Will Singapore's heir turn the ship of state?
 
Philip Bowring IHT
Tuesday, August 10, 2004
In his father's shoes
 
HONG KONG On Thursday, 14 years after Lee Kuan Yew stepped down as Singapore's leader, his son Lee Hsien Loong, 52, steps into the prime ministerial shoes that his father wore for decades. The event has long been heralded, but it could produce some surprises. Will the younger Lee follow in his father's footsteps? Or will he try to break out and lead Singapore on a very different course befitting changes in its demographics and global circumstances?
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Lee Hsien Loong is far less popular than the outgoing prime minister, the personable Goh Chok Tong. Goh has been the velvet glove on the iron fist of an authoritarian government and has entrenched support in a bureaucracy not entirely immune from factionalism.
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But Lee has the advantage that his father, still senior minister, may be likely to allow him more freedom to plot his own course. At 80, the patriarch is less and less involved in daily affairs.
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The new leader also has the benefit of a wide network of Lee family relationships and of his wife, Ho Ching. She heads Temasek, the state holding company whose assets include much of Singapore Airlines, Singapore Telecom and the nation's largest bank, Development Bank of Singapore, plus Singapore Technologies which in turn owns the largest real estate company, semi-conductor fabricator, arms manufacturer and much else.
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Singapore's leaders recognize that to stay ahead it must be more inventive, more entrepreneurial and more competitive. Efficiency and a superb infrastructure may no longer be enough. Foreign manufacturers have a wealth of locations from which to choose. An education system focused on knowledge and discipline, and an economic structure in which the government plays a central role and foreign investors get generous incentives, may not be what is now needed.
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Change will not be easy, however, because of the interchangeable roles of members of the political, bureaucratic and state-enterprise elite. They believe in the elite's leadership role and credit its economic "winner picking" for much of Singapore's success. Social rules, such as on sexual relationships, have been liberalized but open political competition is scarcely more acceptable than in China. The neo-Confucian leadership has always been wary of the potential political power of local rich private groups not beholden to the state, just as it has regarded a free press and a viable opposition party as divisive.
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One aspect of Singapore's dilemma surfaced just last week. Temasek is bidding to buy Singapore's major shipping company, Neptune Orient Lines, in which it has a minority stake. The deal would make sense commercially but entail further expansion of the state at a time when Singapore is supposed to be encouraging genuinely private enterprise and initiative rather than trading stakes in government-linked companies.
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Temasek and other government enterprises are also investing heavily in South Korea, Thailand, China, India and Indonesia. Aware of the diminishing returns on massive domestic savings, Singapore seeks the higher returns that younger Asian economies offer. But state-enterprise managers are not necessarily at home in less regulated, more corrupt business climates where quick thinking is more important than level of education or standing in the governing party. The number of wholly private Singapore companies making a significant mark overseas is tiny.Singapore continues to have a very high savings rate because of the government's surplus and compulsory salary deductions which in turn are mostly channeled through state-controlled bodies. But the return on these savings is very low, which highlights the demographic challenge. Singapore's percentage of retirees is expected to escalate dramatically over the next 20 years.
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This poses a major dilemma for a paternalistic state that has delivered security and decent housing, medical services and education but at a cost to private initiative that leaves it politically vulnerable to less favorable demographic and external circumstances. Measures that reduce the economic burden on the state also reduce the state's role in the economy and hence the role of the political and bureaucratic elite.
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The government has used financial carrots and institutional support to attract new knowledge-based industries and research centers. More originality is now being fostered in the education system. But individualism and entrepreneurship are still ill at ease in the corporate state.
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Tidy but dull on the surface, Singapore has a deep vein of entrepreneurial and artistic talent itching to emerge from the chrysalis that Lee Kuan Yew created. But it remains to be seen whether his son wants to break an institutionalized mold fashioned so many years ago.



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