What not to learn from Singapore

SCMP June 29 2014

So much - often nonsense - is written about how Hong Kong should follow Singapore in assorted ways - economic, political, social and so on. It is time to set the record straight.

First, the good things about Singapore. The most prominent and least controversial are its efforts to be in the van of environmental improvement, whether reducing air pollution, limiting private car ownership and taxing its use, or recycling water.

The reason Singapore has done these things is not because it has an authoritarian government but because it has strong political and bureaucratic leadership, which is relatively impervious to narrow business interests, of the sort with which Hong Kong is all too familiar. It also knows that most of these policies meet with public approval. That helps sustain the People's Action Party in power.

The downside of Singapore's authoritarian system is plain to anyone with the remotest interest in free speech and assembly, and keeping the noses of the government out of personal affairs and private business. That difference indeed remains the cornerstone of Hong Kong. However, it has yet to find a way of marrying these freedoms with a government that is both effective and reflects the interests of the majority.

In Singapore, the ruling party used state power to build an economy in which state enterprises and foreign companies were pre-eminent, and often provided with tax breaks, effectively curtailing the influence of big private businesses and disadvantaging small businesses.

There should be real concern in Hong Kong not only about the political power of a few, mostly property-related business, but also the use of government regulations to favour select mainland state enterprises in key areas such as telecoms and power. The push for Hong Kong to become "more like Singapore" is all too evident.

One bizarre aspect of this was a recent claim by an academic that Singapore's economy is now growing faster than Hong Kong's, partly because Hong Kong is slowed by an increase in public housing. In fact, public housing construction was at its height when Hong Kong was growing fastest - the 1970s and 1980s.

These opponents of public housing in Hong Kong prefer to forget that 80 per cent of Singapore's housing is controlled by the government's Housing Development Board. Though owners can sell, the board has many restrictions which make a nonsense of real private ownership.

Likewise, the compulsory savings system, the Central Provident Fund, not only enforces a high level of savings but ensures that much is directed into low-yielding investments, and HDB housing, so that retirees face at least as problematic a future as their counterparts in Hong Kong. The only advantage Singaporeans enjoy is that lower inflation has meant that savings deposits have not been eroded so rapidly as in Hong Kong, where negative real interest rates have contributed to income inequality.

Not that Singapore has been doing better on that score. Inequality over the past decade has been increasing just as fast.

Singapore's performance would probably be even worse if comparative statistics reflected its huge reliance on temporary, low-paid workers. It has over 200,000 foreign domestic servants - more than Hong Kong does relative to population size. In a population of 5.4 million, only 3.3 million are citizens.

The number of foreigners on various types of employment pass now stands at 1.3 million. Some 336,000 of these are skilled people who have helped raise productivity. But 985,000, or nearly 30 per cent of the workforce, are low-skill employees with work permits.

In other words, Singapore's economic growth has recently outstripped Hong Kong's largely because of this cheap, disposable labour. Is this the sort of society Hong Kong wants to be? One which does not just welcome skilled people from around the world but relies on an army of serfs who subsidise the rest of the population by providing cheap labour but are not allowed to bring families and so make no demands on educational and social services?

Both cities face dangerously low fertility rates, the result of money concerns overwhelming the so-called "Asian family values", of which Singapore used to boast.

Bizarrely, the same commentators who say Hong Kong is slipping in terms of factor productivity growth also demand entry of more unskilled labour. Surely they should see Singapore as an example of what not to do. For sure, Hong Kong needs some immigration to offset an ageing population. But let it be of skilled people with ambition from anywhere, not those decided by some opaque mainland system. Low productivity in sectors ranging from construction to petrol stations is a result of low wages deterring investment.

But Hong Kong does not share Singapore's reliance on foreign capital and labour. Despite its huge foreign exchange reserves, Singapore's gross national income is less than its gross domestic product. Hong Kong is the opposite.

The bottom line is that we have little to learn from Singapore. Hong Kong - even the current government - already knows its own failings. But does it have the means of correcting them?




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