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Hong Kong (SAR, China) and Singapore are two of the four Asian Tigers that keep driving the economy of the Asia-Pacific region towards significant development. Whilst they hold many similarities to Western economies, they remain special due to their small size and dense populations that work day and night to push socio-economic progress.
Together with Taiwan and South Korea, economists have often considered the four part of “The East Asian Miracle”, due to their rapidly industrialising economies that have now made it into the category of ‘high-income country’. By the early 2000’s, in fact, both Hong Kong and Singapore held leading financial and business hubs of Asia, specialising in areas of competitive advantage that benefited the services sector greatly.
Taken as role economic models for other regional developing economies, the “Tiger Cubs” experts continue to study their export-oriented, welfare, and tax policies in order to understand the phenomenon that concerned their rapid development and the implications this may have in the future.
|World Bank 2018 Data||Singapore||Hong Kong SAR, China|
|Population||5.6 million||7.4 million|
|Surface area (thousands of sq. km)||0.7||1.1|
|GDP (US$)||US$ 364 billion||US$ 362 billion|
|Unemployment Rate (%)||4.2%||3.1%|
|Industrial Sector (% of GDP)||25%||6%|
|Services Sector (% of GDP)||69%||86%|
|Exports of goods and services (% of GDP)||176%||188%|
These two city-states have often been compared due to their similar GDP per capita, low poverty rate, low unemployment rate, and explosive services sectors. Recent data from the World Bank Database is gathered in a table above demarcating these similarities.
As shown, the Chinese Special Administrative Region of Hong Kong occupies a bigger territory and hosts a greater population, however, Singapore remains the wealthiest of the two, presenting a rather balanced economy that values the importance of the industrial sector. Hong Kong is positioned strategically geo-politically, allowing it to communicate with the Chinese industrial cities of Shenzhen and Guangzhou. Its economic focus may for this reason be fully shifted towards the services sector. Among the many factors contributing to its development, one can indicate Foreign Direct Investment (FDI) and Import-Export as the most prominent.
However, the historical and political contexts these powers have grown in are leading them to separate destinies. Often, Singapore has been described as a rather independent and complete economy, whereas Hong Kong seems to be increasingly relying on the People’s Republic of China.
The Story of the Lion and the Panda
The name given to the city-state of Singapore originates from the Malay “Singapura” – the “Lion City.” This animal – also known as “The Merlion” – is frequent in the ancient history of Singapore, and symbolises the calm and wiseness of its inhabitants in fighting against evil creatures in the sea. Hence why, the lion is often portrayed with the body of a fish, roaring towards the sea.
It is possible that the semiotics related to the Merlion gather influence from Malaysian culture as well as from British colonisation irrupting repeatedly in the 1920’s, until establishing the Colony of Singapore, lasting from 1946 to 1963. It is in 1965, when Singapore became an independent Republic, the island started employing all its resources and strategic position (just between Asia and Oceania) to push for progress.
A friendly Giant Panda, instead, kept observing from the North. Coming from a painful history of viewing the British and Mainland Chinese constantly contending for its land, the national symbol of Hong Kong – the Giant Panda – portrays a rather calm and silenced reality suffered by the Hong Kong population until recent protests in 2019.
Hong Kong, unlike Singapore, was never able to proclaim independence. Despite the outstanding economic development it has undergone since the end of 1990, the Giant Panda of Hong Kong still seems to have a hard time convincing the Dragon (the PRC) that it should leave the Pandas alone.
The Implication of Sovereign Political Systems
Politics-wise, Singapore and Hong Kong are at opposite extremes. Singapore is governed by a Westminster-like democracy, whereas it is the Chinese Communist Party of the People’s Republic of China that monitors the Special Administrative Region. While Hong Kong has some degree of freedom in executive powers just like Macao and other SARs in China, the Mainland government keeps a tight grip on Hong Kong’s territory. This is especially visible in 2020, when the Chinese government imposed the National Security Law in response to local protests.
Even if Singapore is effectively a capitalist economy, just like the United Kingdom, experts often tend to highlight that, in reality, the Singaporean government has an incredible amount of power. The State, in fact, owns about 90% of the land, and state-owned enterprises provide 80% of the available housing. It is no surprise, therefore, that Singapore has been rated among the highest in Asia for government effectiveness, rule of law and corruption control. However, due to struggles with lacking human rights and civil liberties, sources such as The Economist Intelligence Unit consider Singapore a “flawed democracy” (2019 data).
Therefore, one would easily think that, being governed by a former Communist State, Hong Kong’s soil is similarly state-owned. However, the central Chinese Communist Party only intervenes on matters that are considered of crushing importance or that are related to the sovereignty of China. The daily decision-making, instead, seems to be trusted in the hands of local tycoons: families with overwhelming political and economic power in Hong Kong.
