16 Feb 2007

A relationship built on sand

Below are extracts from an article by Bill Guerin who has managed to take a step back from Singapore's and in particluar Temasek's ongoing financial dealings with its neighbours. The Peoples Action Party has often stated that no opposition party would be capable of running the economy and financial investments as well as they have been doing for the last thirty plus years. The rise to economic dominance in South East Asia was a majestic climb but now that the Peoples Action Party has reached a plateux they seem to be incapable of investing in their neighbours without causing a political stink. So just how great a job have the PAP been doing over the last few years.

JAKARTA - Singapore's aggressive regional investment strategy has already taken bilateral relations with Thailand to an all-time low, but a rising tide of economic nationalism and unresolved extradition issues with neighboring Indonesia potentially represents a more crucial test for the island state's economic diplomacy. [...]

The Peoples Action Party will of course point the finger of blame not at their own party but that of the allegedly independent Temasek in order to defuse allegations that they are somehow mismanaging investments. This seems to be the current line of response in the Thaksin Shin Corp deal, but with the land-reclamation programme and its need for sand imported from Indonesia, such a defence is redundant. I am in no way buying the party line that Temasek is a separate 'business entity', but in this particular case the Peoples Action Party have less of a 'deniabililty' position to fall back on. The land reclamation project is an initiative undertaken and promoted by the Singaporean government. The Indonesian government has banned such sand exports to Singapore as leverage in negotiations over a planned extradition treaty.

Controversy over Singapore's land-reclamation projects, which entail huge imports of foreign sand and soil, represent the latest spat in a historically prickly bilateral relationship - one that is coming under increasing strain that threatens Singapore's Indonesia-based investments. [...]

The two sides have been negotiating the issue [extradition treaty]on and off for more than three decades, although the issue became particularly heated after the 1997-98 Asian financial crisis, when a number of ethnic-Chinese Indonesian businessmen absconded with huge amounts of cash they allegedly illegally deposited in Singaporean bank accounts.

Singapore's drive to be the Switzerland of South East Asia is built on the very premise that the accounts are easy to set up and the money placed in them is done so on a 'no-questions-asked' basis. Of course it attracts money gained through corruption or other questionable means. That's the whole point of running a 'Switzerland' style banking system. The problem for Singapore and the People's Action Party is that in doing it with money in South East Asia which has such a wide and visible lack of social equality it is 'theft'. According to Andy Xie "Actually, Singapore’s success came mainly from being the money laundering center for corrupt Indonesian businessmen and government officials." So until the extradition treaty is drawn up and it includes provisions to include economic crime the situation and antagonism between the two nations will remain.

to continue reading...