Analysts warn that Singapore's clean and green reputation has taken a hit from Indonesian forest fires and its standing as a corporate and expatriate haven could be hurt if the smog becomes an annual scourge.
Singapore has long been a destination of choice for thousands of foreign companies and expat families drawn by its gleaming infrastructure, topnotch healthcare and education, and lush green environs that offer a high quality of living.
But its image took a heavy beating in the third week of June after palls of smoke from slash-and-burn agricultural fires on the nearby Indonesian island of Sumatra pushed levels of haze to record highs, shrouding the city in acrid smog.
Favourable winds, thunderstorms and cloud-seeding by Indonesia over Sumatra have dissipated the smog, but Singapore officials warn that severe air pollution could return any time during the June-September dry season.
If the smog becomes an annual crisis, some multinational companies may consider relocating offices, key operations and expatriate families out of Singapore, analysts warn.
"The long-term reputation of Singapore as a clean-environmental place to live in is at risk if the problem gets worse every year and no solution is in sight," said Jonathan Galaviz, managing director of US-based business consultancy Galaviz and Company, which specialises in Asia.
"I know what it's like," said Galaviz, who was an exchange student in Singapore in 1997 when similar blazes resulted in weeks of choking smog across vast swathes of Southeast Asia and billions of dollars in economic losses for the region.
Many expatriate families living in Singapore were already overseas on summer holidays as smog levels started to rise in mid-June. Air pollution also reached harmful levels in neighbouring Malaysia.
Expatriates who stayed in Singapore were hardly comforted by the chatter on online forums, where some members wondered whether their governments would evacuate them as the smog hit unhealthy levels. Some families, desperate for a respite, fled to neighbouring countries on short breaks.
If smog becomes a prolonged or recurring problem, Singapore's tourism industry, which accounts for 6.0 percent of the city-state's GDP, could suffer badly. International arrivals, currently averaging 40,000 a day, could fall, economists say.
During the SARS epidemic in 2003 that grounded air travel during peak periods of the flu-like virus, Singapore's daily arrivals of around 20,000 at that time plunged to 5,000-6,000 a day in the first quarter, said regional economist Song Seng Wun of Malaysian bank CIMB.
At the height of the current haze crisis, several outdoor tourist attractions shut down while some visitors left Singapore earlier than planned. An international conference on reducing the threat of nuclear weapons was cancelled.
More troublingly, observers warn that if the problem escalates there could be a gradual exodus of foreign companies that have set up offices or regional headquarters in Singapore.
Initially, companies might consider "temporarily" relocating key operations should the haze persist for weeks, said Rajiv Biswas, chief Asia Pacific economist at research firm IHS Global Insight.
"However, if the haze escalates to hazardous levels for a protracted period, to the extent that a state of emergency is declared for an extended time, firms may consider shifting some essential operations to other international hubs," Biswas told AFP.
The problem could tarnish the "long-term perceptions of Singapore as a safe, clean environment for expatriates to locate their families compared to other leading global business hubs and financial centres", he added.
But Delphine Granger, a 40-year-old French-British housewife and a mother of two young girls, is unfazed by such dire predictions. She said Singapore offered far better prospects as an expatriate haven than many other Asian capitals that are beset by natural disasters, political turmoil and traffic gridlock.
"Singapore is well ahead of other cities," Granger, who has been based in the city for nine months, told AFP.
Observers point out that rivals Hong Kong, Shanghai and Beijing are burdened by chronic air pollution. Bangkok, the gateway to the Indochinese region, is periodically hit by floods and political unrest, as is Manila, which is fast emerging as a global outsourcing hub.
"I don't think (Singapore's) image is tarnished. There are no natural disasters here. It's not an earthquake zone, it's not a volcano zone. This is a man-made disaster," Granger said.
Meanwhile, Singapore appears keen to step up pressure on Indonesia as it struggles to contain slash-and-burn farming in its rainforests that generates vast plumes of smoke during the dry season.
"We need to put in place a permanent solution to prevent this problem from recurring annually," Singapore Prime Minister Lee Hsien Loong said after Indonesian President Susilo Bambang Yudhoyono apologised to Singapore and Malaysia for the haze crisis.
The smog issue was discussed over the weekend at the Association of Southeast Asian Nations annual foreign ministers' meeting in Brunei, where Indonesia said the forest fires had been greatly reduced and vowed to sustain its efforts to address the problem.