Attracting and Retaining Investments in Uncertain Times: Singapore in South-east Asia

Abstract

This paper takes a political economy approach in evaluating the state's role in investment promotion. Using the Asian financial crisis as an opportunity to study regulatory mechanisms, the paper examines both state-society relations as well as relations between Singapore and its neighbours, Indonesia and Malaysia. The difficult policies which Singapore enacted during the crisis-namely, a wage-cut as well as the drive to recruit foreign skilled labour in the midst of a depressed economy—cannot be understood except in terms of an institutional context involving agencies, interest-groups and segments of society and the state's continuing ideological work and, specifically, within an embedded autonomy position where the state was able to fend off lobbying efforts while at the same time using its position with the unions to push for wage-cuts and skilled foreign labour. Such embedding or nestedness was also apparent in Singapore's regional relations. The incorporation of the Riau islands in Indonesia in sub-regional production networks managed by Singapore led to consistent stances taken by Singapore and Indonesian regional authorities to protect investments, in the midst of inconsistent signals between the national governments of the two countries.