S'pore stays course; Lee may remain Fin Min while PM

July 21, 2004

By Kevin Lim

LEE Hsien Loong will probably remain Singapore's finance minister after becoming prime minister in three weeks, but he may appoint another politician to replace himself as central bank chief, analysts say.

Although holding the top job while running the finance ministry is rare here, the son of founding father Lee Kuan Yew is expected to keep the finance job to maintain policy stability, at least until he calls elections.

"Singapore Inc doesn't experiment at the top," says Song Seng Wun, a senior economist at GK Goh Securities, referring to the handover to the island city-state's third premier since independence in 1965.

The government will not only stay the present economic course, it will also retain key players who charted it, analysts say.

"We do not expect significant shifts in economic policy, given the emphasis to continuity in this leadership transition," Bank of Tokyo-Mitsubishi said in a commentary.

The finance ministry and central bank declined comment.

In one example of a shift that represents continuity as much as change, Lee is expected to name trade and industry chief George Yeo as foreign minister. But at the same time the foreign ministry will be revamped, taking control over international trade issues, Singapore and western diplomatic sources say.

As trade chief, Yeo has considerable international experience, having helped seal Singapore's pivotal free-trade pacts with the US, Australia, Japan and others.

Long-Awaited Ascension

Lee, 52, has been finance minister since 2001, head of the Monetary Authority of Singapore since 1998 and deputy prime minister since 1990. Prime Minister Goh Chok Tong said Saturday that Lee would succeed him Aug. 12 as premier - a post Lee's been formally awaiting for a year and been groomed for most of his life.

Critics accuse Lee of being aloof and unable to relate to the average Singaporean, arguing he was handed the prime ministership because of his father. But Lee Kuan Yew counters that his eldest child - educated at Cambridge and Harvard and an army brigadier general at age 32 - just "so happened" to be more passionate and committed than others of his generation.

The coming role of Lee Kuan Yew, 80, the powerful senior minister in Goh's Cabinet, remains unclear, although his opinions are sure to carry great weight regardless of any formal title. Goh, too, is to stay in the Cabinet after stepping down as prime minister.

Amid a series of political transitions across Asia this year, Singapore's is the only one without a public vote. But Lee is expected to call parliamentary elections as early as next year. The results won't be suspenseful, though - the ruling party holds 82 of the 84 elected seats.

The younger Lee has been instrumental in steering Singapore through several economic slowdowns and restructuring the economy to face growing competition from China and other low-cost countries. He was also a key figure in liberalizing the financial services sector and allowing foreign players greater access to the local banking scene.

"Lee has been a major driver of economic policy, and the main directions have been already set," says Manu Bhaskaran, economist at the Centennial Group, a Washington-based consultancy.

In recent years Singapore has cut direct taxes, diversified manufacturing into biomedical sciences and financial services into wealth management, while signing a clutch of free trade pacts to remain Southeast Asia's richest economy.

After becoming prime minister, Lee will likely remain finance minister and have a strong second-in-command, says Song at GK Goh. "If you have a capable second finance minister, it's fine," he said, pointing to neighboring Malaysia, where Prime Minister Abdullah Badawi holds the finance portfolio, assisted by Second Finance Minister Nor Mohamed Yakcop.

As for the MAS, while the chairmanship of the central bank is not a cabinet-level position, it has traditionally been held by a minister and is to be announced soon after the cabinet is sworn in.

Lim Tipped For Central Bank

Many, including Song, expect Lee to appoint Lim Hng Kiang, the deputy finance minister and deputy chairman of the central bank, to replace him as head of the central bank - but not to name Lim finance minister.

"The sense you get is that (Lim) has gone as far as he can go and his star has plateaued," said a local university professor who has worked closely with the government. A private sector economist, who also asked not to be named, said, "Hng Kiang is very bright but he doesn't have charisma - that X-factor" needed to be finance minister.

While Lee Kuan Yew is the only person previously to have been Singapore's prime minister and finance minister simultaneously - and that only briefly in 1983 - the finance minister traditionally has headed the central bank. But the younger Lee may break the pattern, just as he did when he first ran the central bank under another finance minister in 1998.

In what could be a related move, Parliament passed a law Tuesday allowing the finance minister to appoint someone other than himself to run the Inland Revenue Authority of Singapore. That means Lee could be finance minister but delegate the tax duties.

Lim, like many in Singapore's cabinet, has been in the military, the bureaucracy and eventually joined politics. He's been the minister of national development and junior minister for foreign affairs since joining the Parliament in 1991. In a cabinet reshuffle last year, Lim was moved from minister of health to a minister without portfolio.

Tharman As Future Finance Minister?

One candidate markets favor as finance minister is Tharman Shanmugaratnam, former managing director of the central bank, who was drawn into politics three years ago.

In his short time as a politician, Tharman has acquired the education portfolio, considered one of the most important in Singapore.

"Tharman is doing quite a lot of radical changes on the education side," said Song of GK Goh. "He's still reviewing existing practices to see what else we can do."

Like Lee, Tharman favors further economic liberalization; he helped Lee open up Singapore's financial sector. Tharman was also a key member of a high-powered committee in 2001 that chartered Singapore's current economic course.

By contrast, Lim, who has been the second finance minister since 1995, wasn't on the Economic Review Committee. He was, however, last year tasked with leading another committee to help arrest the steep decline in Singapore's birth rate - which the government views as a national crisis.

Singapore's birth rate has fallen to a record low of 1.26 births per woman, far below the 2.1 viewed as the minimum needed to keep a country's population stable.