Can Singapore overtake Hong Kong?

The dispute between Beijing and Hong Kong is driving foreign investors increasingly to Singapore

In the last years, Beijing’s pressure on Hong Kong’s domestic politics has generated clear implications not just with regards to the political-administrative aspect of the island, but also affecting indirectly its economy. The riots in Hong Kong have warned foreign investors that they would begin to increasingly redirect their investments to Singapore, the second largest financial hub in Southeast Asia.

The triggering cause of this trend is precisely the political influence of China on Hong Kong: for the city-State, in fact, the definition of "one State, two systems", the one that was adopted in 1997, the year in which the United Kingdom gave back Hong Kong's sovereignty to the People's Republic of China, is fading away.

Last month the Heritage Foundation, an American think tank that deals with analyzing the data of all the countries of the world drawing up their economic characteristics, has decided to remove Hong Kong from the ranking and its data now are no longer available on the association's website: a severe blow for Hong Kong, which, from 1995 to 2019, was considered by the American foundation the country with the freest economy in the world, the perfect place for foreign investors.

The decision comes from the fact that Hong Kong, from a political-bureaucratic point of view, is no longer considered autonomous: the association has therefore decided to combine its data with China, ranked 107th among the freest economies. In light of these developments, Singapore smiles: having overtaken Hong Kong last year, today the small State continues to hold the top spot on the list with a score of 89.7, far ahead of New Zealand by almost six points. 

If already in 2019 there were the first signs of an increasingly marked economic crisis for Hong Kong, the draconian law on national security, promulgated by Beijing last July, has caused some companies to run for cover towards the shores of Singapore. Deutsche Bank for example, stated its intention to move the office of the new CEO of the Asian area to Singapore, no longer considering Hong Kong a safe place. The new security law would affect two of the main pillars on which the strength and attractiveness of Hong Kong’s economy was based: the protection of property rights and the rule of law. For these reasons, another phenomenon that has been marked in the last two years is the decision of many companies to rely on arbitrary judges in other cities such as Singapore or London, fearing the lack of transparency of the new Hong Kong bureaucracy. 

Even for business expansion, companies are looking more towards Singapore: according to a Financial Times survey, some credit companies and banks would show more interest in expanding their branches in Singapore rather than Hong Kong: on Linkedin, jobs position opened by UBS and JP Morgan in Singapore are eight times than those in Hong Kong, while Credit Suisse and Goldman Sachs have doubled their advertising campaign in Singapore.

However, not all the analysts agree with the decline of Hong Kong: the strong interest of tycoon and Chinese companies are giving new impetus to the island’s economy.

However, with its excellent results in terms of protection of property rights and government integrity, Singapore has the opportunity to establish itself as the main hub for international investments in the Southeast Asia. 

By Alberto Botto

The “One Million Trees Movement” in Singapore

The city-state aims to bring nature back to the city by planting more than a million trees

As a city-state with limited land resources, Singapore has long been torn between urban development and nature conservation by losing much of its green spaces in the 19th century to deforestation, and a century later, a growing population and rapid urban development meant that other trees were removed for land reclamation.

But now Singapore is trying to reverse course by organizing an ambitious reforestation campaign. In fact, in August 2020, the government announced the launch of the new Sungei Buloh Park Network, a 990-acre park in the northern part of the island that is a refueling site and an essential stop for migratory birds coming from Siberian Russia and going to Australia and home to eastern hornbills, otters, saltwater crocodiles, and many other unique species. However, Sungei Buloh is part of a larger project that aims to plant 1 million trees over the next 10 years, “The One Million Trees Movement” launched in March 2020 by the government agency National Parks Board (NParks).

Over the next 10 years, NParks plans to conserve more than 70 native animal and plant species and to redevelop 30 hectares of forest, marine and coastal habitats. The multi-level seeding will be carried out along the city streets, called Nature Ways with the aim of covering about 300km and transforming almost every street in the city into a long-term Nature Way by making the roads fresher and more aesthetically pleasing. 500km of park connectors will also be available by 2030, effectively putting all families within a 10-minute walk from a park.

