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Singapore's economy: SARS gloom and doom
By Tony Sitathan

SINGAPORE - For its quick and timely response to curb and contain the spread of the severe acute respiratory syndrome virus, Singapore was almost awarded SARS-free status for not reporting any new incidents for a two-week period, from the World Health Organization (WHO), recently. Unfortunately its hopes were dashed when a Singaporean was diagnosed with SARS several days ago.

Calling this an isolated incident, however, Singapore is preparing for a post-SARS recovery of both its economy and its business confidence. It already has earned kudos from the Australian Chamber of Commerce in Singapore (AustCham), which welcomed the recent comments by Qantas chief executive officer Geoff Dixon, who recently visited Changi International Airport. He was confident that the SARS situation would have no impact on the Australian airline's position as one of the mainstays of the airport. Qantas is the second-largest user of Changi's services after Singapore Airlines.

The Australian chamber, similarly to the US Chamber of Commerce, has issued statements confirming that the Singapore government's measured, transparent and effective approach to fighting and containing SARS has reaffirmed a high level of trust among the business community. The two chambers felt that the open and honest communication with all sectors of the population, including expatriates, has worked to abate the fear of traveling to Singapore.

However, the damage done to Singapore in dollars-and-cents terms is staggering. Singapore's exposure to SARS has cost it nearly US$570 million, or close to S$1 billion. The effect has been so damaging that Singapore's unemployment level has moved to a record high of 5.5 percent.

"Singapore's tourist sector has been decimated," said Angeline Woo, the general manager of Trans-Global Travel Services based in Hong Kong. "We are seeing fewer bookings of tourists going to Singapore from Hong Kong. It has dropped by almost 70 percent over the last four months." The official drop in tourist arrivals has been pegged between 30 and 40 percent this year according to figures disclosed by the Ministry of Trade and Industry. It was a drop described as unprecedented in the history of Singapore.

Singapore has been reliant on its services sector for maintaining its economic growth. Singapore's reputation as a convention and exhibition center has also been badly affected as several conventions have been canceled by event organizers. With the slowdown in tourism, its hospitality industry including the traffic in its national airline has been badly affected. "The airport is almost empty and traffic load for planes has been halved in most cases. Singapore Airlines for instance has slashed 298 flights from its weekly schedule, causing a near 28 percent reduction while layoffs in its engineering section are to be announced later," said a senior traffic engineer with SIA Engineering Division.

The government has announced that its growth forecast for 2003 has been halved while maintaining that its rise in gross domestic product will not exceed 2.5 percent. Some analysts even maintained that if the SARS continues well into the second half of 2003, Singapore could well see a negative growth since its manufacturing sector would equally be affected.

According to a recent survey by the Singapore Confederation of Industries (SCI), the impact of SARS has been somewhat mild compared with the negative spin in the services sector. It was revealed that manufacturing sales might fall by up to 20 percent and production could post a fall of less than 10 percent in coming months if the SARS outbreak is not prolonged any further. However, if the SARS outbreak is prolonged, losses could be higher. "Manufacturing, considered the heart of Singapore's economy, would throttle and weak sales demand for finished goods would decline by more than 30 percent should the SARS outbreak not be contained," said Andrew Song, a regional economist with an investment bank in Singapore.

In order to assist the manufacturing sector, several manufacturing firms have wanted the government to extend property and rental rebates for another six months, and postpone the increase in its goods and services tax (GST) from 4 percent to 5 percent until next year.

Besides the manufacturing sector, the information and communication (infocomm) industry is also a victim of SARS. According to information-technology (IT) research group Gartner and International Data Corp (IDC), buying decisions for major infocomm purchases have been postponed, especially hardware updates and upgrades. Gartner said personal-computer sales growth in Singapore in 2003 is expected to be near zero because of the SARS outbreak. It has also predicted poorer semiconductor sales for the Asian region, including Singapore, in a report this month.

IDC has also predicted weaker sales and a lower market forecasts for Singapore after taking into account the SARS outbreak. It intends to lower its full-year as well as quarterly forecasts for the IT market in Singapore, once it has updated its forecasts toward the second half of May and early June. It had earlier forecast Singapore's overall IT market at about US$3.19 billion in gross revenue in 2003, up a modest 4.5 percent from last year's $3.05 billion. Although the situation could improve, it would be overly optimistic to paint a rosy picture for the rest of 2003, maintained the report.

While Singapore is battling with a crisis on confidence, the effect of SARS on the Singapore economy seems to take a page from Deputy Prime Minister Dr Tony Tan, who described the SARS attack as similar to the September 11, 2001, incident in the United States. Only this time instead of losing lives to a terrorist attack, Singapore seems to be losing its engines of growth in a battle of economic wills.

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May 23, 2003

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