Goh pitches pro-market policies

Business Asia, Nov 2, 1998 by Valerie Lee

Singapore, which has stayed adamantly pro-market while other Asian countries have acted to protect their battered economies, is plugging its policies in a bid to win favour with investors.

And it appears to be working.

"The steely calm with which the authorities have weathered the crisis has enhanced (Singapore's) credibility. In spite of pressure on the currency, and equity and property markets, the Goh Government has refrained from intervening," Salomon Smith Barney said in the September issue of its monthly equity report.

Malaysia has slammed its doors in the face of investors with draconian capital control measures. Hong Kong, once Asia's bastion of free-market practices, has shown the heavy hand of government in the stock market.

Singapore is beginning to look better and better to investors, analysts say.

"It's poetic justice of sorts," said the research director of a European investment house. "The most laissez-faire countries in Asia have tried to impose controls that even in its most restrictive moments would have given (Singapore) pause to think," he said.

The irony, analysts said, is that Singapore, with its long-time reputation as a tightly controlled economy, is shifting into forward gear as far as opening up is concerned, while its competitors seem to have taken a step back.

"It was only two years ago that there seemed to be signs of Singapore slightly worrying that Malaysia was opening up, capturing the limelight," said Mr Hugh Young, managing director of Aberdeen Asset Management Asia.

"Not long thereafter Malaysia is off the map as far as an investment destination is concerned for the fund management industry."

In November last year, Singapore Deputy Prime Minister Lee Hsien Loong, describing Singapore as a place where "anything not expressly permitted is forbidden" in contrast to Hong Kong, where "everything not expressly forbidden is permitted", announced a radical change in the financial regulatory regime.

Since then the Monetary Authority of Singapore (MAS) has announced a change in its regulatory approach while domestic banks are bringing transparency in their accounts up to international standards, among other measures.

"Our fundamental approach towards economic development has not changed: to rely on market forces, allow free capital flows, encourage foreign investments, and plug ourselves into the global economy," Mr Lee, who is also the head of the MAS, told a conference in Japan recently.

He made the same pitch to a gathering of fund managers in Singapore last month, advocating the use of Singapore as a base from which investors "can follow the region dispassionately, with neither euphoria nor panic".

"Ultimately, whenever Asia comes out of this (crisis), Singapore will come out greatly enhanced. It is the only government that has been responsive and responsible," Mr Young said.

But analysts said it is not just the openness that will take Singapore ahead, but its push to boost skills in its financial sector.

That is a luxury other Asian economies, hobbled by failing economies and banking systems, cannot currently afford.

"The crisis makes it important for Singapore to try and structure its financial centre for what it thinks the future is going to be. Plain vanilla equities, which is what our neighbours were very good at, is not going to be the way forward," one analyst said.

But economists said Singapore would not benefit from its openness and sensible policies until the region recovered.

Singapore's economic data next year is widely expected to show a recession.

"It is still going to have a recession but it will come out without the structural dislocation like some of the other countries," said Mr Arup Raha, regional economist with Citibank in Singapore.