To move from a “city in a garden” to a “city in nature” Singapore will need to implement four key thrusts: more natural parks, transformation of the wild environment into public gardens, integration of nature into the building environment and making green spaces more accessible. In fact, by 2030, there will be another 200 hectares of natural parks, which will serve as complementary habitats and protect nature reserves from urbanization. For example, only for the Khatib Bongsu Nature Park an area of 40 hectares is planned. Waterways and water bodies in gardens and parks will also be protected from rising sea levels and floods.

“Trees play an important role in creating a livable environment”, said Adrian Loo, director of NParks Conservation Group. “They act as natural air filters, reflect radiant heat making the surfaces cold and provide the ambient temperature through the shadow and evapotranspiration; help mitigate the so-called urban heat island effect and climate change”. In fact, making the city greener will also help mitigate the aforementioned “heat island” effect created by the pavement and skyscrapers, which absorb and radiate solar radiation and increase the temperature of Singapore’s urban core.

Adrian Loo said, however, that for the One Million Trees project to be effective, everyone must be involved: “The success of the project is also measured by our ability to instill a sense of respect among Singaporeans, towards trees and the environment”. The government agency Clean and Green Singapore (CGS) aims to inspire city dwellers to care for and protect common spaces and the environment, adopting a clean and sustainable lifestyle.

However, Singapore is not the only ASEAN country to carry out projects of this type: environmental education is in fact an important pillar in the cooperation of member countries. An example of this is the ASEAN Eco-school program, which aims to create a school culture oriented towards the protection and conservation of the environment through the management, commitment and cleanliness of the territory. These activities are dedicated to education, facilitating and inspiring school communities to protect and support the environment, both in schools and at home, but also in the community and within the state in general. Currently, several ASEAN member states have already adopted the eco-school program including Cambodia, Indonesia, Malaysia, Philippines and Thailand.

To date, ASEAN countries face an enormous challenge in maintaining a delicate balance between environmental sustainability and economic development as despite the abundance of natural resources, rapid population growth and even faster economic and industrial growth risk threatening natural resources causing serious environmental problems. However, ASEAN has recognized the need for a major change of direction towards a greater balance between people, planet earth and profit for proper sustainable development.

This transformation will require a change in the way of thinking and acting of the new generations of Southeast Asia who must be educated to safeguard green spaces and give weight to sustainability and the environment, also exploiting the opportunities of digital transformation. 

Singapore home of the 2021 World Economic Forum

The city-state will host the World Economic Forum this year given the still uncertain Covid-19 situation in Europe

The annual meeting of the world’s leading decision makers will be held in Singapore from May 13th-16th, and will feature heads of state and government, CEOs, civil society leaders, global media and youth leaders from seven continents. “A global leadership summit is vital to address how we can bounce back together. The World Economic Forum 2021 will be the moment in which leaders from business, politics and civil society will meet in person for the first time since the pandemic began. Public-private cooperation is more necessary than ever to rebuild trust and address the challenges that emerged in 2020”, said WEF founder and executive chairman Klaus Schwab.

In fact, the event will be attended by many academics, world leaders in politics and business to discuss the most urgent issues of the moment. The aim is to focus on the objectives to be achieved, including sustainable development, and to discuss topics such as technology and commercial governance.

The WEF’s decision to hold its annual meeting in Singapore reflects the trust the city-state has gained through its handling of the Covid-19 pandemic; unlike previous editions, in fact, the 2021 meeting will not be held in the Swiss town of Davos. “After careful consideration, and in light of the current situation regarding Covid-19 cases, it was decided that Singapore was in the best position to host the meeting”, a WEF spokesperson said.

The city-state has in fact kept the virus under control with strict measures such as the implementation of a partial block for two months, the obligation to wear a mask and the limitation of social meetings. This has allowed the economy to gradually reopen from mid-June, with daily cases in the community dwindling to minimal or even zero, while most of the new cases are imported.

In fact, despite the economic impact of the pandemic, Singapore managed to attract foreign investment worth $13 billion in the first four months of 2020, said Chan Chun Sing, stating that these investments come from the electronics and technology sectors. Companies that have invested in the city-state include electronics company Micron, e-commerce platforms Lazada and Shopee, and manufacturing company Thermo Fisher Scientific.

