Singapore at 60 (SG 60): A Time for Choosing

For fans of foreign affairs and students of public policy, a kind of Rorschach test is to ask them about Singapore and wait to see their reaction. The tiny nation’s undoubted success is analyzed endlessly. But the lessons drawn from it tend to reveal more about the viewer than they do about the city-state.

By any measure as it turns 60 years old, Singapore is a masterpiece society. Observers from wildly different nations tend to agree that there is much to admire in a country notable for its glittering office towers, robustly efficient infrastructure, low crime rates, high social, cultural and racial cohesion.

Singapore is nothing less than a beacon of prosperity. In a part of the world where middle-income status is the norm, the city-state is now the richest country for many thousands of miles in any direction. At around $88,000, its GDP per person has doubled in real terms over the past 20 years. At the moment of its independence in 1965, the country was poorer on the same basis than South Africa or Jordan.

Singapore’s stature as a financial center has risen in recent years, leading to inevitable comparisons with rival Hong Kong, once the undisputed leader among Asia’s global cities. Indeed, the balance has now changed. The city-state maintains a solid lead in salaries, which are around 50% higher for Singaporeans than Hong Kongers. As a hub for wealth, it is growing far faster than its competitor: in 2017, Singapore boasted $2.4trn in assets under management (AUM), according to the Monetary Authority of Singapore (MAS), about three-quarters the size of Hong Kong’s $3.1trn. By 2022, Singapore’s pile had grown to $3.6trn, just 8% behind Hong Kong. Indeed, as of this writing, AUM in Hong Kong and Singapore each stood at around US$4 trillion in 2023.

Liz Truss, the former (and somewhat infamous) British prime minister, has argued that her country should have become “Singapore on steroids” after Brexit. Notwithstanding whatever one might think of her tenure in office or the value of her opinion by that remark she had in mind an economic model of very low taxes and ultra-light regulation. The respective presidents of Rwanda and El Salvador, Paul Kagame and Nayib Bukele—one a stern authoritarian and the other a Trump-style populist disdainful of democratic checks on power— see proof in Singapore that Western-style democracy is not required to reach first-world prosperity.

Indeed, Singapore is an easy place on which to project desires and even fantasies. Having achieved independence in 1965, it has grown rich in a single lifetime. The universal use of English makes it superficially easy to engage with. Like a business-school case study, foreigners get the impression that they can take a pick-and-mix approach to Singapore’s practices and innovations, a view they would not extend to nations with older histories and institutions.

Yet the individual preoccupations of the country’s many international fans run up against Singapore’s more complex realities. For leaders in the developing world who love Singapore’s no-nonsense tough-on-crime approach, its efficient courts and low corruption level are often far less of a priority. Those such as Truss who fantasize about the city’s light regulation ignore its active interventionist industrial policies, with substantial government support in chosen sectors and many subsidies to citizens. Small-state fans rarely mention the city’s successful system of mass public housing— the vaunted HDB BTOs (Housing Development Board build-to-order flats) -- crucial to understanding why Singapore’s very diverse ethnic population has remained coherent even as property prices have shot up and show no signs of stopping. Selective blindness prevails. Ergo, the Rorschach test.

In truth Singapore’s is not a liberal democracy but rather an anomalous (in this increasingly polarized globalized vs populist world) hybrid political system which defies categorization. Perhaps a quasi-democratic system with pragmatic characteristics designed (or evolved) its unique reality as one pf the world’s few city states is a more accurate description. Yet it sits alongside much freer places in corruption rankings maintained by NGO Transparency International. Though its global fans come mainly from what could be considered the political right, Singapore’s housing policies have a distinctly socialist tinge. Left-leaning economists have said positive things about its low inequality, though the gap between the rich and poor is growing, and the middle class is squeezed, like almost everywhere else.

Meanwhile, its commitment to policing speech which might offend racial or religious sensibilities goes beyond what even the ‘wokest’ Westerners might advocate for.

This is an essential truth about the country: it can be everything and anything all at once.

It is hard to imagine that foreign leaders and bureaucrats will ever cease travelling to the city in search of lessons (once among these number could be counted a Fuzhou city Communist Party secretary named Xi Jinping who has sought to fashion a nation made up of a host of Singapore-scaled cities through urban development and economic zones). But, in the harsh light of objective analysis, how many of the country’s policies can other nations truly borrow? It is unique, created in unique historical circumstances very challenging, if not impossible to replicate in world where the colonial overhang has long receded in memory and circumstance.. Some Singaporean policymakers say that even Singapore would struggle today to replicate its earlier successes, achieved when strong-arm rulers studied a range of systems, picked and chose policy options from the cultures in which they studied (i.e. Clement Attlee’s Labour Britain) as if at a policy buffet, then simply laid down what must be done. Today, despite the sanitized politics, many voices increasingly contend over key policies, filtered through the stylized prism of what constitutes debate and discourse in its political institutions.

