Ties fray as S'pore cools towards Indonesia

Far Eastern Economic Review July 9, 1998
By Ben Dolven in Singapore with John McBeth in Jakarta

WHO could have known? In February, Singapore's senior minister, Lee Kuan Yew, suggested the Indonesian rupiah had tumbled because markets were afraid of a B.J. Habibie vice-presidency. Nearly four months later, Habibie became Indonesia's president, and Singapore's ties with its giant neighbour headed south.

Growing strains in the relationship became public on June 26, when Singapore's Business Times published an interview with Tanri Abeng, Indonesia's minister overseeing state-enterprise reform. On its front page, the daily quoted Tanri saying "ties are not moving in the right direction." Citing the fact that Singapore hasn't yet implemented a promised trade-guarantee plan, Tanri said that if the relationship was at its best, "that would have been resolved."

Six weeks into the Habibie government's tenure, it's clear that Indonesia's new leader won't win unreserved support from Singapore. And that matters. Earlier this year, the city state actively drew international attention to Indonesia's problems, pledging $5 billion in aid. Today, the $5 billion remains undisbursed, contingent on economic reforms from Jakarta. The trade plan, a $3 billion bilateral scheme, remains unfinished. For its part, Singapore's Ministry of Trade and Industry says it's game to resume negotiations when Jakarta is ready. But unsure exactly who they need to deal with in Indonesia, Singaporean leaders have quietly moved to a more passive role.

Part of the reason is the contentious relationship the Lion City has long had with Habibie. Many of his ambitious development projects, such as the cargo airport he wanted to develop just 20 kilometres from Singapore, have been greeted warily in the city state. Analysts say Habibie's pro-Muslim sentiments are treated with deep suspicion in Singapore. Ditto his nationalistic views on economic policy.

Now, analysts say, it's unlikely the city state will loosen the taps on economic assistance to Indonesia without guarantees that the money will go to productive uses--and be repaid. "Even if we want to help Indonesia--and I think we do--if we do so indiscriminately I think we lose credibility," says Simon Tay, an appointed member of Singapore's parliament.

This is quite a change from early this year. Between October and February, Singaporean Prime Minister Goh Chok Tong flew to Jakarta three times to encourage President Suharto to stick to IMF reform guidelines. In February, Goh surprised the international community with a call for a $20 billion trade-finance scheme to support Indonesian exporters.

Those promises won Singapore some diplomatic capital in Jakarta. But now, Singapore is discovering how tricky it will be to deal with a post-Suharto Indonesia. For years, the city state has assiduously built links with the military and Suharto. Half of that framework is now gone.

And with the length of Habibie's tenure uncertain, it will be hard to begin reconstruction. "There's no immediate way to establish ties with the powers that are emerging in Indonesia," says Garry Rodan, head of political science at Australia's Murdoch University. "Singapore's in a situation of being passive and waiting to see what unfolds."

It appears likely that the relationship will grow frayed. "I think Singapore could pay dearly for that," says one long-time Singapore resident of Jakarta. "Indonesia doesn't forget who its friends are and who turned their backs when they needed help."