Confidence in S'pore critical, PM tells nation

The bad news: this year will be more difficult, with slower growth in the region affecting Singapore.

Giving his assessment of the year just ended, and of 1998, Prime Minister Goh Chok Tong had this New Year message for Singaporeans: the country had weathered the financial turmoil in the region because of the hard-earned confidence the international financial community had in it.

This, he said, was the key lesson from the currency crisis.

Looking ahead, he called on the country to use the next few years to consolidate and sharpen its competitive edge, so that when the region recovers, it would be able to ride the next wave.

Mr Goh began his traditional three-page message by recounting the key events of 1997, which, he said, was a most eventful one.

These were the strained Singapore-Malaysia ties arising from Senior Minister Lee Kuan Yew's affidavit on crime in Johor, the haze from Indonesia, and the crash of SilkAir Flight MI 185, in which 104 people perished.

But the most important development last year was the continuing regional economic crisis.

He noted that it was the loss of confidence in Thailand which triggered off the financial turmoil in Asia, with huge losses subsequently in the currency and stock markets of countries in the region.

Amid these difficulties, Singapore's economy grew by 7.6 per cent in 1997.

But, he said that this year would not be so rosy.

Singapore's trade with the region would fall, banks would see less financial activities and make fewer loans to the region, and there would be fewer tourists from Asean countries, he said.

But he noted that the country's economic links with developed countries would help it to cushion slower growth in the region.

Noting that the Trade and Industry Ministry had said in November that Singapore's economy would grow by 5 to 7 per cent this year, he added: "But since then, the currency and economic situation in the region and Korea has worsened. The outlook has become greyer. It will be a few months before the situation stabilises."

The ministry, he added, would revise its growth forecast in the budget statement, to be presented next month. As part of Asean, Singapore's economy was linked to that of the region, he said.

"When our partners grow, we grow. When they catch the flu, we will feel unwell," he said.

"We cannot isolate ourselves from events in the region.

"But we can minimise their impact on us by strengthening our immune system."

Singapore's economic fundamentals were sound, he noted, and the Singapore dollar would remain strong.

The country, he said, had large foreign reserves, no foreign debt, substantial budget surpluses, strong banks and political stability.

"Our primary objective is to maintain price stability and to control inflation. This policy remains unchanged, notwithstanding the currency turmoil in Asia," he said.

Turning to how Singapore would maintain its growth and prosperity, he said that confidence in Singapore was the key.

"Being a financial centre, we cannot have any capital controls," he said.

"Any loss of confidence in our economy or our government will lead to capital flight, out of Singapore dollars and out of Singapore."

He said this would set off a vicious circle of lower currency value, leading to lower share and property prices.

In an open global system with information and even rumours transmitted instantaneously, he said that fund managers scrutinise the latest data and moved funds freely across borders at the click of a mouse.

"We have won the confidence of the international financial community through 32 years of hard-headed economic policies, prudent financial management and consistent rational behaviour, he noted.

"If we lose this hard-won confidence, it will take us years to win it back, if ever."

The key lesson from the currency crisis, he added, was to stick to rational policies, and maintain the strong economic fundamentals that have served Singapore well.

Ending on a positive note, he said that medium and long-term prospects in the region were promising, despite the current gloom.

Countries in the region would emerge lean, fitter and more competitive, and resume their robust growth if they undertook painful, but necessary, adjustments.

For Singapore, the next few years should be used to consolidate and sharpen its competitive edge by upgrading skills, developing talent and topping up with foreign talent, he said.

"Then we can ride the next wave and surge ahead when the region picks up, " he concluded.

Published in the Straits Times. January 1, 1998