Howard, Goh must take lead - South East Asia economics

Business Asia, April 5, 1999 by Peter Charlton

Strong leadership by John Howard and Goh Chok Tong is crucial to South East Asia's economic recovery -- and peace in the region.

Australian Prime Minister John Howard and his Singapore counterpart Goh Chok Tong have clearly become the two "strongmen" of South East Asia.

Both have distinct mandates to govern, both have strong economies and both understand the problems around them.

However, with strength comes responsibility and, like it or not, Goh and Howard have major responsibilities on their hands with South East Asia.

The Asian meltdown can be classified into two streams -- north and south.

There is little Singapore and Australia can do to help rejuvenate, refinance, restructure, re-engineer, or re-anything else, Japan's moribund political and economic society. The same goes for South Korea.

But Goh's recent visit to Australia did illustrate that capital-rich Singapore and "funds-under-management-rich" Australia could, and should, do much more for South East Asia.

While Singapore has recently taken a few backward steps and reported unheard of no-growth and negative-growth scenarios, its prudence over many years has built a rich society.

While Muslims in Malaysia, Indonesia and Thailand fight off calamities they increasingly envy Singapore's calmness, prescience and wealth.

For its own survival, Singapore must do more with its wealth to aid the reconstruction, re-financing and re-floating of neighbours.

This is not an easy political task in a hazardous economy.

Singaporeans realise that, unless they do this, the surrounding envy will grow greater.

Already, Singapore's leaders are talking publicly of their defence firepower and superiority over near neighbours. They may well need it.

If Australia is described as a "miracle" economy because it has survived the meltdown relatively unaffected -- even though 60 per cent of the country's exports go to Asia -- then it too, although more distant, will stimulate politics of envy among Asian neighbours.

It was not for trite lip service that Goh came to Australia seeking a common identification of problems and suggested a cohesive Singapore-Australia plan to work together to solve them.

The recent SABAF (Singapore Australia Business Alliance Forum) meeting in Sydney -- co-chaired by Maurice Newman of the Australian Stock Exchange and Peter Seah of Singapore's Overseas Union Bank -- worked on a range of initiatives, foremost of which was for Singaporean capital and Australian ventures to help rejuvenate South East Asia. Together, Singaporean and Australian capital can help re-finance or re-float some of Asia's ailing icons.

It is an idea that has great merit.

Singapore and Australia have similarities that have enabled them to work together cohesively for many years, although they are competitors in many ways.

Obviously, defence co-operation between both societies works well.

What both economies need is a plan and a Year 2000 version of the 1950s Colombo scheme, or indeed, of Roosevelt's great "Lend Lease" concept of the 1940s.

The Australian and Singapore governments must underwrite a program for governments and the private sector to float capital for reconstruction, re-engineering and re-capitalisation.

In turn, a model should be found that suits the region -- not the doctrinaire, rigid and Western model of the International Monetary Fund.

Any equity investments made on this model should be indemnified by both governments so capital is put to work urgently. And lower initial returns should be balanced by government indemnity.

It would also be worthwhile for the Australian and Singapore governments to put in place an urgent re-education plan of capital and investment for the political and entrepreneurial classes of countries under huge debt loads.

The clear message is if Singapore and Australia don't float strongly and purposefully a series of economic stimuli packages to South East Asia, their combined defence forces might well be doing more in the near future than playing war games.

This is how serious the Asian scenario is getting.

It is apparent that unless the Indonesian elections return a definite and popular leader by clear mandate, all hell will break loose in the archipelago -- and forget the United Nations or the United States as a bridge for peace! If Indonesia does become Balkanized, it could become Singapore and Australia's Kosovo/Bosnia.

Goh and Howard need to push more levers and buttons and dedicate bureaucrats and business groups to implement plans quickly for dual financing and rejuvenation. Or ultimately, however distasteful, the defence forces may have to do it for them.

And that is an unwinnable option.