Don't
stop believing in S'pore economy, Govt, urges Lee Jr
Sunday Times. Dec 28, 1997
BY Warren Fernandez
SINGAPOREANS and foreigners must not lose confidence in the economy or
government, because once it is shaken, it takes a very long time to recover,
Deputy Prime Minister Lee Hsien Loong said last night.
Speaking at a grassroots function, he warned: "The most important thing for us is to maintain this confidence which takes years to build up, but if shaken, can be destroyed in a few days.
"All it will take are a few reckless policies, a few foolish speeches, a few riots and demonstrations, and it will take a long time to recover, even with International Monetary Fund help."
In his speech Brigadier-General (NS) Lee, who will take over as chairman of the Monetary Authority of Singapore from Thursday, singled out Indonesia as one country facing a loss of confidence.
"Look at the problems in Indonesia. Investors watch everything -- all the government policies and everything the ministers say. If they like it, they buy rupiah and the exchange rate goes up.
"If they don't like it, then in one day the rupiah can fall by as much as 15 per cent," he told residents at an Interim Upgrading Programme completion ceremony in Chong Boon estate.
And that, he said, was just the start of the problems. The investors might take the money out of the country, convert it into US dollars or yen and the exchange rate would suffer even more, he warned.
"And it is a contagious problem. As the situation gets worse, even those who had confidence in the country initially will follow those moving out of the economy, to protect themselves," he said.
"And it is not just foreigners who make these calculations, but also the local companies and the citizens.
"If they lose confidence, then it is very hard to restore it, even with the help of the IMF."
He explained that his emphasis on the importance of retaining local and foreign confidence in the country was because any loss of confidence would lead to a whole host of other economic problems.
Initially, inflation would set in and the people's purchasing power would be eroded. Then, if the government borrowed heavily to defend the exchange rate, the interest rate would be pushed up.
Companies which had borrowed heavily from the banks, might then be unable to repay their loans, forcing banks into financial difficulty, and then the country, he said, would be "really in a deep hole".
Singapore, however, had been spared the worse -- partly because it was lucky and partly because it had followed sound economic policies which had not shaken investor confidence.
He noted that when the ongoing economic turmoil began, foreign newspapers had written many articles about the region's problems, but "Singapore did not appear on their map of troubled nations".
Instead, now there were articles about how Singapore had done the right thing, how it had avoided the brunt of the economic turmoil and how it stood to gain when the region eventually recovered.
Commending the government for having adopted the right economic policies, he said that economic growth would be affected by the regional currency crisis, but not severely, and continued sound policies would help retain confidence.