Singapore and Indonesia have been conducting “megaphone diplomacy” with each other in the past few weeks. Officials and parliamentarians on both sides have been trading barbs over Indonesia’s sudden ban on the export of sand to Singapore and the bilateral Extradition Treaty that Indonesia so desperately seeks.
Indonesia has been wanting to sign the Extradition Treaty with Singapore for over 30 years. However, it is only in the past decade since the 1997-98 financial and political crisis in Indonesia that nationalistic drumbeats have forced this to the top of its foreign policy agenda with Singapore. In 1999, then-President B. J. Habibie accused Singapore of being racist and harbouring “economic criminals” as he tried to pressure Singapore to sign the Extradition Treaty. It was in this context that Habibie uttered his now infamous remark that Singapore is nothing but a “little red dot in a sea of green”, an analogy that the Singapore Government has used ever since to explain its dispassionate and clinical approach to foreign policy.
After Singapore’s and Indonesia’s new leaders — Lee Hsien Loong and Susilo Bambang Yudhoyono — took power in 2004, the two countries finally agreed to move forward on talks on the Treaty. In early 2005, during President Yudhoyono’s first state visit to Singapore, PM Lee assured him that Singapore would work towards concluding the Treaty. But since then, Singapore officials have been uncharacteristically slow in working out the details of the Treaty to bring it to a conclusion.
The Indonesians have not bothered to hide their impatience with Singapore’s apparent delay tactics. In February this year, Jakarta suddenly announced a complete ban on sand exports to Singapore. Singapore was the biggest importer of Indonesian sand, which is needed for its construction industry. The Indonesians first cited environmental and border encroachment concerns. But then the Director-General for Asia in DEPLU (Indonesia’s foreign ministry) revealed to the Jakarta Post on 26 February what both parties knew all along: the sand ban had nothing to do with the environment, and everything to do with applying pressure on Singapore to conclude the Treaty expeditiously.
The next day, Indonesian Vice President Jusuf Kalla lashed out at Singapore in an interview with the Financial Times for “refusing to sign” the Extradition Treaty. He accused Singapore of trying to keep “billions of dollars” in corrupt money siphoned out of Indonesia by fleeing tycoons during the 1997-98 financial crisis. He added that “Singapore often says there’s so much corruption in Indonesia. But when we want to work together on combating corruption, they don’t want to.”
A report in Australian daily The Age (“Singapore none too fussy about the source of wealth in its financial sector”, 26 July 2006) pointed out that among those believed to be hiding out in Singapore are convicted crooks who had embezzled hundreds of millions of dollars from Indonesian banks and state investment agencies. Many of these white collar criminals had bribed state bank officials to give them huge unsecured loans, and then fled to Singapore.
Singapore: Indonesian corruption is not our problem
The Singapore Government has countered Indonesia’s claims by pointing out that an Extradition Treaty is not going to solve its corruption problems, and that the main culprit is poor law enforcement within its own borders. It has also argued that the Treaty is a complex document that is complicated even further by the different legal systems in each country.
It is clear that the Singapore Government does not see any economic benefit in concluding the Extradition Treaty with Indonesia. A Merrill Lynch report in October 2006 found that one-third — or 18,000 — of Singapore’s high net worth individuals (those with over $1 million in assets) are Indonesians holding Singapore Permanent Residency. Their combined assets are worth a whopping $87 billion — prized foreign talent indeed! No doubt these Indonesian tycoons have contributed tremendously to the strong growth of Singapore’s wealth management industry in recent years.
Of course, not all rich Indonesians living in Singapore are corrupt. But the fear in the financial services industry is that once the Treaty is signed, many corrupt Indonesians will simply pull out their money and move to another safe haven to avoid extradition, and in the process hollow out Singapore’s private banking industry. So while Indonesia’s loss has been Singapore’s gain, Singapore’s loss (when the rich crooks pack up and leave for third countries) will not necessarily be Indonesia’s gain.
So what’s in it for Singapore?
So, from a Singaporean perspective, are there any compelling reasons for concluding the Extradition Treaty with Indonesia? In my humble opinion, there are many.
Firstly, it is the morally right thing to do. “Always do what is right, because it is right“, is what an American soldier’s mother advised him when he went out to war in Clint Eastwood’s movie, Letters From Iwo Jima. Just because Indonesia wrongly thinks that the Extradition Treaty is a panacea for its corruption problems, doesn’t mean that Singapore should continue to provide refuge for economic fugitives and profit from their dirty money. As a Christian, I am convinced that “righteousness exalts a nation, but sin is a disgrace to any people” (Proverbs 14:34, NIV). We will reap in future what we sow now. Obviously this cuts little ice with our self-proclaimed rational and amoral government, but that doesn’t make it any less important.
Secondly, taking a firm stand on money laundering will raise our profile as Asia’s premier fin
ancial services hub. This issue has been reported in the leading newspapers in Australia, the UK and goodness knows where else, causing much damage to Singapore’s squeaky clean reputation. The Government previously claimed that there is no need for an extradition treaty, because Singapore banks already have stringent checks in place to ensure that the Republic is not used as a money laundering centre. If this is the case, then the Government should have no worries that the Extradition Treaty will impact the money parked in local banks. If it turns out not to be the case, then it’s high time our banks put their house in order.
Thirdly, the conclusion of the Extradition Treaty will extinguish Indonesia’s main bargaining chip in its negotiations with Singapore. They have already agreed to renew the bilateral Defence Cooperation Agreement in exchange for the Extradition Treaty. In addition to continued access to training areas for the SAF, improved defence diplomacy with Indonesia will in no small way contribute to Singapore’s security. The Treaty will also remove the main bugbear in bilateral relations with our largest and most important neighbour, and open doors for further cooperation in a myriad of areas.
Finally, if Indonesia makes inroads into combating corruption, Singapore will be one of the main countries to benefit. This is the basis of ASEAN’s “Prosper Thy Neighbour” policy. Corruption is a scourge that is preventing the Indonesian economy from achieving its full potential. Although an extradition treaty is not going to fix Indonesia’s endemic corruption, it is part of the effort and would force corrupt businessmen to think twice before committing fraud and escaping to Singapore.
Indonesia is Singapore’s second-largest trading partner and Singapore is one of Indonesia’s biggest foreign investors. A growing Indonesian economy would be a boom for not only our exporters and investors, but our services industry as well. It is certainly not a “zero sum game”, as many in our government often see it. A Business Times report (“Betting on IT in Indonesia”, 1 March 2006) indicated that there is strong interest among Singapore’s companies in the Indonesian ICT market, which is set to grow from US$1.9 billion in 2005 to US$3.7 billion in 2010. Lower corruption means more efficient running of business and less “overheads” that need to be paid out to get things done.
Concluding the Treaty “early”
It is heartening to note that the Ministry of Foreign Affairs indicated yesterday that Singapore “would like both Agreements (the Extradition Treaty and the Defence Cooperation Agreement) to be concluded early”.
Hopefully this is the honest truth, and not just more diplomatic lingo.