The Indonesian Crisis: A Human Development Perspective

13. Political Economy of Business Relations between Indonesia and Singapore

Political Economy of Business Relations Between Indonesia and Singapore 345© 2003 Institute of Southeast Asian Studies, Singapore m n LINDA LOW Introduction Indonesia and Singapore easily stand at two ends of a continuum in the Association of Southeast Asian Nations (ASEAN), ranging from physical size and per capita national income to, most starkly, their responses to globalization and governance. Both the Indonesian state and government, synonymous with the dominant Golongan Karya (Golkar) since independence in 1945, tightened under Soeharto’s New Order in mid-1960s, and the People’s Action Party (PAP) in Singapore since 1959 bears resemblance. However, the similarity ends as soon as the strategies and policy options to run the largest ASEAN economy and a mere city-state are put in a practical perspective. While the historical and traditional symbiosis between Singapore and Malaysia with the British legacy is pervasive, a contention of this chapter is that the political economy of business relations between Indonesia and Singapore has far more potential and opportunities. Paradoxically, national rivalry has emerged between Malaysia and Singapore as a consequence of converging development paths in industrialization and in the level of prosperity and standard of living, especially between Kuala Lumpur and Singapore. The same competitive strain may not, or would take a much longer time to surface for Indonesia as it is a much larger agriculture-based economy and there is more scope for complementarity with Singapore. 13 345 POLITICAL ECONOMY OF BUSINESS RELATIONS BETWEEN INDONESIA AND SINGAPORE Reproduced from The Indonesian Crisis: A Human Development Perspective, edited by Aris Ananta (Singapore: Institute of Southeast Asian Studies, 2003). This version was obtained electronically direct from the publisher on condition that copyright is not infringed. No part of this publication may be reproduced without the prior permission of the Institute of Southeast Asian Studies. Individual articles are available at . 346 Linda Low© 2003 Institute of Southeast Asian Studies, Singapore Much depends on the evolving political economy of relations and alliances at both the state and private levels, and these prospects are assessed here, beginning with a brief overview of economic relations before and after the financial crisis in 1997. The issues and problems facing Indonesian–Singapore relations are discussed in the following section, first in the context of their respective domestic constraints before translating them into the regional and global environment. The concluding section notes some policy implications, and suggests how business relations can be further synergized between the two countries. Economic Relations Before and Since the Crisis Two crucial related areas define economic relations between Indonesia and Singapore: the historical entrepôt trade, and networks of Chinese capital and enterprise. The true magnitude of trade between the two countries has been officially blacked out on the Singapore side since Indonesia’s confrontation during Singapore’s merger with Malaysia and never restored because of extant smuggling trade. Indonesia must be as important as Malaysia in Singapore’s trade relations. Table 13.1 shows Indonesia’s main export and import markets in 1996. Singapore accounted for the third largest in exports and fourth in imports. Thus, Singapore was the top ASEAN market for Indonesian exports and imports. Table 13.1 Indonesia’s Main Export and Import Markets (In US$ million) Exports 1994 1995 1996 1997 e Japan 11711 12627 12885 13976 US 6382 6852 6795 8150 Singapore 3605 2898* 4565 Na South Korea 2584 2888 3281 3880 Germany 1684 1535 1489 1984 China 1445 1817 2057 2400 Hong Kong 1150 1579 1625 1468 Others 11499 15222 17119 21595 Total 40060 45418 49816 53453 Political Economy of Business Relations Between Indonesia and Singapore 347© 2003 Institute of Southeast Asian Studies, Singapore Table 13.1 (continued) Indonesia’s Main Export and Import Markets (In US$ million) Imports 1994 1995 1996 1997 e Japan 8441 10735 8504 11056 US 3092 4572 5060 4976 South Korea 2794 2949 2411 4192 Germany 2408 3052 3001 2802 Singapore 2045 1288* 2875 Na Australia 1597 2156 2535 2862 UK 617 1013 1118 892 Others 10886 14864 17365 14889 Total 31880 40629 42869 41669 e BMI estimates. * Non-gas and oil only. Source: Bank Indonesia, Business Monitor International (Indonesia, 1998), p 66. Table 13.2 shows Indonesia’s top investors on a cumulative basis from 1967 to July 1996. Singapore was fourth after Japan, the United Kingdom, and Hong Kong, but first among the ASEAN countries. Table 13.2 Indonesia’s Top Investors, 1967–July 1996, Cumulative (In US$ billion...