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Singapore officially in recession -

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Reporter: Karen Percy

LEIGH SALES, PRESENTER: Once an Asian economic success story, Singapore is now officially in
recession. Its decline has come as a shock to many Singaporeans who now face job losses and pay
cuts and hundreds of thousands of foreign workers may be forced to return home. South-east Asia
correspondent Karen Percy reports from Singapore.

KAREN PERCY, REPORTER: For decades, Singapore has been the envy of its neighbours across south-east
Asia, but after years of extraordinary advances, times are changing. Singapore's economy is heavily
dependent on external trade and shipping, with both sectors struggling now because of the huge
problems being seen in the United States and Europe.

SONG SENG WUN, ECONOMIST: We see Singapore registering very, very strong above trend growth for
several years. Now the opposite has happened where we have significant slowdown in demand across
the board. So, as a result of that, you know, we have seen headline numbers coming off very, very
quickly.

KAREN PERCY: According to the minister mentor and one-time Prime Minister Lee Kwan Yu, GDP could
fall 10 per cent this year. The father of modern Singapore is so concerned, that he himself issued
a warning this month for people to ready themselves for tough times ahead.

The immediate effects are being felt by the country's foreign workers. In good times, the Tekka
market in little India is teeming with customers, many of them the much-needed workers who keep
Singapore's building sites and low-skilled industries moving. But many of the usual patrons have
been forced to leave because of the lack of work.

MARKET SELLER: Well I would say there are a few, like, three or four customers, my regular
customers from India, they have told me previously, about two to three weeks ago, that they have to
go back because of this economic downturn. They don't have - their company has no business, you
see. So, they have to go back.

KAREN PERCY: By some estimates, 200,000 foreign workers could be affected over the coming year and
that will have a big impact on those all along the chain.

MARKET SELLER II: The business at the moment is about - drop about 40 per cent, our business. You
see in the morning, so quiet.

KAREN PERCY: Modern Singapore has had hard times before. During the Asian Economic Crisis of the
1990s and then the dotcom bust. But it has never seen anything of the depth and breadth of this
downturn, which is affecting everything from tourism to construction to electronics.

The big-spending Americans and Europeans are staying away and business travellers are also cutting
back. That's giving the local cabbies plenty to gripe about.

CAB DRIVER: Now because economy all the world's very bad and foreigners less come to Singapore.

PHILIP OVERMYER, INTERNATIONAL CHAMBER OF COMMERCE: Our output has plummeted. We've seen factories
dramatically scaling back on what they're doing in terms of output. And throughout the whole
economy, this is starting to ripple through. I think it's still early, though, in the game.

KAREN PERCY: Exporters are looking for fresh opportunities and markets to guard against the
downturn. At Tow Orchids, 50,000 stems are shipped every week to Japan, Australia and beyond. For
more than three decades, Too Peng Sung's family has run this business.

TOO PENG SUNG, BUSINESS OWNER: Every week, practically speaking, every day, we are harvesting. So,
if the market orders, we have the flowers for them.

KAREN PERCY: Turnover is more than $3 million a year. Every step of the way, the family has had to
react to change.

TOO PENG SUNG: You know, in the '80s we grew anything and everything sells. In the '90s, we had to
grow what the market wants. What about in the 20s now? We really had to just the quantity, the
colour, the variety. Then what next?

KAREN PERCY: It's Singapore's soon-to-be graduates who are likely to be most affected by the
downturn. They're the first modern generation who won't be guaranteed high-paying jobs when they
leave university.

STUDENT: I expect that, like, maybe really good prospects, you know, like after five years, you
know, companies would be coming for us and stuff, but it's not happening.

STUDENT II: We have entered a state that, you know, there's no jobs for us. And even if there are,
it's just, like, you know, so many people competing for the same and because, you know, with
cost-cutting, everybody's just gonna, like, you know, reduce.

KAREN PERCY: Many students are thinking about extending their studies or altering their courses to
make themselves more marketable.

PHILIP OVERMYER: People coming out of schools now while it will be harder for them in the
short-term, I think in the long-term these people will become the ones that are more resilient,
understand what needs to be done, know you can survive with less than you thought you can and know
how to get by in hard times.

KAREN PERCY: Singaporeans might be feeling the downturn more than most in the region right now, but
they remain confident that the Government, with its large reserves and solid track record, is also
in better shape than most to deal with it. Karen Percy, Lateline.