Spore's vulnerable after Wahid's criticisms

Spore's vulnerable after Wahid's criticisms

SINGAPORE (AFP): Indonesian President Abdurrahman Wahid's scathing attack on Singapore highlights the affluent city-state's vulnerability to a volatile region despite political and economic stability at home, analysts said.

"It's a worrying development for Singapore," said Bob Broadfoot, managing director of Hong Kong-based Political and Economic Risk Consultancy (PERC).

"Singapore faces risk by being in a less stable part of the world right now," he told AFP.

In remarks following the end of an Association of Southeast Asian Nations (ASEAN) summit in Singapore last weekend, Wahid accused Singapore of trying to go its own way and only thinking of profit. He also threatened to cooperate with Malaysia to cut off the city-state's water supply.

While his remarks did not send the local equity share market tumbling, the longer-term implications for the tiny but prosperous nation were once again highlighted, analysts said.

Even if Singaporean leaders employ the best economic policies, they have little influence on the external factors.

"What Singapore will find more difficult in avoiding ... is preventing a deterioration in conditions in places like Indonesia and Malaysia from making foreign companies and banks more wary of the entire Southeast Asian region," PERC wrote in an October Asian Intelligence report.

In a telephone interview, Broadfoot said Wahid's tirade had broader implications for ASEAN in terms of investor confidence.

"This is one example where relations are moving to a less friendly environment and will damage the investment climate for the whole region," Broadfoot said.

"Southeast Asia, in order to get back its attraction (to foreign investors) is going to have to start cooperating more," he said, adding that most investors are now looking to China and East Asia.

Steve Brice, a treasury economist at Standard Chartered Bank, agreed that the water supply issue exposes Singapore's vulnerability but said bilateral ties were not likely to deteriorate.

"It's more political rhetoric for a domestic audience," Brice said of Wahid's remarks.

Trade-dependent Singapore has always touted itself as the gateway to Southeast Asia and most international corporations have made the city-state the hub for their regional operations.

While this has brought Singaporeans the highest standard of living and economic wealth among its neighbors, its leaders have time and again reminded the island's four million residents of the external threats facing the country.

"Because of our small size, lack of natural resources and inherent vulnerabilities, we need the three key pillars of strong political leadership, sound national institutions and quality people more than others do," Prime Minister Goh Chok Tong said early this month.

"We do not have the luxury of towing Singapore away to the south of Hawaii, nor do we want to," he said.

Ananda Perera, in a letter to the Straits Times, said Wahid's comments were a "wake up call to all Singaporeans to take our defense and sovereignty seriously."

Singapore is dependent on Malaysia for half of its daily water needs and is keen to reduce that dependency by planning to build a multi-billion dollar undersea pipeline to harness water from Indonesia's Riau province in five years.

The governments of Singapore and Indonesia entered into an agreement in 1991, good for 100 years, to develop water resources in Indonesia for supply to the city-state.

In his remarks, Wahid also said Singapore liked to "underestimate Malay people" and said Malaysian Prime Minister Mahathir Mohamad now "has a new friend."

Ethnic Chinese make up about 75 percent of Singapore's population while Malaysia and Indonesia are dominated by ethnic Malays.

Singapore and Malaysia have had an uneasy relationship since the former declared independence from the Malaysian federation in 1965.

Persisting disputes between the two include water supplies to Singapore, customs, immigration and quarantine arrangements on a railway linking the two countries, withdrawals of pensions by Malaysian workers in Singapore and the use of Malaysia's airspace by Singaporean aircraft.