Lawrence Wong, the country’s newly minted prime minister, has acknowledged new pressures from ordinary Singaporeans, such as a desire for less immigration and more welfare. He says that the government is ready to re-examine all of its assumptions, and advocates a softer, more consultative form of leadership. Students of Singapore could soon find that the Rorschach inkblot itself begins to change shape.

It must. But as the world looks askance at globalization with increasing skepticism and navigates a power structure that is increasingly populist in outlook, balancing Singapore’s domestic politics against its role as a global city will become trickier.

It is not just the private sector’s holdings that have bulged. Singapore’s state-owned investment company, Temasek, had $288bn USD in assets as of 2024. The country’s Monetary Authority manages around $419 bn USD in foreign-exchange holdings, gold and other reserves. Singapore’s GIC, previously known as the Government of Singapore Investment Corporation, does not disclose its holdings, which the government only concedes are above $100bn. But by the estimates of Global SWF, a data firm, GIC’s assets are substantial, running to $769bn USD. If correct, that would make the sovereign wealth fund the sixth largest in the world, outstripped only by a handful of petrostates and by China’s two funds. It would also mean that Singapore’s state-owned assets run to over 270% of its GDP.

These numbers underline a national economy that continues to save far more than it spends. Indeed, Singapore also has one of the largest current-account surpluses in the world. As a small country and a close partner of the United States in security, Singapore avoids the scrutiny others might endure for its huge savings and managed exchange rate. The fact that the US has a bilateral trade surplus with Singapore tends to keep it out of the glare of increasingly protectionist American politicians. But the country did land briefly on America’s radar for currency manipulation under the first Donald Trump administration and its delicate balancing act between the US and China runs the risk of it returning to the crosshairs of America’s increasingly shrill trade warriors. The 47th president is not afraid of making nations choose between the world’s current hyperpower and its emerging superpower rival.

Yet, for all its immediacy international disapproval is a less immediate concern than domestic concerns. Since the ruling People’s Action Party (PAP) won 83 of the 93 seats in the 2020 election, it would be easy to presume that it has little to worry about from the rag-tag patchwork of parties which constitute the opposition. But, in historical terms the handful of seats held by the centre-left Workers’ Party is actually the largest presence for another party in parliament since independence. Before 2020 there was not even a leader of the opposition in Singaporean politics. By the standards of a Western democracy, the dominance of the PAP is still overwhelming. This is not an unknown phenomenon in the region (i.e. the Liberal Democratic Party – LDP – has held power in Japan almost continuously since 1955).

But the very presence of competition (whatever the veracity of its policies) has impacted the equation: it has made the government more focused on public consultation before pulling the levers of policy.

There is demographic reality behind this. A core support group for the PAP continues to be the older generation who remember the chaos and uncertainty of past times and the central, vital role the ruling party played in bringing stability, and socio/cultural cohesion to a small island that could so easily have gone in grimmer, more sectarian directions. Yet, as with all ‘greying’ Asian societies, as the years grow and memories fade, the acquisitive younger generation are drifting towards exploring alternatives to the status quo.

The opposition has different views on how the city-state should be run. Its lawmakers have called for a higher share of the returns on the assets to be remitted to the budget and used for everyday spending, rather than the 50% currently permitted. They also argue for greater transparency when it comes to the make-up of the national reserves and the total held by the GIC.

The government believes that the idea of putting the reserves at risk less about policy than a sop to cheap populism. It argues that the country is ageing, and at its present income levels it will never go through a similar period of rapid growth as when the assets were accumulated. The bull markets which produced strong returns for riskier investments, like Temasek’s 20-year returns of 9%, may never be so favorable again.

But the cost to Singapore’s public finances as the country ages will still have to be funded somehow. The proportion of Singapore’s citizens who are over 65 rose to 19% in 2023, from 12% a decade ago. It will rise to almost 25% by the end of this decade. Social spending has roughly doubled in the past decade, and state spending on health care now outstrips the education budget. Singapore’s low level of government spending, the envy of small state advocates the world over, is climbing: it will reach 20% of GDP by 2030, up from 14% in 2010. Tax increases (albeit not a more direct income tax) are likely. A sales tax (the GST) has already risen: the levy has climbed from 7% to 9% in the past two years and the costs of water and electricity have also risen, all the while still contending with the persistent influences of worldwide inflation.

Meanwhile the country’s changing demography will make itself felt in other ways, too. In 2023 Singapore’s fertility rate fell to just 0.97, a figure below all but a small handful of countries in the world. The Singaporean government does not publish detailed population forecasts regularly, but UN projections suggest that without immigration Singapore’s working-age population would drop by a third between 2022 and 2050.

