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.