City Life: Singapore

The island state that wishes it could be towed to less murky waters

Eric Ellis

Singapore’s property market is roaring.

I know that because our lease will soon expire and our landlady wants 70 per cent more rent than she did in 2004.

No matter that our flat leaks like Blair’s Cabinet, that its 1970s-wired electricity trips at least once a week and the bath threatens to plunge its water-weakened supports into the place below: these are details too far for our pococurante proprietrix. But the consonant challenged Ms Sng has greedily noticed that a private banker from Tokyo has signed, sight unseen, for a same-sized unimproved flat downstairs at 150 per cent more than the vacating lessee.

It’s all very puzzling: there’s no textbook rationale to the real-estate boom. The economy is growing at an unremarkable-for-Asia 6 per cent, much the same as it has for years, save the difficult ‘Asian Contagion’ period of the late 1990s. And though Singapore is wealthy, its population of only 4.5 million leaves it 2.4 billion consumers short of being ‘Chindia,’ the Asian neologism du jour that excites so many economists in Delhi and Beijing.

From Sotheby’s to shares, Singapore has no shortage of places to park cash. But new luxury apartment blocks are sprouting among the frangipani, touting all manner of metropolitan arcadia — infinity pools, gyms, private clubs. They sport bizarre names such as Trillium and Botanika, fashioned in designer fonts on hoardings that seem styled by the editors of Wallpaper* magazine. My favourite promises the elysian towers rising behind it will be ‘Home to 46 of the Most Luminous Families’ — which will presumably take care of residents’ electricity bills, also on the rise.

The reasons why it’s suddenly salad days for Singapore developers seem to reside in neighbouring Indonesia, a country rated by the graft watchdog Transparency International at 130th of the 163 nations it tracks in its annual corruption survey. Jakarta’s dubious tycoons and officials have long regarded Singapore as their own private Switzerland — a handy place to stash cash, few questions asked. Indeed, a Merrill Lynch study last year noted that a third of Singapore’s 55,000 millionaires were Indonesian nationals. They control US$87 billion in assets, making Singapore an affluent suburb of Jakarta. That seems to explain why I’ve suddenly got a private banker for a neighbour.

Seeking facts from chaos, as Mao might have put it, some analysts here who know Indonesia only too well (read: had their fingers burnt there) point to the coincidence that Singapore’s boom followed the Boxing Day tsunami of 2004. The worst of that calamity was experienced just an island away from Singapore in Aceh. After the waters came another tsunami, of aid and donations. But the aid effort has been plagued by massive corruption. Indonesia’s President Susilo Bambang Yudhoyono landslid to office in 2004 on a ticket to clean up graft in his sprawling archipelago. He suspects that too much of Indonesia’s wealth is secreted away in Singapore and wants to winkle miscreants back to justice in Jakarta. Brussels too wants Singapore to co-operate with its efforts to crack down on tax shelters. But the boom in private banking has been a nice little earner for Singapore, and it’s all very tricky for a regional financial centre which trades off a self-styled global reputation for transparency, good governance and intolerance to corruption.

Singapore and Jakarta don’t have an extradition treaty but, with so much at stake, the tiny city-state isn’t exactly rushing to sign one. So Indonesia, a poor country but by dint of its size and population the regional superpower, has gently reminded Singapore who is boss in Southeast Asia — by banning sand exports from neighbouring Indonesian islands to Singapore, depriving it of an essential building material for all those new towers to be developed and populated by Indonesian tycoons.

The junta in Burma has helpfully offered to step into Jakarta’s shoes and supply Singapore’s sand. But with such fractious and — the truth that dare not speaks its name in Singaporean diplomacy — mostly Muslim neighbours like Malaysia and Indonesia, sometimes Singapore’s leaders seem to want nothing more than to attach tugboats to their mostly Chinese-inhabited dot and tow it northwards, anchoring somewhere off the coast of China equidistant from Japan, Taiwan and South Korea, where Asia’s economic action really is.

Take tetchy Thailand. Last year Singapore Inc, in the form of the government-owned investment agency Temasek, bought the then Thai Prime Minister Thaksin Shinawatra — Asia’s Silvio Berlusconi — out of his family’s telecom-to-TV conglomerate Shin Corp. The US$4 billion deal, the biggest in Thai history, was also the biggest done while Madame Ho Ching has run Temasek. She happens to be the wife of Singapore’s Prime Minister Lee Hsien Loong, himself the eldest son of Singapore’s philosopher-king Lee Kuan Yew.

The transaction was anything but transparent. Thaksin and his family didn’t pay their due taxes, and there were mysterious nominee companies entangled in the deal. Outraged Thais hit the streets in protest — perhaps looking for an excuse to do so. Temasek’s dealmaking suddenly plunged its neighbour into turmoil and by September, Thaksin was toppled in a bloodless military coup blessed by King Bhumiphol.

Shin has been a spectacular misjudgment for Madame Ho and Temasek, an US$80 billion enterprise that frequently compliments itself on its investment perspicacity. A year later, Shin is worth about half what Temasek paid and Singaporeans, the ultimate owners of Temasek, are outraged. Last month things got worse when the Thai junta seized a Shin-owned TV station in lieu of an unpaid $3 billion fine. The rest of the business is vulnerable to seizure too as Thailand is gripped by a wave of economic nationalism.

What with Singapore’s sandfight with Indonesia, Temasek’s blow-up in Bangkok, and perpetually awkward cross-causeway relations with Malaysia, perhaps Singapore can also ask Rangoon’s generals to supply the towropes — and the cheap labour as well — for that longed-for long haul north.

Eric Ellis is Southeast Asia correspondent of Fortune magazine