Financial Crisis Straining Asian Neighbors' Political Ties
International Herald Tribune
August 8, 1998
Michael Richardson 

When a Malaysian opposition leader joined forces with the government of Prime Minister Mahathir bin Mohamad in a verbal assault on Singapore this week, it touched a highly sensitive nerve.

The remarks were made as a dispute over a border checkpoint on the railroad that connects the two countries came to a boil. The deputy chairman of Malaysia's opposition Democratic Action Party, Karpal Singh, was quoted by the national Bernama news agency as saying that Singapore "should not consider itself an Israel which could impudently flex its muscles against Malaysia in a display of arrogance and intimidation."

Barely a day earlier, Indonesia's president, B.J Habibie, had evoked a similar image of a tiny, predominantly non-Muslim country (Singapore's population is only three million) surrounded by much larger Muslim-majority neighbors. He pointed to a regional map in an interview with two journalists, then compared the vast area occupied by Indonesia's "211 million people" with the "dot" of Singapore.

As Singaporeans prepared to mark their National Day on Sunday, they do so in an atmosphere of uncertainty about the future contrasting starkly with the buoyancy of nearly all previous independence celebrations.

Then the country was basking in an era of rapid economic growth and rising living standards, in a part of the world where relations between neighbors were characterized more by cooperation than confrontation.

"We are now facing the most serious economic challenge since our independence" in 1965, Singapore's minister of state for manpower, Othman Haron Eusoffe, said Friday. "There is a strong likelihood that we will go into a recession next year."

Lim Boon Heng, chief of Singapore's National Trades Union Congress and an official with cabinet rank, said recently that the island-state had been adversely affected by the slump, especially in neighboring countries. "Relations are not as warm as they should be," he added.

"The problems facing East Asian countries are not easy to solve," Mr. Lim said. "Until they recover, our economy will also slow down. This shows how interdependent our economies have become."

Singapore must import virtually all the raw materials it needs to survive, including water and food from Malaysia.

Given the importance of business and investment confidence in a trade-reliant economy that lacks natural resources, Singapore's recovery could be slowed if relations with its two much larger neighbors remain uneasy or deteriorate, analysts said.

Yet, for the first time, Singapore's relations with both Indonesia and Malaysia are tense as the economic and social stresses of the financial crisis start to affect political ties.

In the past, Singapore has had frequent spats with Malaysia but always managed to keep relations with Indonesia on an even keel.

The Singapore government has moved quickly to repair the breach in relations with Jakarta, which Indonesian officials said stemmed from unhappiness over comments made earlier in the year by Singapore's senior minister, Lee Kuan Yew, and conditions attached to a Singapore offer of $5 billion to finance Indonesian trade.

Mr. Habibie, who succeeded former President Suharto in May as riots and protests engulfed Jakarta, complained in an interview published Tuesday in the Asian Wall Street Journal that "a friend in need is a friend indeed. I don't have that feeling from Singapore."

Mr. Lee said in February, the month before Mr. Habibie, then research and technology minister, was made vice president, that financial markets were "disturbed" by Mr. Suharto's criteria for selecting someone for this position.

Mr. Lee added that the criteria pointed to a minister the markets "associated with Indonesia's high spending projects. If the market is uncomfortable with whoever is the eventual vice president, the rupiah will weaken again."

Singapore's education minister, Teo Chee Hean, visited Jakarta on Thursday, delivering humanitarian aid from Singapore worth about $7 million. Afterward, Dewi Fortuna Anwar, Mr. Habibie's media and foreign policy adviser, said in an interview in Singapore's Straits Times on Friday that Mr. Habibie had felt "inattention from Singapore to Indonesia's plight since he's taken over."

"With this visit, President Habibie's perception that Singapore is aloof will be laid to rest," Ms. Dewi said. "We hope bilateral relations will continue to be as warm as they have always been."

Copyright © 2006 the International Herald Tribune