Singapore Seizes Opportunities to Pull Itself Out of Asian Crisis

After two quarters of negative economic growth, Singapore is technically in recession. So what’s the response of this city-state that is hardly larger than Zion National Park?

Well, you could start with Singapore Airlines, ranked in many polls of business travelers as the world’s best carrier. Singapore is spending $300 million to refurbish the fleet’s cabins.

Then there’s the Internet. Singapore is Southeast Asia’s most computer-literate society--half the homes here have PCs--and is pushing ahead with a mega-project to wire every home on the island with fiber-optic cables.

For Singapore, which has made a fetish of long-range planning, such moves are merely part of staying competitive--or, perhaps more aptly, of outrunning the competition. For the island, the regional economic crisis isn’t a call to panic. It’s an opportunity.

By offering corporations what is considered among the world’s most business-friendly environment, Singapore is attracting companies that have shunned Hong Kong because of high costs, Indonesia because of instability, Vietnam because of the slow pace of economic reform, Malaysia because of currency controls.

The Reuters news agency, for instance, moved its regional headquarters from Hong Kong to Singapore two years ago. And in October, the country scored a coup with the announcement that Caltex Petroleum will move its main office here from Dallas. Caltex is the first international corporation to establish its global headquarters in Singapore.

Prime Minister Goh Chok Tong’s plan is to cut business costs back to 1994 levels in order to make Singapore a cheaper place than Hong Kong to do business. Utilities and rents on government-owned property have been reduced, and one recent study showed that renters in Hong Kong pay three times more, on average, but end up with smaller apartments than those available in Singapore.

After a slow initial response to the crisis, the government cut prime lending rates to 5% and announced $6.5 billion in budget cuts. In addition, wage and benefit cuts of 5% to 10% hit both the public and private sectors. Employers’ contributions to pension funds have been reduced by 50%. The cuts drew not much more than a whisper of protest from trade unions.

The acquiescence was not surprising because Singapore’s 3.5 million people have long believed that the government acts in their best interests, despite its authoritarian nature and a plethora of rules and regulations that prohibit chewing gum, result in quick executions for drug traffickers and restrict the media to little more than a government mouthpiece on domestic affairs.

What Singaporeans get in return is a country where everything runs efficiently, per capita annual income is $27,000, violent crime is all but nonexistent, and virtually everyone has access to good public housing.

Since 1970, when Singapore began the transformation from port city to major financial center, literacy has increased to 93% from 69%. Schooling is not compulsory, but Singaporeans spend more years in school than students in other Southeast Asian nations.

All of this, economists say, has softened the bite of recession and positioned Singapore for an eventual rebound. “The economic situation for Singapore is worrisome, not scary,” a Western economist said.

Singapore has hardly escaped the pain of a downturn. Unemployment, usually less than 2%, has edged up toward 6%. Retail sales are down 20%, and the $8-billion tourist industry has seen a 12% decrease in the number of visitors, mainly through the loss of Asian shoppers who once poured in from Malaysia, Indonesia and other countries.

Before the recession, Singapore was content to promote itself to tourists as a place to shop, dine and watch newly released films.

Yet, as even the government admitted, Singapore had no “buzz.” It didn’t have excitement like Hong Kong, didn’t exude culture like Vietnam, didn’t have the graciousness of Thailand.

Now the government is trying to tackle that problem too. Musicians play in subway stations, auctions of regional art have become commonplace, and “The Phantom of the Opera” is playing to sold-out houses as part of the government’s plan to turn Singapore into a “global city for the arts.”