TOP SECRET
An essential feature of the situation is that it is extremely difficult to envisage the development of markets for products manufactured in Singapore sufficient to support a viable economy. It may be algued that unexpected developments could transform Singapore's economic prospects (e.g. a rapprochement with Malaysia and a speedy recovery by Indonesia)
but we have no right to count on this.
43. The economic problems of Singapore are complicated by the rapid growth of the working population and the already high rate of unemployment, which even in terms of the level of unemployment which is unfortunately common in Asian countries presents a particularly difficult problen. Clearly if no
corrective action is taken, the rapidly mounting level of unemployment
combined with a drastic fall in incomes implied by the rundown on the assumptions set out above would bring economic, social and political chaos to Singapore well before the rundown itself could be completed.
There is
a clear and obvious British interest in avoiding such a situation not only from the point of view of maintaining conditions for an orderly withdrawal but also to protect our financial and commercial interests in Singapore and to avoid introducing a major element of instability into an already disturbed
We have, therefore, to consider the ways in which the effects of the rundown on the Singapore economy could be mitigated. These can be sub-
area.
divided into the following broad categories
(a) Redundancy payments.
(b) Defence aid and budget support.
(c) Development aid and commercial measures.
The effectiveness of the remedial measures will depend on Singapore's
co-operation with us in an agreed programme,
4. It should not, of course, be assumed that Her Majesty's Government would necessarily have to foot the whole of the bill for remedial measures though there would be strong local pressure for this. However the prospects for finance from elsewhere are by no means hopeful. It is unlikely that
there will be many projects which would attract International Bank lending, per capital incomes are too high to justify IDA lending and while it may be possible for Singapore to obtain some loans from the Asian Development Bank, (particularly the Special Fund) the amounts involved cannot be great and
could only have a marginal significance. Other bilateral donors are likely
to consider this problem as basically a British responsibility. It would
be logical for us to press Australia and New Zealand, in view of their own
-16-
TOP SECRET
Page 90Page 91