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Singapore struggles to recover

SINGAPORE became one of Asia's economic tigers in the past decade by forging commercial ties to Silicon Valley and styling itself as the ''wired island." Now, with demand for Singapore's electronics exports plummeting, the tiger's roar is decidedly more muted.

The business-minded island nation is mired in "the deepest recession since independence in 1965," said Chan Heng Chee, Singapore's ambassador to Washington, who visited San Francisco to address the Asia Society and the Singapore American Business Association on Tuesday.

The statistics paint a glum picture. After growing 10 percent in 2000, Singapore's economy is on course to contract 11 percent this year. The important electronics sector, which exports parts and equipment to recession- wracked Silicon Valley, shrank 35 percent in the third quarter from the third quarter of 2000.

The business impact of the Sept 11 terrorist attacks on the United States is making recovery even more difficult, Chan said.

Indeed, terror has joined trade as a prime concern for Singapore, a famously orderly nation of 4 million people whose economy is driven by trade with the outside world. With its busy, efficient harbor, Singapore, a stalwart US ally, is a prominent port of call for US warships and its small but modern military works closely with American forces.

Chan said Singapore has actively joined the anti-terror campaign, pooling intelligence with Washington and scrutinizing the financial services sector, with an eye toward "shutting off the tap" for subversives.

Without supplying details, Chan said terrorist networks have made so far unsuccessful attempts to recruit Singapore's ethnic Malays, Muslims who comprise 14 percent of the population. Its neighbors, Malaysia and Indonesia, are sizable Muslim nations.

"Southeast Asia's Muslims, by and large, are moderate, compared with Muslims of the Middle East," she said, "although there is radicalization at the fringes."

No Singaporeans died in the World Trade Center attacks, according to Chan, Singapore's former ambassador to the United Nations. But the ripple effects can be clearly seen in the decline in trade between Singapore and the United States, each with weakened economies.

Normally, business between the two countries is robust. The United States is Singapore's largest trading partner and Singapore is Washington's 10th- largest trading partner. The two countries did US$44 billion in two-way trade in 2000.

These days, Singapore and the United States are trying to boost trade by negotiating a free-trade agreement. Chan said that five rounds of trade talks have been held this year, with three more meetings planned early next year.

The agreement would change investment and operating rules, making it easier, for example, for US companies to operate in Singapore without in-country partners. Exporters in both countries would benefit from lower tariffs; such a move would especially help California's agricultural exporters. Singaporean companies, slowed by American import duties on electronics, would find the going easier with lower US tariffs.

An agreement with Singapore would lower tariffs, streamline investment rules and slash quotas for both countries, and make Singapore the fifth nation to have such a pact with the United States; the others are Canada, Mexico, Israel and Jordan.

"We had progress on e-commerce rules, services and investment, but there's one point not realized that has to do with your domestic politics: labor and environmental rules," Chan said.

US liberals want to make sure that environmental protection and labor rights in Singapore are not undercut by the agreement; conservatives say those are side issues that should not be incorporated into trade agreements.

"You have to work it out," Chan said, referring to the United States, but she acknowledged that the protracted debate can be frustrating. "If you cannot negotiate with Singapore, it will be difficult to negotiate with anyone. We're very pragmatic and practical, not ideological."

While Singapore waits for Washington to clarify its position on labor and environmental rights -- which Chan says are already strong in Singapore -- the island nation is moving closer to China and the Association of South East Asian Nations.

ASEAN, a regional political organization, is mulling the creation of a huge, region-wide free-trade agreement. Earlier this month, China proposed creating just such a free-trade pact, which Beijing would presumably dominate by virtue of its size.

Chan said Singapore hopes to increase business with China, a market of 1.3 billion, which is growing by a healthy 7 percent this year, even as the United States, Japan and the European Union are all stumbling. On Tuesday (Nov 20), the Singapore government said it has begun an Internet portal called Network China designed to help Singaporean companies do business with Beijing.

"Singapore always walks on two feet," Chan said. "We are a country without natural resources. We look regionally. We look globally. It is inconceivable that we will turn away from the technology and markets of the United States, if the US is interested.

"If there is business in one place, we go there. If there is business elsewhere, we go there. That's what trading nations do."

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