S'pore fights to emerge in better shape

By Jasmina Kuzmanovic

SINGAPORE (AP): While its neighbors are wrestling with civil unrest and economic collapse, this tiny island-state is intent on not only surviving the economic crisis, but emerging in better shape.

Singapore's unusual combination of tight government control and freewheeling capitalism has already resulted in one of the world's most impressive success stories.

Now the government, dominated by Singapore patriarch Lee Kuan Yew and his powerful son, Deputy Prime Minister Lee Hsien Loong, is angling for a second miracle.

And experts say they've a good chance of succeeding.

"Singapore is a very good place to be to emerge from the crisis, with far more credibility than it had when the crisis had started," Desmond Supple, director of Barclays Capital Asia in Singapore, said in an interview.

"And this is very rare in Asia."

Poor in land and resources with a potentially volatile multiracial population, this island nation of 3.1 million was transformed under former prime minister Lee Kuan Yew into a global financial center and a harmonious society of the skilled and the educated.

For years it has been generally acknowledged that the Great Singapore Dream is the five C's: condo, car, career, credit card and cash. Singaporeans used to spend so much of their money in splendid malls and on overpriced luxury cars that Prime Minister Goh Chok Tong urged citizens in 1996 to stop chasing wealth.

Though the worst blows of the crisis have been averted, the government recently announced the country has slipped into its first recession since mid-1980s. Unemployment has doubled to 4.5 percent, a warning to Singaporeans the era of prosperity may be over.

So warning that Singapore "must adapt or become irrelevant," the younger Lee recently introduced a host of measures, including painful wage cuts, to reform the economy.

"While elsewhere in the region -- in Malaysia, Thailand, Hong Kong -- there has been an effort to influence the market mechanism, in Singapore, market has not been manipulated," said Supple.

"Instead, Singapore took steps to further liberalize its economy and increase transparency, so that investors don't have to think twice," he said.

Among the measures were a US$6 billion cost-cutting package that reduced land and factory rentals, slashed levies and service charges, lowered customs duties and offered tax rebates.

The government also has embarked on a series of financial market reforms that include merging its equities and futures markets and injecting huge funds into the private mutual fund industry.

"Singapore's financial system and its reputation have been enhanced immeasurably by the way it responded to the crisis," said Bruce Gale, an analyst in the Hong Kong-based Political and Risk Consultancy.

The Heritage Foundation, a conservative U.S. think-tank, recently said Singapore had replaced Hong Kong as the world's freest economy.

Since the economies of two of its main trade partners -- Indonesia and Malaysia -- are in tatters, however, experts say economic growth will not resume before year 2000, and when it does, it will be weak.

"Singapore will emerge from this crisis a vastly different country," said Supple.

But other volatile factors could still catch up with Singapore's planners.

The younger Lee recently noted that, in addition to adjusting to a slower economic growth, maintaining social peace and finding good leaders are the main challenges the country must face.

So far ordinary Singaporeans are not grumbling.

"For a while we will have to stretch our budget, but nobody will go hungry or homeless," shopkeeper Leong Guat Cheng said.

However, recent official findings show that Malays, who make up about 14 percent of the population, have been hit by the crisis harder than any other ethnic group in Singapore.

Tension between Malays and the majority ethnic Chinese simmer below the surface of Singapore's carefully controlled society, and race riots in the 1960s left scores of dead.

Further down the road, Singapore must find a way to continue its succession of competent leaders.

The People's Action Party has ruled for nearly 40 years in a virtual one-party system. Singapore's success has thus depended on the quality of enlightened absolutists.

"There are a small number of individuals on the very top that ensure that Singapore stays on the winning side," said PERC's Gale.

"This works as long as you have a wise king on the top. But one day, when this generation leaves and you don't have that anymore, the whole system could crash."