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Yet despite the carnage unfolding around them, Zielinski and other Singapore investment professionals remain relatively upbeat about the island-state's economic prospects. Most, in fact, give the Lion City credit for maintaining one of the region's strongest economies, as well what arguably is Asia's best investment climate.

"I certainly feel more confident in Singapore than Thailand or Malaysia," says Zielinski. "If you look around the region, you see the exact same trends of property price appreciation, overbuilding of new hotels and condominiums, and bank exposure to real estate. Here in Singapore there's been much less excess. The property market is quite controlled by the government. It's not like in Bangkok, where everybody can put up a building. I also think there's greater recognition here of the problems—the necessity to react and change policies."

Koh Foong Yin, vice president of economic research for Singapore's Overseas Union Bank (OUB), says Singapore's economic outlook is encouraging despite the recent market plunge. The economy has recently shown signs of rebounding from two years of slowing GDP growth (10.5% in 1994, 8.8% in 1995, and 7.0% in 1996) caused mainly by a worldwide slump in electronics prices. Koh, after seeing a surprisingly strong 7.8% gain in this year's second-quarter GDP, had been projecting growth of about 6.6% for all of 1997, and 6-7% growth again in 1998. "Now it may be closer to 6% for next year," she says. "But I think we can maintain that type of growth."

Ironically, the unsettled markets may actually benefit Singapore's financial industry, says Koh. "Because of the currency turmoil and falling share prices, turnover has been quite active," she says. "Although the stock market is down, volume is up, and therefore I think the financial sector did well." Koh notes that the financial services sector grew strongly in 1997's first half, up almost 15% over the previous year. "We think that this will probably be maintained in the second half as well," she adds.

Jim Walker, Singapore-based chief economist for Credit Lyonnais Securities Asia, agrees that Singapore's economy seemed on the verge of recovering its lost momentum before last month's market plunge. "That [recovery] actually is probably still in place, but I think people are looking more 12 months out now rather than the next three months or even the next two quarters," he says.

Although there clearly has been some element of "hysteria" in the markets recently, Walker says that at least some of Singapore investors' fear has been well-founded. "Part of it is a reflection of Singapore companies, including the banks, which have a very big exposure to other countries in the region," he says. "What happens in the rest of Southeast Asia does have a material impact on Singapore."

Indeed, Singapore's links to the rest of Asia—previously a growing source of regional pride and solidarity—are now among the island republic's biggest economic concerns. "In recent years the intra-regional trade has been very strong," says OUB's Koh. "About 27% of our trade now goes to Southeast Asia, and almost 9% goes to Japan. And Japan's economy is looking very dangerous, as though it may tip back into recession."

Nonetheless, there are bright spots for Singapore. One is the relative strength of its currency, which admittedly has fallen about 7% against the US dollar since the start of this year, after years of steady appreciation. "But considering the US dollar's strength in the world economy as well as the strength of US financial markets, that's not something to be concerned about," says Koh. Nor is she worried that Singapore may fall prey to the speculators who have helped drive down other regional currencies. "We've got very strong reserves, almost [US]$81 billion—the sixth-largest in the world. And we've got current account surpluses," she notes. "The economy is slowing down, but it's not an unhealthy slowdown. So I think the fundamentals are fairly supportive of the Singapore dollar."

Zielinski believes Singapore could have held its currency even with the dollar, but the price was too high. "Singapore could not afford to allow its currency just to hang in there with the dollar," he says ."There was enough money to do it, and the economy's small enough, so they could have maintained it at that exchange rate. But they had to worry about competitiveness vis-a-vis Malaysia and other Asian countries."

As it stands, Singapore's relative currency strength is already hurting it in terms of regional competitiveness, says Credit Lyonnais's Walker. "Singapore is running up against constraints on its cost side—in its ability to attract manufacturers," he says. "Other countries have become much cheaper in comparison with Singapore, if these currency levels stick."

Rising costs have long been a painful thorn in Singapore's side, forcing much of its labor-intensive manufacturing abroad and drawing complaints from even well-heeled investors in the finance and service industries. Pricey or not, Singapore's modern infrastructure and quality of life are quick to draw praises from Zielinski and others. "As it currently stands, Singapore is, I think, the only livable city in Asia," he says.

Singapore's attractions, plus one of Asia's most aggressive industrial recruitment and incentive programs, are still strong enough to lure many of the world's largest multinational companies, which committed 17.6% more in foreign investment in 1996 than the previous year. Singapore has attracted more than $3 billion in new semiconductor investment alone recently. It also has become Asia's undisputed capital for foreign exchange trading and a major fund management center.

OUB's Koh says manufacturing, finance, transport, and commerce each contribute roughly one-fourth of the island state's economic activity. That "broad-based economy," she says, is a key reason for her long-term optimism. Therefore she expects the current situation to be temporary. "This is just a short-term hiccup, I think. A painful one no doubt, but temporary."

But Credit Lyonnais's Walker sounds a more cautionary note about the time required for a regional recovery. Moreover, he adds that Asia may not have seen the worst yet. "It took the effects of Mexico three months to work through Latin America. So it's difficult to imagine that it's going to be any less than that here. We're only really six or seven weeks into it, so there's probably still a way to go."

Currency Crunch Asian currencies VS. THE US$ (% Decline From Jan 2 to Aug. 26)

Japanese YEN -2.47%

Australian DOLLAR -5.65

Singapore DOLLAR -7.26

Malaysian RINGGIT -10.74

Philippine PESO -14.11

Indonesian RUPIAH -17.51

Thai ВАНТ -30.90

Сингапур.

Вторая финансовая сердцевина Азии: Возможности в Hongkong массовом бегстве?

Хотя Куала-Лумпур украл часть грома, Сингапур не находится ни в какой опасности потери неофициального заглавия(права собственности) Юго-востока ответ Азии на Hongkong. Вопрос - может ли Сингапур присоединяться К Нью-Йорку, Лондону, и Hongkong как верно глобальный, с полным обслуживанием финансовый центр. Более к сути, Сингапурское правительство сдаст достаточно контроля(управления), чтобы позволить островной республике выполнять потенциал?

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