Immigration continues to be both a sensitive and controversial topic in Singapore. The share of the city’s population made up of its own citizens has dropped from 74% in 2003 to 61% in 2023. The city has four official languages and three official ethnic groups, of which Chinese are by far the largest. The government tries to keep this balance not just for internal but external reasons. Ethnic Malays, who are mainly Muslim, are a minority in Singapore but a majority in Malaysia and Indonesia, its far larger neighbors. So, Singapore’s restrictions on speech are understandably tightest where religious and racial sensitivities are touchiest.

Even for a political force as dominant as the PAP, the high levels of migration stemming from global political, economic and climate considerations seem threats that Singapore has to contend with. But it is not alone in facing these conditions as they plague all governments.

It's a challenging position to be in. With its declining birth rate, the nation has had no real alternative to importing foreign workers from the region in order to build and maintain its infrastructure and systems. Yet it must maintain a delicate balance as it cannot bring in foreigners in amounts that could ultimately result in local residents being a declining minority in their own country.

Balancing the needs of large international companies and Singaporeans’ wariness of immigration will be an increasingly delicate task for the government. In a survey published in 2021 by the Institute of Policy Studies, a unit of the National University of Singapore, 44% said that immigration increases unemployment, a figure that rose to over 50% among respondents over 65.

All things considered, the greatest of all the threats to Singapore’s enviable position are those ultimately outside its control. Singapore sits on the Strait of Malacca, a bottleneck for trillions of dollars in global trade. Its trade volumes run to an enormous 337% of its GDP, compared with 27% in America and 68% in rich countries across the world.

The continued protracted fraying of relations between Beijing and Washington is a particular worry. Singapore is heavily exposed on both flanks. In the worst-case scenario, in which trade is split between two global blocs—between those countries which voted to condemn Russia’s invasion of Ukraine at the UN General Assembly in 2022, and those which did not—Singapore’s GDP would decline by around 10%, compared with 3% for Asia or 1% for the world.

China is not only Singapore’s largest source of imports, as it is for most countries in the world, but its largest source of exports too. Indeed, almost all East Asia’s energy imports flow through the Strait of Malacca, and much of its manufacturing trade flows the other way.

At the same time, America remains by far the largest single investor in Singapore, with S$574bn ($428bn) invested in the country at the end of 2022, compared with $156bn from mainland China and Hong Kong combined. According to the American Chamber of Commerce in Singapore, American firms employ over 200,000 people in the country, about 6% of the workforce. Singapore is also America’s closest security partner in South-East Asia, despite its neutral diplomatic stance. Witness the fact that Singapore will have a total of highly advanced American-made 20 F-35 fighter jets, consisting of 12 F-35B variants and 8 F-35A variants, once all orders are delivered; effectively expanding its F-35 fleet to 20 aircraft in total. This constitutes technological superiority over every ASEAN country, reinforced by the fact that U.S. Navy ships dock at Changi Naval Base (CNB) in Singapore. CNB is a joint naval base used by the United States Navy (USN) and the Republic of Singapore Navy (RSN).

America’s increasing restrictions on China’s semiconductor industry could embroil Singapore in the increasingly acrimonious tiff between the two countries. Its chip industry does not specialize in the most advanced nodes, where Taiwanese firms predominate. But it does well in producing older chips, the ‘mature’ nodes. America’s Department of Commerce has said it has no plans to extend its restrictions and sanctions to older chips. But China’s massive expansion of its chipmaking industry may change that, undercutting prices. In the second half of 2023, Singapore’s chipmakers sold around half a billion dollars’ worth of equipment a month to China, a figure that is more than double the same period in 2022.

Lawrence Wong recognizes America’s prerogative in export restrictions where national security is concerned, but hopes they are carefully calibrated. Jake Sullivan, the former national security adviser in President Joe Biden’s administration, has spoken of a small yard with a high fence, referring to controls imposed on a small number of high-tech industries. But Donald Trump is not Joe Biden and is already looking to expand the size of that metaphorical yard.

For the country’s highly efficient yet anxious bureaucrats, the idea of planning for a full-scale split between America and China is a nasty prospect. Singapore hosts one of the the global headquarters of TikTok, which has been buffeted by geopolitical considerations and has now become a chess piece on Donald Trump's board. Its example shows how hard it is to straddle the two worlds without being caught up in the machinations of geopolitics.

Of all the varied economic risks facing Singapore, one underpins the lot—and keeps the city’s watchful administrators up at night. What happens if Singapore, like Britain or other slow-growing European countries, entered a period of stagnation in which ordinary household incomes stop rising? That sort of pressure would threaten the contract between the PAP and the Singaporeans, who vote for them in extraordinary numbers in the expectation that they will continue to get richer.

Before November this year, Lawrence Wong will lead the PAP to a general election, the results of which will do much to frame his time in office. Singapore’s many successes give its government a great deal to preserve. Few countries have managed to surf the wave of globalization so competently. With the tide now quickly going out, Singapore -- the Great Experiment -- faces the challenge of a generation as it looks to the future.