Hanging in the balance

Florence Chong
November 22, 2005

AUSTRALIA'S campaign to save convicted drug trafficker Nguyen Tuong Van from the hangman's noose has created an increasingly dangerous undercurrent in an otherwise stable bilateral relationship. Despite representation from the highest political levels in Australia, Singapore will almost certainly proceed with the hanging on December 2.

While Prime Minister John Howard is disappointed at Singapore's decision to hang Nguyen, he maintains it will not affect relations between Canberra and Singapore. "It's not going to contaminate our relationship with Singapore," Howard maintained on Sunday. Others are not so sure.

Opposition foreign affairs spokesman Kevin Rudd says the Singapore Government led Prime Minister Lee Hsien Loong has treated Australia with contempt and predicts the bilateral relationship will be affected.

Some Singapore executives have expressed concern privately about possible trade sanctions. At least one senior Singapore executive has decided to postpone his trip to Australia until the Nguyen case cools.

"Everyone is getting emotional over this issue, but when it dies down, nothing would have changed because the relations between the two countries would remain as strong as ever," a Singapore source says.

Howard understands the groundswell of popular feeling in Australia about the mandatory death penalty soon to be carried out on a young first-time drug offender. "There is great feeling and great conviction in our country that, on this occasion, the death penalty should not be imposed," he says.

Every appeal for clemency by Canberra, ranging from Governor-General Michael Jeffery to a unanimous parliamentary resolution, has been studiously ignored by Singapore, much to the annoyance of Howard's cabinet.

Howard was also embarrassed and upset to learn in South Korea last week that Singapore had already notified the Nguyen family of the December 2 execution date when he was still making a personal appeal for clemency to Lee.

All that is left for Canberra to explore is a legal appeal through the UN's International Court of Justice, a slim prospect given that Singapore does not recognise the compulsory jurisdiction of the court.

If relations between the two countries are disrupted, both sides will suffer. Australia's ties with Singapore, which became an independent state in 1965, are deeper than with any other Asian country and extend into defence, trade, investment, education and tourism. Singapore's armed forces have a permanent training presence here and intelligence sharing has deepened since September11, 2001.

What's at stake is bilateral trade, which totalled more than $8 billion last year, and bilateral investment valued at more than $30billion. Singapore, a tiny city-state with just 4.2million people, is Australia's biggest trading partner in ASEAN. It is Australia's eighth largest trading partner. In 2003-04, Singapore imported more than $3 billion in Australian products. Singapore Airlines alone imports $1million worth of Australian produce a day or $365 million worth a year.

Australian businesspeople in Singapore say the local media has reported reactions in Australia to Nguyen's imminent execution fairly. But one of them is particularly concerned that the campaign could escalate into a boycott of Singapore investment. He recalls how the more sensitive relationship with Malaysia sank to a new low with the hanging of convicted Australian drug traffickers Kevin Barlow and Brian Chambers in 1986. "The problem Singapore faces is: it is being asked not just to make a concession to a friend but it is being asked to revise its government policy. The debate boils down to whether you agree or disagree with capital punishment," he says.

Singapore's overriding concern is becoming a transit point for drug trafficking. "I have heard it said before that transiting through Singapore provides a way to legitimise the journey," another business source says. "This case is extremely tragic. But for Singapore to reverse its decision is to change its policy on capital punishment."

A businessman who was in Singapore in 1994, when Washington exerted great pressure not to cane a US citizen found guilty of vandalising cars, says Singapore will not buckle. In 1994, Singapore provoked an outpouring of condemnation and criticism when it hanged a Filipina maid, Flor Contemplacion, for killing another Filipina. The Philippines made high-level representations to the Singapore government, but in vain. "One of the most regrettable things is the planned execution will encourage Australians to resort to the old negative stereotype impression of Singapore as an inflexible, stubborn state," says the businessman. "It is disturbing that this proposed execution will revive such accusations of the country."

According to the Department of Foreign Affairs and Trade, Singapore's investment in Australia totalled $19.1 billion at the end of last year. Although Singapore's investment throughout the 1980s and '90s has been concentrated in real estate, it diversified in the past few years.

