This year 'will be tougher'

Problems are not over yet, says BG Lee. Tensions in Indonesia, the Malaysian economy and possible slowdown in US could affect Singapore

By IRENE NG

THIS year could be even more difficult than 1998, Deputy Prime Minister Lee Hsien Loong said yesterday in a sobering reminder to Singaporeans that "our problems are not yet over".

He cited the political tensions in Indonesia, as well as the state of the Malaysian economy, and a possible slowdown in the United States, as factors which might affect Singapore.

In a keynote speech to the People's Action Party's ordinary party conference at Kallang Theatre yesterday, he noted that the public mood in Singapore appeared to have improved over the last one or two months. "The stock market has gone up. Over Christmas and Hari Raya, people were cheerful."

He related how Education Minister Teo Chee Hean, who visited Jurong last Sunday, had sensed that people felt the crisis was behind them. Their questions during a dialogue focused on domestic issues, not problems in the region.

"In reality, our problems are not yet over. 1999 may be a more difficult year than 1998," said BG Lee, who is the party's first assistant secretary-general.

Giving the 1,000 PAP cadre members an overview of the uncertain regional situation, he noted that this would be a "turbulent year for Indonesia".

"The Indonesia economy is still weak," he said. He added that the biggest obstacle to an early economic recovery was the political climate and the expected increase in political tension in the run-up to the general elections in June and the election of a new President in November.

The Indonesian military Abri, which was "the only national institution that keeps the vast Indonesian archipelago intact", had been weakened considerably. "Its image has been tarnished by disclosures of its past excesses."

Turning to Malaysia, he said that it was not "out of the economic woods yet".

The ringgit had stabilised and interest rates had come down. But liquidity stayed tight as banks are reluctant to lend because of their high non-performing loans.

Malaysia's economic health has a "big bearing" on Singapore, he said. "It is against Singapore's interest to see Malaysia suffer a deep, prolonged recession. Our two economies are closely linked. Malaysia's recession will drag down our growth."

On the state of bilateral ties, he described it as now "passing through a relatively calmer patch".

"We shall try to keep them this way, for as long as possible. But occasional hiccups in bilateral relations must be expected. When they arise, we will take them in our stride and manage them as best we can."

Despite the regional problems, Singapore was in a secure position, he said.

"The way the Government and people have responded to the crisis has impressed analysts and investors. We were not rattled. We pursued sound policies. We persuaded and carried workers and voters to make drastic but necessary changes," he added.

He recounted how an European banker had told him that his bank had decided to make Singapore the Asian centre for his treasury operations after watching carefully how governments responded to unexpected events.

But the flow of investments had been hit by the uncertainty in the region. While investment commitments for this year "should still be all right", the Economic Development Board is concerned about the next few years, he said.

Investors would take into account the problems in the region before deciding whether to invest in Singapore, he said. "So we must show that we can cope with these problems, and that they will not overwhelm us."