Singapore dependent on Malaysia, RI: Goh

Singapore dependent on Malaysia, RI: Goh

SINGAPORE (Bloomberg): Singapore's Prime Minister Goh Chok
Tong started his National Day Rally speech last night by focusing
on the economic problems of the island-state's neighbors, which
determines Singapore's future, he said.

"Our country is facing a big test -- the economic situation in
Asia will get worse before it gets better. The problems spill
over to us. We are in the same boat," Goh said in what is
considered an annual state-of-the-nation address to mark
independence.

Speaking first on Indonesia, whose currency is now worth one-
fifth of its value a year ago against the U.S. dollar, Goh said,
"If Indonesia prospers, we prosper too. If the Indonesian economy
falters, we lose an important hinterland and a valuable economic
partner."

Singapore has been facing bilateral problems with both
Malaysia and Indonesia, her closest neighbors, key trading
partners and tourism markets. The Southeast Asian countries have
been suffering from a 13-month-long currency crisis that has
damaged their economies and exacerbated political strains.

Goh said Singapore has about S$4 billion (US$2.3 billion)
investments in Indonesia, and Singaporean banks have about S$4
billion in loans to Indonesia.

"An Indonesian collapse will hurt us," he said, adding the
country has a "vested interest" in helping revitalize the
Indonesian economy.

Goh noted that about 60 percent of Indonesians lived below the
poverty line when former president Soeharto took over in 1965 and
"eradicated" the problem by turning "a backward country to one of
steadily improving standards of living."

Now, "Indonesia has to start all over again. President Habibie
has the toughest job in the world," he said.

"Indonesia is in political transition -- he has to forge
national consensus on political reform and at the same time solve
the country's economic problems" and manage social unrest.

"The policies he pursues will determine the future of
Indonesia. Indonesia has to achieve political stability."

Indonesian President B.J. Habibie has criticized Singapore for
being a `fair-weather friend', and expressed unhappiness about
the speed with which Singapore's offer to extend trade financing
aid has proceeded.

Singapore extended a US$3 billion trade financing offer to
help economically troubled Indonesia several months ago, in
addition to undisclosed aid to support the Indonesian currency.

Indonesia may accept the Singapore initiative at a later date,
the Singapore Straits Times said yesterday, citing
Indonesia Trade and Industry Minister Rahardi Ramelan. Bambang
Subianto, Indonesia's finance minister, has yet to approve
Singapore's plan and the conditions set by the Singapore
government.

Likewise, Malaysia's ties with Singapore has deteriorated in
recent months over a variety of issues, among them a national
call for Malaysian exporters to use local ports rather than
Singapore's port. Goh emphasized Singapore and Malaysia's inter-
dependence in his speech.

He urged Singaporeans to brace for worse times ahead.
"Fortunately, we have financial resources, a hardworking,
talented population and national unity. We should use this
opportunity to lower our cost structure."