantial losses on investments, or
\nthe prospect of having to transfer them to Malaysia and, under
\nthe new controls, wait until the end of 1999 before they are able
\nto take any profits they might then have.<\/p>\n
One estimate put the number of investors in Malaysian shares
\nthrough Singapore's over-the-counter Central Limit Order Book
\n(CLOB) market at 200,000, and thousands more had ringgit
\ndeposits, in a country of just 3 million citizens.<\/p>\n
As a direct result of Malaysia's controls, CLOB trading of
\nMalaysian shares will end next week.<\/p>\n
\"The death of CLOB will...have an impact because it did
\naccount for a big share of transactions on the stock market\" in
\nSingapore, Paul Schymyck, chief regional economist for the
\nCanadian Imperial Bank of Commerce (CIBC), told Reuters.<\/p>\n
SG Research said this week it had cut its growth forecast for
\nSingapore for 1998 and 1999 to one percent and 0.5 percent,
\nrespectively, due partly to Malaysia's control measures.<\/p>\n
\"The commerce and financial services sectors could be most
\nseverely hit as entreport activity and foreign exchange
\ntransactions decline. And there is a real long-term danger of
\nSingapore's lifeline of a critical mass of skilled Malaysian
\nlabor being cut,\" the SG report said.<\/p>\n
\"If your clients and those who are taking services from you
\n(are) no longer there, like Malaysia or Indonesia, then obviously
\nyour growth takes a hit,\" SG economist Nilesh Jasani said.<\/p>\n
Some analysts also worry about Singapore banks' exposure to
\nMalaysia, where their loans alone total Singapore $28 billion
\n(US$16 billion), according to research house I.D.E.A.<\/p>\n
But a major long-run plus for Singapore from Malaysia's steps
\nback from global markets could be enhancement of the city state's
\nposition as the main regional base for financial service
\ncompanies and multinational manufacturers.<\/p>\n
\"I think 12 months ago there was a big fear...of Singapore
\nlosing some of its financial services to Malaysia given the
\ncountry's rapid development and the huge turnover on the
\nMalaysian stock market,\" said CIBC's Schymyck.<\/p>\n
Now, he said, \"I think there's no danger of that given what
\nMalaysia's done. They've basically handed it back to Singapore on
\na silver platter.\"<\/p>\n
A Western diplomat agreed, calling Malaysian plans to be an
\ninternational financial and technical hub \"dead in the water\".
\nBut other consequences depended on how successful Malaysia's
\npolicies were in reviving its moribund economy, how long capital
\ncontrols lasted, and whether there were more restrictions to
\ncome, the diplomat and other analysts said.<\/p>\n
SG's Jasani said the political battle between Mahathir and
\nAnwar was unlikely to help in that regard.<\/p>\n
For controls to work, \"you need all the bureaucratic and
\nadministrative resources that you can manage...if at such time
\nyou have political troubles, political turmoil, then bureaucratic
\nand administrative attention gets diverted.\"<\/p>\n
Despite the direct effects of the Malaysian moves, Singapore
\npolitical leaders have thus far had little to say about them.
\nMalaysia does not take kindly to outside criticism, and with
\nrelations already at a low ebb due to a series of recent spats,
\nSingapore comments on the economic measures would likely have
\nminimal impact or if anything aggravate tensions.<\/p>\n
Singapore is in a quandary in that it is \"less than
\nenthusiastic about financial policies enacted in both Jakarta and
\nKuala Lumpur but is expected to help support those policies to be
\na good ASEAN neighbor\", said PERC's Gale.<\/p>\n
He said the end of CLOB Malaysian share trading should help
\nrelations as it was always seen as an irritant by Malaysia.<\/p>\n
But that still leaves unresolved disputes over Malaysian
\nsupply of water to Singapore, Malaysian efforts to make more
\nshippers use its ports instead of Singapore, and customs and
\nimmigration facilities, among others.<\/p>",
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