Singapore companies have invested in aviation, telecommunications, energy, information technology and hi-tech companies, with much of this investment made by state-owned companies and led by Temasek, which owns and control Singapore's direct investment locally and overseas.

Among Singapore's largest investors in Australia is Singapore Telecom (Singtel), which acquired Optus in 2001 for $14 billion. Singapore Power paid $5.1 billion for the assets of the US utility company TXU Corporation in Victoria and South Australia last year.

Singapore GIC paid $813 million for Mayne Group's 53 private hospitals and it owns a large portfolio of real estate in Australia, including the luxury Shangri-la Hotel in Sydney; it is also a part-owner of Sydney's trophy office building, Chifley Tower.

According to DFAT, the most notable investment in recent times is Qantas's joint venture project to establish Singapore-based budget airline Jetstar Asia, which began operating in December last year. Until now, any discord in the bilateral trade relationship between the two countries was over the issue of open skies. Singapore Airlines feels frustrated in its repeated attempts to get Canberra to lift restrictions preventing it from flying between Australia and the US.

Australian companies have a more comprehensive presence in Singapore than in any other country in the region. John Dick, president of the Australian Chamber of Commerce in Singapore, says about 1200 Australian companies are registered in Singapore. They range from the big four banks to professional firms and small businesses offering lifestyle products and services. Dick says the University of NSW is planning to build a $150 million campus in Singapore.

A leading expert on Australia-Singapore relations says Singapore has become increasingly attractive to Australia as it strengthens its reputation in the arts and education, and by becoming an ideas hub in Southeast Asia.

Australia also chose to negotiate its first free trade agreement with Singapore, more than 20 years after it signed its Closer Economic Relations deal with New Zealand. Known as SAFTA, the agreement has further enhanced trade and investment links between the two countries. According to DFAT, in the 14 months since SAFTA was implemented, Austrade has assisted 546 Australian companies to win business in Singapore worth $458.6million in total export sales value. Of these, almost 250 were new exporters.

A senior government trade source in Canberra says: "When we look for markets for new Australian exporters, Singapore is the destination. We encourage Australian companies to start in Singapore because it is a transparent market, English is spoken and it is a wealthy market."

Dick, who is also the senior partner with leading Australia legal firm Freehills, agrees Singapore is a stepping stone for many Australian companies into other countries in the region. He points out the ANZ bank has a regional head office in Singapore that directs business expansion into other countries in the region. "Our relationship with Singapore has opened up tremendous opportunities for Australian companies to expand into the rest of the region," Dick says.

The Australian Chamber of Commerce in Singapore and its opposite number in Australia, the Australia Singapore Chamber of Commerce and Industry, are planning a joint trade mission to India. "We hope to be able to leverage off Singapore's relationship with Indian companies and to secure projects for our companies," Dick says.

Although trade and investment form the backbone of bilateral relations, strategically Singapore is also an important partner. It has long been one of Australia's strongest allies in the region, credited with helping to lobby for Australia's participation in the inaugural East Asia Summit to be held in Kuala Lumpur next month. "Certainly, Singapore helped to lobby and push for Australia to be a member of the East Asia Summit," says a well-placed Canberra source.

The source says Singapore is also close to Australia because "the truth is Singapore feels that it is on the outer edge of ASEAN. It is more developed and ambitious and has a predominantly Chinese population."

A long-term specialist on Australia-Asia relations says: "Australia's ties with Singapore are critical for its relationship in ASEAN. We have a strong and longstanding defence relationship, especially in the context of the Five-Power Defence Arrangement [Singapore, Malaysia, Australia, New Zealand and Britain]."

Another source close to Singaporean political and business circles stresses: "Both sides are anxious not to contaminate relations. Singapore is Australia's strongest ally in the region and when there are bilateral tensions with Malaysia or Indonesia, Singapore provides a bridge." However, he adds that Singaporean investors would continue to be attracted to Australia for the same reasons that brought them here. "Australia offers a bigger economy, political stability and legal certainty. It is a window to the West. Those things will not change."

Florence Chong is The Australian's Asia business reporter.
Additional reporting: Patrick Walters.