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SCMP Reporter

The region's economies should stick to their policy of globalisation despite the onset of recession, Singapore's Deputy Prime Minister Lee Hsien Loong said yesterday.

 Mr Lee said Asia's financial crisis had exposed the 'downside risk' of globalisation.

 'Foreign capital brings growth, but it can also transmit instability and external shocks,' he told a lunch held by the Singapore and Hong Kong general chambers of commerce.

 'But backtracking from globalisation cannot be the solution for the world. The trend of technology is strongly towards ever larger economies of scale and finer division of labour.

 'The cost of a reversal will be very high.'  Small, open economies such as Singapore and Hong Kong could not afford to be cut off from the rest of the world, when they relied so heavily on free flow of trade and investment.

 Mr Lee cautiously criticised Malaysia's recent moves to impose capital controls, saying this approach went against conventional solutions.

 As its nearest neighbour, Singapore had an interest in Malaysia and was anxious that Prime Minister Mahathir Mohamad's policies succeeded in restoring economic wealth.

 Mr Lee said the key to Singapore's approach to the financial crisis was to reduce costs drastically.

 The process had begun in June with measures aimed at reducing costs and a S$2 billion (about HK$9.46 billion) infrastructure programme, followed by another package of reforms to reduce labour, land and utilities costs.

 Mr Lee said the wage cost reduction was the most important strand of Singapore's economic survival.

 Singapore was still expecting economic growth of between 0.5 per cent and 1.5 per cent this year.

 International solutions were also needed to the crisis, he said.

 However, transparency and disclosure of standards of auditing of macroeconomic data were all necessary, Mr Lee said.



Singapore's Lee warns against backtracking from globalisation