Economic storm clouds gather on Singapore's horizon
Economic storm clouds gather on Singapore's horizon
The Straits Times, Asia News Network, Singapore
The numbers were expected, of course, but when they were
released on Wednesday, the third-quarter flash estimates still
packed a shocking clarity: Singapore's gross domestic product
declined by 5.6 percent compared with the same period last year,
or 9.9 percent on an annualized quarter-to-quarter basis, after
declining by 10.4 percent in the first and second quarters.
The manufacturing sector fell by a whopping 15 percent,
chiefly because of a global slump in electronics; non-oil exports
contracted drastically, falling by 30 percent in August alone;
and the unemployment rate among residents rose from 3 percent in
June to 4 percent in September.
Not since 1968, when the British government announced the
withdrawal of its forces, has Singapore faced so severe an
economic test. Unlike then, however, it is today not without
resources to ride out the storm. Its population is educated, its
infrastructure world-class, its financial reserves are healthy,
the elected leaders and institutions tried and tested. The story
of this island has barely got past the preface; there are still
many chapters, filled with wonder and surprise, waiting to be
written.
But to begin writing those chapters, Singaporeans must
understand the nature of the current crisis, and what can and
must be done to overcome it. To begin with, the crisis has two
sources, one immediate, the other long-term. Immediately, what
Singapore faces is a global cyclical downturn.
The United States, European and Japanese economies were
already slowing down before Sept 11, but at different rates.
After Sept 11, they are all contracting simultaneously, which
means the last quarter of 2001 may well be brutal.
The U.S. government has responded aggressively to the crisis,
with the Federal Reserve slashing short-term rates and Congress
considering a fiscal stimulus package. Europe, however, because
of the limitations of the European Central Bank and the
strictures placed on fiscal policy by the Maastricht Treaty, has
not been able to act aggressively. And Japan, of course, is in no
position to do much but stave off, as best as possible, a
financial collapse.
But sooner or later, global demand will recover -- led,
perhaps, by the U.S. by the second half of next year. When that
occurs, Singapore, too, will recover, but the long-term economic
challenges posed by China and India still remain. To remain
competitive in this new environment, Singapore will have to
restructure and diversify its economy.
Its dependence on manufacturing will perhaps be lessened, some
old industries will disappear, new ones will have to be
attracted, the service sector will have to be expanded. Radical
approaches, including further liberalizing sectors like
education, health and the media, will have to be considered.
People will have to be retrained for new jobs, and a risk-taking
culture nurtured.
The Prime Minister, in his National Day Rally speech, spoke of
the seven-hour flying radius around Singapore as its hinterland.
Singaporeans will have to learn to plug themselves into this
hinterland, which contains more than half the world's population.
The degree to which they succeed will depend to some extent,
of course, on factors beyond their control.
Singapore can make a contribution to regional stability by
playing its part to strengthen the Association of Southeast Asian
Nations and promoting free trade, both regionally and globally,
but it cannot single-handedly refigure the regional environment.
What it can do is keep its own house united and strong -- and
that, as in the past, will see it through whatever storms that
may rage.