These famous “Crazy Rich Asians” include holders of Swire Pacific, Galaxy Entertainment Group, and Jardine Matheson Holdings. According to economist Andy Xie in an interview with CNBC, “The Hong Kong government is not really in charge (even though) most people think that they need to listen to Beijing, but perhaps more importantly, they are really influenced by the big property tycoons.” In fact, one of the latest news reports concerning the National Security Law, stated that the tycoons reunited to put their names behind the law, so that the Chinese government would approve to discuss with them how to relocate a wealth summing up to $140 billion USD in safety.
The political structures of these systems, therefore, go beyond the conventional assumptions of how decision-making processes occur in seemingly democratic or socialist marketized systems. Both Singapore and Hong Kong are extremely unique in this sense, and such peculiarities, of course, do not only shape domestic politics but also inevitably their economic structures.
Economic Models that Run After Each Other
Export and Foreign Direct Investment certainly have a leading role in the economic structures of these Asian Tigers, however, they present major divergences in the manufacturing sector. As reported from the table at the beginning of this analysis, the industry occupies a larger share of GDP in Singapore compared to its Hong Kong counterpart.
Data shows that manufacturing in this city represents less than 8% of the GDP, and that this depends heavily on the low costs that South China can offer. The whole area of Guangdong (known as Canton province) concentrates an enormous amount of manufacturers, that produce goods to then ship them all over the world. Luckily enough, Hong Kong is just around the corner and can commission these manufacturers to sell goods at a lower price.
From this point of view, Hong Kong is heavily reliant on China and, in the case that it would be granted independence, it is unclear how its economic model would change. The primary, secondary and tertiary sectors seem unbalanced, therefore Hong Kong would be compelled to keep friendly ties with China despite political differences.
On the other hand, manufacturing in Singapore has always represented around 20% of the GDP, maintaining the strategy to diversify the economy steady over time. Singapore has strong ties with China, yet its exports are much more significant with other powers such as ASEAN, the EU, and the US. This may be related to the fact goods and services provided by this Republic are rather expensive because, as a unitary economy, Singapore must be self-reliant. Therefore, China would choose to import the same products at lower costs from developing countries in Southeast Asia.
This, however, does not exclude that Singapore is dependent on the global market’s volatility. This small economy is powerful and does influence the world’s economy at its best, but globalization still exposes Singapore to risks and challenges that vary according to external variations in all sectors.
Competitiveness and Future Prospects
The similarities between the economic models have often escalated in a healthy competition, testing the capabilities of their structures and eventually emphasizing emerging weaknesses. In an everlasting race that sees Singapore and Hong Kong alternating the pole position over the decades, there appears to be no supreme winner. However, as of 2020, the media highlights that it may in fact be Singapore holding first place, gaining ground against Hong Kong in many aspects.
The ongoing protests and Coronavirus outbreak certainly brought very few benefits to Hong Kong’s economy. According to the South China Morning Post, investors complain that they need more harmony in the city and that political instability creates an enormous obstacle, holding back businesses and enterprises rather than encouraging their growth. The recent pandemic has proven that Hong Kong, relying on the tertiary sector, cannot make it on its own in case of external shocks or force majeure. Below, a video by the South China Morning Post explains these implications in detail.
Contrarily, Singapore might have been gaining from these losses. As reported by CGTN and by the President of the American Chamber of Commerce (AmCham) in Hong Kong, 46% of companies are pessimistic about Hong Kong’s future, and 24% have chosen to move their companies overseas – Singapore being their top choice. An estimation by Goldman Sachs also predicts that around $4 billion USD has been fluctuating from Hong Kong directly into Singapore’s pockets since April.
Despite the inevitable benefits the global condition is bringing to this city, however, it is important to mention that Singapore also has no interest in losing Hong Kong as powerful Asian Tiger or as a direct rival. Competitiveness is surely held at a tough level, but Singapore needs its close neighbour to drive regionalism jointly in East Asia. As explained by the Minister for Trade and Industry, Chan Chun Sing, Singapore needs Hong Kong as an economic partner, and its increasing instability not only threatens the population in Hong Kong, but East Asia as a whole.
As for future prospects, Singapore must expect talent migrating from Hong Kong, with young educated people who begin searching there for more valuable job opportunities. However, with population density being a big problem in Singapore, the government might also impose a severe selection process for incoming individuals.
Coronavirus, unfortunately, affected all world economies and Singapore will have its own struggles to overcome. What will occur in the next months is hard to say, but it is very likely competition will continue regardless of the future political status quo of these cities.