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On a typical day, more than 500 ships sail in or out of the harbor here, an armada of mercantilism that makes Singapore one of the busiest ports in the world.
These days, though, Singapore stands at the terminus of a commerce parking lot.
Hundreds of ships idle at anchor within sight of this city-state, giving the Strait of Malacca the look of Burnham Harbor on the 4th of July. Except the vessels in the water have the length and girth of a mid-rise office building, and the people on board are not having fun.
“Look at the number of ships anchored out there,” exclaimed David Lum, chief executive of Chicago-based Aon Corp.’s South Asia business, waving an arm toward the still life on the waters visible through both corner windows of his 32nd-floor office. “They’re all anchored there with a skeleton crew, waiting for some cargo to load. But there isn’t any.”
Singapore harbor sums up how the global economic crisis has reached around the globe. Starting with the housing and financial crises in the U.S., it quickly leached into Europe’s financial markets, then spread to China when Americans stopped buying furniture, electronics and cars. Now that China’s growth engine has ground to a halt, the supply-chain economics of Southeast Asia are sputtering toward a stopping point too.
That’s why maritime Singapore is at a standstill, one that affects the local economy and revenue at Aon, the insurance giant with headquarters off Michigan Avenue.
Aon’s revenue from Southeast Asia has declined sharply as ships that hired out a year ago for around $60,000 a day now have a hard time fetching $8,000 a day, and far fewer are leaving port.
“Shipping values have collapsed completely,” said Lum. And so has revenue from the shipping insurance Aon sells from its Singapore office.
Before the economic crisis hit, there was some talk that the Asian economy had “decoupled” from the old days of U.S.-dominated global economics. China’s growth was so powerful a force, the argument went, that a China-centered Asian economy was growing, and thriving, almost independent of the U.S.
Few people talk that way anymore.
Chia Siow Yue, senior researcher at the Singapore Institute of International Affairs, used to see some logic to the argument for a decoupled global economy.
“Now we know that Asia has not decoupled, and that is the problem,” she told a group of journalists touring Southeast Asia in a program sponsored by the East-West Center of Hawaii.
Evidence of the close coupling abounds in Asia.
The Chinese economy, which grew at double-digit rates in recent years, is expected to slow to an 8 percent pace this year, a dizzying slowdown that prompted Chinese officials this week to criticize the “Buy American” policies in the U.S. economic stimulus package. Japan’s heavy reliance on U.S. exports was at the heart of its weakest economic report in 35 years.
Tiny Singapore has seen multiple signs of trouble, not surprising, perhaps, for the world’s most trade-intensive economy at the time of a global economic breakdown.
The key electronics sector is staggering, with the electronics purchasing managers index hitting a record low in December. Singapore Airlines, a major carrier to Chicago and other U.S. cities, announced it is cutting 11 percent of its fleet and will cut staff. Singapore’s economy is expected to shrink some 2.4 percent this year, which would be the worst performance since after the dot-com bust in 2000. Rents in Singapore’s densely populated office market are expected to drop by half this year.
The fully coupled economy may be a problem for now, but it has the potential to be an asset to the Asian economic zone if the U.S. leads the world back from recession a year or so from now, as many economists expect.
When that happens, Aon’s Lum may be among the first to notice. The evidence of a comeback will move right before his eyes, just outside his office window.