Asia's politics challenge Singapore economy: Lee

Asia's politics challenge Singapore economy: Lee

HONG KONG (Reuters): The biggest challenge that Singapore faces is Southeast Asia's political instability, rather than the direct economic impact of the region's financial crisis, Singapore Deputy Prime Minister Lee Hsien Loong said.

In an interview with a German newspaper also published in Hong Kong's Sunday Morning Post, Lee said: "...the biggest challenge for us is not the direct economic impact. It is the political instability and uncertainty in the region which has arisen."

"Here in Singapore, things are calm and stable, but because of the regional turmoil, investors' perceptions are nevertheless affected," he said.

"If you look at the Asian currency deposits, you'll see that the deposits actually shrank. This means that there has been some departure of capital from Singapore."

He said that most of Singapore's exposure was in Malaysia, with the six local banking groups totaling an exposure of S$36 billion -- or 15 percent of their total assets -- in Malaysia, Indonesia, South Korea and the Philippines.

Lee said Singapore was aiming for a 15 percent overall reduction in wage costs to strengthen competitiveness. He said Singapore was putting a new banking framework in place and taking a more hands-off attitude.