SINGAPORE is grappling with its most serious economic crisis since the British withdrew armed forces from the former colony in 1968, according to elder statesman Lee Kuan Yew.
"The damage to the Indonesian economy and the problems in Malaysia have made for more concerns" for neighbouring Singapore, Senior Minister Lee was quoted as saying in The Business Times.
"Their difficulties will affect us through our many trade and investment links."
Mr Lee, the father of modern Singapore, said the country would have to cut business costs to restore its competitiveness and control rising unemployment.
Since the start of the financial crisis in Asia, Singapore's currency has fallen less against the US dollar than the currencies of most of its neighbours.
Also, the cost of doing business in the city-State has risen steadily to levels higher than those of its competitors.
Speaking at an event to launch his controversial memoirs and celebrate his 75th birthday, Mr Lee explained that simply letting the Singapore dollar fall to regain competitiveness would not work.
He said all-round cuts in rents, fees, taxes, power and telecommunications rates and wages were required.
"These adjustments will not solve our problems and cause us to recover quickly, as happened in 1985" during the last recession, Mr Lee said. "But they are indispensable if Singapore is to weather the severe difficulties that will last at least a few years."
He added that the present crisis was more difficult to overcome because Japan was in recession, leaving only the US and the European Union to aid Singapore.
The huge depreciation in Asian currencies, including the Indonesian rupiah and the Malaysian ringgit, had made Singapore less competitive than other Asian countries. "For example, the Japanese are making disk drives in The Philippines to compete against those made in Singapore, paying wages and rents in pesos at a fraction of ours," he said. |
