The Boom That Went Bust

The tiny island of Singapore, strategically situated midway between India and China, has long been a commercial center of Southeast Asia. It processes and exports rubber, tin, pepper and copra from Malaya and Borneo, imports machinery from Australia, Britain and the U.S. Its trade has made it a leading banking, warehousing and insurance city in Asia. When Singapore joined with neighboring Malaya, nearby Sarawak and North Borneo in 1963 to form the rich Federation of Malaysia its 1.8 million people prepared expectantly for a boom in business.

The boom began all right--but it went bust after Singapore's expulsion from the federation last August as a result of racial and political conflicts. Instead of a boom, Singapore now faces such critical problems as widespread unemployment (13.5%), dwindling trade (down 20%), and tense relations with Malaya, on which Singapore depends for, among other things, its water supply and its raw materials. Singapore's leaders are trying to keep their nation's economy afloat by a massive switch from trade to manufacturing, are urging industrial countries to set up plants in Singapore and buy its products. If the switch fails, says Defense Minister Goh Keng Swee, "it's a certain deduction that the Communists will eventually win power by free elections"--a statement that is clearly made to elicit help and sympathy from the U.S.

Production Cutbacks. The push for industry is centered in a new 9,000-acre manufacturing city called Jurong that has been hacked out of mangrove swamps and jungled hills. So far, 47 factories there make products ranging from ships and socks to tires and toothpaste, and another 16 plants are abuilding. But the factories were designed to supply the federation's 11 million customers, and since the breakup Malaysia has erected high tariff walls against Singapore-made goods. Result: most factories have cut production drastically, are searching for overseas markets to take up the slack. They are plagued by strike-prone unions, face increasingly stiff competition from aggressive and more experienced manufacturers in Hong Kong, Japan and Formosa.

Pleasure Dome. As one step to boost employment, Singapore hopes to resume its profitable $500 million-a-year trade with Indonesia, halted 18 months ago in protest against Indonesia's guerrilla war with Malaya. The island's dire need for business has led it since October to sell the U.S. more than $2,000,000 worth of supplies for Viet Nam, though it disapproves of U.S. policy there. Premier Lee Kuan Yew is also considering making Singapore available as a rest spot for dollar-laden U.S. troops from Viet Nam. The most intriguing proposal, however, is for a gambling and tourist resort on Pulau Sajahat ("Naughty Island") off Singapore's coast. This Asian pleasure dome would feature greyhound racing, nightspots and hotels, could double Singapore's 90,000 tourists a year.

Despite these prospects, Singapore may face insurmountable odds. Manufacturing provides only 20% of its gross national product, and the vast British naval and military bases provide 23%. Thus more than half Singapore's economy is still dependent upon trade, and as the country's relations with its neighbors remain tense, other Asian lands are eagerly grabbing its business.

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