Leaders who put the people first

 

SCMP May 22 2011

Philip Bowring

The retirement of Lee Kuan Yew makes this a good time for another look at how and why Hong Kong and Singapore differ, and what they can learn from each other.

On the face of it, Singapore appears to be doing a lot better in terms of economic growth and now has per capita income 10 to 20 per cent (depending on the method of calculation) higher than Hong Kong. However, this apparent success partly explains the reason for the People's Action Party's (PAP) poor showing in the recent election when opposition parties got 40 per cent of the vote.

Firstly, Singapore's population has been growing far faster than Hong Kong's, rising from 3 million to 5 million in just 20 years. However, the number of its citizens has been rising slowly and now totals just 3.77 million. The big increases have been in temporary residents, now totalling 1.3 million and providing 36 per cent of the workforce. Many are maids, construction and factory workers and others in low-paid occupations who have no right of abode. Then there are 540,000 holders of permanent residency, a category that has increased especially fast with a recent influx of mainland Chinese.

The government views the increase in permanent residents, particularly professionals, as necessary for economic growth. But pressure on housing, transport and other amenities and job competition in some sectors have not gone down well with the masses, who care about actual conditions, not statistics.

Resentment has also risen against increasing income inequality which has now almost caught up with Hong Kong, the global leader among rich societies with a Gini coefficient (inequality measure) of 43.4. Although statistics tell us that Singapore and Hong Kong both have per capita incomes higher even than Germany and Sweden, the reality in terms of disposable incomes and effective living standards for the majority is rather different. This is partly unavoidable in very open economies but can be tempered by government tax policies and provision of low-cost health care and education - cheaper in Hong Kong than Singapore.

Singapore's immigration policy partly explains why the median age of its population is now some three years younger than Hong Kong's. With fewer old people, and a roughly similar percentage of under-15s, it has a higher proportion of population in the workforce. These factors have added to its economic outperformance. So, should Hong Kong change its immigration policy? For sure, it would be better to choose new permanent residents on the basis of skills than rely mainly on the current mainland-operated opaque system of 150 a day.

But the last thing Hong Kong should want is the mass of expendable, low-paid temporary workers with few rights that underpins so much of Singapore citizens' prosperity. As it is, domestic helpers in Hong Kong already account for about 6 per cent of its workforce.

Nor does Hong Kong need to follow the Singapore pattern of, in effect, using the tax system and central provident fund to hold down private consumption - just 38 per cent of gross domestic product compared with 62 per cent in Hong Kong, partly to accumulate vast foreign reserves mostly invested in low-yielding assets. The Hong Kong government already has vastly more than it needs. For sure, Hong Kong needs to improve its own inadequate and ill-devised pension system.

Nor should Hong Kong follow Singapore's policy of trying to attract foreign investment with tax breaks and other lures to the relative disadvantage of local enterprise squeezed between foreign giants and the government-linked companies which dominate much of the domestic economy. The huge foreign investment presence boosts Singapore's top-line numbers but the bottom line is less impressive. Foreign companies and residents account for 42 per cent of Singapore's GDP, some of which is remitted home. As a result, Singapore has a net income outflow while Hong Kong has a net inflow. These flows narrow the gap between the two in national income terms by about 5 per cent.

But there are certainly some things Singapore does a lot better. Most obvious are rational land use and town planning policies, transport pricing to deter car usage and a whole range of measures to improve environmental practices. These are not just beneficial results of an authoritarian system. It is more that the political leaders make decisions and expect the civil service, which in origin is identical to Hong Kong's, to carry them out.

For much of the past 30 years, Hong Kong has lacked leadership. Two of the last three colonial governors (Chris Patten was the partial exception) cared more about diplomacy than domestic policies. And, since 1997, the leaders have become increasingly averse to making decisions that will upset one vested interest or another. These are most evident in the areas where Singapore has outperformed Hong Kong, because its leaders kept big local commercial interests at arm's length.

Maybe a Singapore without the ruthless and unforgiving Lee Kuan Yew will fall into the same bad ways, with or without a more open political system. But it is clear that Hong Kong's problems do not lie with its liberal attitudes on economic, social and political issues. They lie with failure of the system to deliver and implement decisions in the overall public interest in the limited areas in which government needs to be involved.

 

 

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