Singapore's $10 billion aid to Jakarta may have strings
Singapore's $10 billion aid to Jakarta may have strings
By Doreen Siow
SINGAPORE (Reuters): Singapore should benefit from helping Indonesia to beat its financial crisis, but it is unlikely to give money without conditions, economists and analysts in Singapore said yesterday.
Singapore has not said how much money will be forthcoming for its giant neighbor and major trading partner, even though Indonesian President Soeharto said on Tuesday it had agreed to extend US$10 billion in soft loans.
"Prime Minister Goh Chok Tong and President Soeharto agreed in Jakarta on Oct. 21 that Singapore would help to supplement the IMF effort to restore confidence in the Indonesian economy, the Singapore Foreign Ministry said late on Tuesday.
Ministers from the two countries were to meet soon to work out the details, it said. Singapore has said nothing since.
Several analysts told Reuters they expected the Singapore aid would be given within a larger framework with conditions attached, some of which would never be revealed.
"It is very unlikely the money will be given without conditions," said Bill Belchere, head of fixed income and economic research at Merrill Lynch.
"Can you imagine the Singapore government just saying 'Here is $10 billion'? I am pretty certain there will be conditions, but some may never be made known," said Christopher Chong, head of HSBC James Capel Securities.
Chong said even if the money was not given under the umbrella of the International Monetary Fund (IMF), which is negotiating an aid package for Jakarta, it would be under an arrangement with other organizations like the World Bank or the Asian Development Bank.
"A healthy Indonesia is good for Singapore. There is so much of Singapore business that would be affected by instability in Indonesian," he said.
Analysts said it was hard to guess the extent of Singapore investments and trade with Indonesia as Singapore does not release such figures on a regular basis.
But at the official opening of a Singapore Trade Development (TDB) office in Jakarta two months ago, the TDB revealed that Singapore was Indonesia's third largest trading partner and foreign investor.
A TDB officer said Jakarta figures showed imports from Indonesia hit a record $4.6 billion in 1996, while exports to Indonesia were $2.9 billion. Direct Singapore investments in Indonesia that year were $3.13 billion.
Despite its extensive interests in Indonesia, it seemed unlikely Singapore would give aid independent of the IMF, Belchere sid.
"I can't imagine Singapore would give money to Indonesia outside the IMF package. I think it would at best be a supplement to the IMF package to help them with the balance of payments, financial sector adjustments exercise," he said.
Belchere said he expected the IMF to put money into Indonesia as well as manage disbursement of other money coming into the system, as it did in Thailand, for which it put together a $17.2 billion rescue package in August.
"You will have IMF money involved, you would have Japanese money, maybe Singaporean, Australian and Malaysian money. And that would be conditional upon them meeting performance targets and making adjustments, particularly in the finance sector," he said.
Economists and analysts said while $10 billion was a lot of money, it should not strain Singapore's foreign reserves, which official figures put at S$117.6 billion (US$74 billion).
Lim Chung Chun, an analyst with ING Baring Securities, said the $10 billion was less than Singapore's 1996 current account surplus of about $14 billion. ING Barings expected Singapore to have a similar surplus in 1997, he said.
"Whether it is $5 billion or $10 billion, it is a serious amount of money and a serious commitment of confidence in Indonesia," Belchere said.