Prepare For A Rough Ride: PM Lee

Source : The Business Times, October 11, 2008

There is no escaping global impact of crisis

IN his first public comment on the global financial crisis, Prime Minister Lee Hsien Loong yesterday told Singaporeans to 'prepare for a rough ride at least over the next year, and quite possibly longer'.

While Asian banks have been spared the woes of their US and European peers, stock markets everywhere have been battered in the fallout. Singapore shares tumbled 7 per cent yesterday.

The crisis will curb consumption and investment in the developed countries and affect economic growth beyond their shores, Mr Lee said. 'Asian countries cannot avoid the impact of weakening US, European and Japanese economies.'

He was speaking on the first day of the two-day Global Indian Diaspora Conference, where Mauritian Prime Minister Navinchandran Ramgoolam and India's Minister for Overseas Indian Affairs Vayalar Ravi were also present.

Mr Lee's comments came after Finance Minister Tharman Shanmugaratnam on Sunday projected 'several quarters' of slowdown for Singapore's economy. And National Trades Union Congress (NTUC) chief Lim Swee Say warned on Thursday of possible wage and job cuts.

Expressing a similar view at the conference, Senior Minister Goh Chok Tong said: 'This time, Asia is not as adversely affected as US and Europe because we are less sophisticated in derivatives.'

Banks have also recapitalised since the Asian financial crisis, he said. But there is no escaping the global impact of what is happening. 'The worrying part is how it affects the real economy,' Mr Goh said. 'That will affect us. The US is one of the biggest exports markets for Asia. Asia and Singapore will be impacted. The worry for next year is how long will slow growth be dragged out for all of us.'

Mr Lee said that the problems facing financial institutions in the US and Europe are complex and grave, and will not be solved overnight or even 'within a few months'.

'The fear and panic gripping financial markets everywhere will take time to subside,' he said. 'The trust and confidence between banks, which lie at the heart of finance intermediation, will take time to restore.' But the momentum from projects Singapore has secured, including the F1 race, will help see it through the financial storm, he said. Unemployment here remains low and 'we are still on a steady course'. Singapore's strategy of growing with Asia remains valid, 'because we are confident that Asia's dynamism will endure', Mr Lee said. 'Both India and China are continuing to transform their economies, and their emergence in a stable and peaceful region will benefit many other Asian countries.'

Singapore's links through the Indian disapora - the second largest, with 25 million people of Indian origin scattered around the world - has helped Singapore and India boost ties, he said.

Also, the Comprehensive Economic Agreement signed between Singapore and India in 2005 has helped increase two-way trade to $24 billion in 2007. Singapore was India's second-biggest investor last year. And Singapore was the choice investment location for Indian companies venturing overseas.

Mr Lee said that just as Singapore has built ties with India itself, it wants also to network with Indian overseas communities throughout the Asia-Pacific.

The conference is hosted by the Singapore Indian Chamber of Commerce, the Ministry of Overseas Indian Affairs and the Confederation of Indian Industry.