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Singapore’s investments in its neighbours

Updated On: Jul 24, 2007

Singapore has close economic ties with its ASEAN neighbours and strong investment interest in its immediate neighbourhood, but at the same time, relations can often be testy.

With increasing interdependence, cooperation and coordination of policies are becoming more and more important amongst neighbours but historical baggage and other reasons often coloured Singapore’s relations with its immediate neighbours. Investments from Singapore, particularly from government-linked companies sometimes receive much more scrutiny and at times viewed with some suspicions. Despite these, Singapore’s enthusiasm in investing in its neighbours have not been dampened.

Highly optimistic about Singapore-Malaysian collaboration in the IDR, Singapore's Foreign Minister George Yeo said: 'If there are no borders, then water will find its own level and a lot of the economic growth in Singaporewill spill over into the IDR, which will lower our own costs. 'It will be good for Johor. It will be good for Singapore. Both sides will benefit. The pie will grow faster and there will be plenty to be shared.’ This is an outward expression of mutualism by the Singapore team in the dialogue with Malaysia over the IDR. 

This however, does not mean that there are no challenges. Yeo said: 'But of course, there is a border, there is a fence. So the water doesn't flow completely and there is a certain pressure difference, but to the extent that there is connectivity and ferocity, that is good for both sides.' Just as optimistic as his Singaporean counterpart, Foreign Minister Syed Hamid Albar reiterated: 'We welcome anyone who wants to invest in the IDR' when asked to respond to remarks by Yeo that 'some practical problems' would be brought up during the first two-day joint ministerial committee meeting on the IDR. The outcome of the meeting is likely to be overall positive as both sides seem ready to tackle the issues ahead for a mutually beneficial outcome.  Already after the first day of the meeting, it has been agreed that four working groups to look into ways of cooperating over IDR will be set up. The four groups will look into issues of fast-tracking immigration clearance; transport links; tourism events; and environmental matters such as river-cleaning.

While hopes are being raised of the potential of the IDR, Singapore’s investments in another of its neighbour, Indonesia has recently been under some scrutiny.  Nationalist-oriented politicians together with other interest groups have been pushing the Indonesian government to buy back ST Telemedia’s shares in the satellite and telecommunications company, Indosat.  A proxy war over Indosat is being waged through an NGO, two university student bodies and a university alumni association which banded together to demonstrate against ST Telemedia (STT) investments in Indosat. They called on the Indonesian anti-corruption body, the police and the tax authorities to investigate losses suffered by Indosat between 2004 and 2005 and also accused  the company of manipulating the accounts and tax evasion.  Earlier on, Indosat and Telkomsel (Singapore’s Temasek Holding has shares in Telkomsel) have also been accused of price-fixing and monopolistic practices.  Both STT and Temasek have denied any wrongdoing.

An Indonesian parliamentary hearing, called by the Parliamentary Commission on defence, foreign affairs and telecommunications, was held to hear if the Indonesian government should buy back STT’s 41.9% stake in Indosat.  The hearing concluded that it would be counter-productive for the government to buy back STT’s shares. Commission chairman Theo Sambuaga says such a move could hamper the development of Indonesia's telecommunications industry and send the wrong signal to foreign investors. 'It is also not in line with the country's aim of attracting foreign investors into the country,' he said, at the end of a meeting with telecommunications chief Basuki Yusuf Iskandar.

Another Commission member, Andreas Pareira from the Indonesian Democratic Party-Struggle (PDI-P) told the Straits Times that the Indosat issue had been politicised by 'certain quarters under the guise of being nationalistic'.  Supporting his view, another legislator, Jeffrey Massie of the Prosperous Peace Party (PDS), said that the government could not resort to political pressure to buy the stake back because such a move 'can boomerang and hamper the flow of investment into the country'.

As a long-term investor in Indosat, ST Telemedia welcomes the Commission’s decision. Echoing the views of the Indonesian parliamentary hearing, ST Telemedia spokesman Melinda Tan said: 'This prudent decision will certainly send a strong signal to foreign investors that the Indonesian government is committed to creating a conducive environment where there is business certainty and the law of the land is upheld...As a long term investor in Indosat, we remain committed to its business growth and will continue to fulfil our social responsibility towards the community.'

Meanwhile, also on investments, Singapore Minister Mentor Lee Kuan Yew said that within Indonesiawith its market “should be the leading choice for investors in ASEAN”. However, the money has gone to places such as Vietnam because investors remained worried about Indonesia’s “labour problems and legal uncertainties”.  MM Lee is on a visit to Indonesiaand shared his views at a lunch meeting yesterday (23 Jul) with leading Indonesian personalities. (24 July 2007)

Sources:

4 work groups formed to look into IDR cooperation (Straits Times, 24 July 2007)

KL pledges to tackle investor issues on IDR (Straits Times, 23 July 2007)

Study abroad but 'make future here'  (Straits Times, 22 July 2007)

Complex proxy war over Indosat being waged through NGOs  (Straits Times, 21 July 2007)

MM Lee to visit Jakartaon Sunday (Straits Times, 21 July 2007)

'No buy-back of STT's shares in Indosat'  (Straits Times, 21 July 2007)