Saturday, March 03, 2007

Trade Sanction on Little Red Dot?

Relationship between Singapore and Indonesia has definitely taken a turn for the worse.

First, Indonesia has banned the sale of land sand to Singapore. Second, Indonesia has disrupted the supply of granite to Singapore. The two ingredients are crucial to Singapore's booming construction sector.

Is Indonesia effectively imposing a selective trade sanction on Singapore due to its unhappiness with the little red dot? The answer seems to be yes, without judging the merits of the two countries' cases due to lack of information.

A major thorn in the bilateral relationship is their inability to sign a protracted extradition treaty that may have a big impact on Singapore should it favour Indonesia.

According to earlier reports, Indonesia has been pushing for such a treaty with Singapore in a bid to nab what it regards as criminal fugitives. But Singapore finds it difficult to accede, according to CNA.

What's next? A total ban on trade and the flow of Indonesian capital to Singapore?

Such a scenario is extremely unlikely and is difficult to implement. But any disruption on the flow of Indonesian trade and capital to Singapore could have a crippling effect on the little red dot.

Indonesia is Singapore's sixth largest trading partner with bilateral trade exceeding $30 billion, according to data disclosed in 2004 -- the first time in three decades -- following the end of the Malaysia-Indonesia Konfrontasi in the 1960s.

Indonesians are also the single biggest group of foreign buyers of private homes in Singapore. Many rich Indonesian businessmen obviously see Singapore as a safe haven for their capital.

Singapore will therefore do its level best to safeguard its safe haven status.

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