S'pore 'hostage to events in Indonesia'

BY outward appearances, Singapore remains a bustling gateway to South-east Asia, carrying on business as usual.

At its squeaky-clean Changi airport, new Boeings belonging to national carrier Singapore Airlines line up for take-off to major cities in the region.

On the docks, containers from throughout the region are stacked as high as the skyscrapers that are fighting for space in the tiny island state.

At its famous Orchard Road, upmarket department stores that stretch through the thoroughfare are filled with shoppers, while corporate executives in business suits are seen breezing in and out of luxury hotels.

Appearances, however, can deceive.

Once the roaring lion in a den of South-east Asian tiger economies, Singapore is beginning to sound more like a pussycat as the dirt that has hit the region is starting to blow into the sanitised city-state.

Wealthy and middle-class Indonesian shoppers who used to hop on a plane from Jakarta to Singapore for a day or the weekend have all but disappeared.

Officials say the number of visitors to the island fell by 20 per cent in February to 490,000. The number of travellers from Indonesia dropped by 50 per cent. Even a price war among air carriers has failed to bring in the crowd.

The island at the southern tip of the Malay peninsula has more than S$100 million (M$225 million) in foreign currency reserves, low unemployment, a relatively healthy real-estate market and an untarnished image as an obsessively efficient, squeaky-clean business centre.

But the exposure to countries in the South-east Asian region that helped propel Singapore to the ranks of Asia's miracle economies when the region was booming, now means it is vulnerable to the reversal of fortunes of its neighbours.

The heyday of economic exuberance has resulted in a massive hangover. In one industry after another, Singapore is beginning to feel the impact of the worst financial setback to sweep through Asia in three decades.

Singapore Airlines has since scaled back its services in the region, although it does not expect to delay or cancel deliveries of a huge order for Boeing 777s; while the port of Singapore, which markets itself as a major transhipment centre for cargo, is struggling with competition from neighbouring ports as its import volume from Thailand, Malaysia and Indonesia drop dramatically.

The banking industry, which made many loans to projects in Indonesia and Malaysia, is in similar decline with many in the industry forced to lay off staff in order to remain competitive.

Retail sales have also dropped by 25 per cent during the past six months, and officials predict they will decline 30 per cent during the next six months as the economic uncertainty surrounding Singapore's neighbours has prompted Singaporean consumers to be more cautious.

The Singapore dollar has declined by 17 per cent, while the stock market has lost as much as 35 per cent of its value. Property values have declined by about 20 per cent.

During the recent reporting season, the combined earnings growth of listed Singapore companies fell for the first time since the recession of 1985.

The combined earnings for 137 companies with Dec 31, 1997, as their financial year-end stood at S$4.8 billion, or 26 per cent, lower than a year ago.

In 1985, the combined earnings of the 78 listed companies with December year-ends posted a 51.2 per cent decline to S$337 million.

However, the actual quantum of the fall -- at S$1.7 billion this year -- is more than three times the decline registered in 1985.

Worse is expected to come, just as the prospect of another year in which forest fires in Kalimantan are expected to cast a dark pall over most parts of the region, Singapore included.

Unemployment in a country that prides itself on its ability to provide a job for almost every citizen is expected to rise to 5 per cent from 2 per cent currently.

Late last month, about 500 employees from two Japanese multinational companies became the latest group of workers to be axed, bringing the 1998 retrenchment toll to more than 3500, including the 1800 staff of American computer giant Seagate Technology, who lost their jobs earlier this year.

More worrying, however, for the authorities is the prospect that the economic troubles elsewhere will turn Singapore into a destination for economic refugees.

Illegal immigrants, especially from Indonesia, are being hunted like animals and treated worse than criminals.

Thousands are behind bars and will be leaving Singapore with three cane marks on their buttocks, compliments of the prison authorities, once they complete their jail sentence.

Despite the state of the country currently and the gloomy outlook, there is still hope, however, that Singapore could emerge from the regional troubles as one of Asia's most competitive business centres.

Besides its practice of taking a long-term view, Singapore is not wholly dependent on South-east Asia.

It remains an important well-organised player in the global economy, handling container traffic and airline travellers for carriers in Europe, North America and Japan. Many of its high-tech exports also go to those markets.

The island is also the regional headquarters for hundreds of foreign corporations that have no intention of pulling up stakes, with most confident that Singapore is one of the best places in Asia, if not the world, to do business.

Singapore, however, remains hostage to the developments in Indonesia, which is currently on the brink of economic chaos, hunger and social instability. Because of its size and location, the archipelago with more than 200 million people will send a very strong rippling effect to Singapore, if it goes down.

Published in the Straits Times. April 8, 1998