Companies like Twitter, Tencent, Zoom, Snap and Rakuten Mobile have also expanded to Singapore in the midst of the global pandemic, but the city-state is no stranger to frequent investments by tech companies as it hosts 80 of the 100 most innovative in the world. The main factor behind these companies to expand into Southeast Asia is the presence of approximately 650 million people, more than half of whom are under the age of 30. Other reasons are also the rapid digitization of ASEAN, the burgeoning middle class, rapid urbanization and industrialization, and the effects of Covid-19 which are increasing demand in sectors such as e-commerce and robotics.

For this reason, many international companies are looking for a hub within ASEAN where it is easy to do business and which contains a dense ecosystem of customers, suppliers and partners. Companies already based in Asia have also chosen to establish a presence in Singapore, such as the Chinese tech giant, Tencent Holdings, which announced in September 2020 that it had chosen Singapore to support its expansion into ASEAN.

Singapore’s global leadership in the digital sector is the result of years of active government-supported technology initiatives. These were also joined by private initiatives such as that of Google, which launched the Skills Ignition SG in July 2020 with the aim of training participants in works related to digital marketing and cloud technology. The rates of the training programs and the monthly salary of the participants are covered by the government of Singapore which, by supporting the technology industry in setting up such initiatives, can ensure that attractive companies have access to competent technicians ready to support their needs in the city-state.

Digitization will therefore have a very significant impact on the labor market, and Singapore, as the financial hub of Southeast Asia, will benefit from the growth and economic transformation of post Covid-19 Asia. To maintain this status, however, it will need to continue to be the global and regional headquarters of financial institutions, attracting highly skilled technicians, hiring responsibly in every professional sector and distributing the benefits among Singaporeans, while also valuing local talent.

Singapore bets on cryptocurrencies

How Singapore is becoming the new Asian capital of digital currencies 

At the end of October, one of Southeast Asia's largest banks, BDS Bank of Singapore, accidentally posted information concerning the imminent launch of their cryptocurrency exchange. Despite being deleted, a Twitter user managed to take a screenshot. The exchange would support the Singapore, American and Hong Kong Dollars and the Japanese Yen alongside some of the main cryptocurrencies. The platform would also include tokenization services for securities and assets, and custodian services for cryptocurrencies and tokens. However, the exchange is still under development and awaiting for regulators’ approval. The news confirm not only the interest of Singapore for the digital transformation of finance but also the recognition by traditional banks of the growing potential of cryptocurrencies.

Several industry leaders have already opened their offices in Singapore, such as Binance (a leading trading platform), Wirex (a payments platform) and Coinbase (cryptocurrencies exchange). And 91 new start-ups have been established in the small city-state in 2020, for a total of 234 new entities in this industry. Some of these are involved in projects with Mastercard, Visa, Alibaba, Tencent and Facebook.

In the broader Asia-Pacific, the first countries that adopted the cryptocurrencies were Japan, China and South Korea, despite in some cases either limiting or banding their usage. Singapore opted for a different approach. The Monetary Authority of Singapore (MAS) – the local Central Bank and regulatory authority – has proactively monitored the evolution of these technologies and businesses. It first advised consumers and investors on the risks involved in these kind of investments. In some instances it directly intervened by asking to return the funds to investors of a Singapore based ICO or by sending warnings to cryptocurrencies exchanges that did not properly inform local authorities on their activities.

The purpose of these actions was not aimed at disrupting or prohibiting these new businesses but rather to monitor this new industry in order to develop an adequate regulatory framework. In 2017 a Guide to Digital Token Offerings was issued and in 2019 a more detailed regulation, in effect as of January 2020, the Payment Services Act, was developed. This law regulates digital payment services, including cryptocurrency exchanges in Singapore. As a consequence, entities that operate in the crypto space need to register and obtain a license in order to do business in Singapore.

Having a clear regulatory environment in this new industry will allow Singapore to maintain its current international financial center status as well as take advantage of these new technologies and investment opportunities. In the meantime, many jobs opportunities have already been created. 

The government of Singapore is also interested in these new technologies for other reasons. Blockchain technologies are not limited to the financial space. The way information is organized and stored grants a very high degree of security. It allows to create what one could call a “digital authentic”. Its applications are therefore not limited to the monetary, but they can be extended to other fields such as the public administration, register office management and other public services.

MAS has recently announced it shall grant 180 million USD in the next three years to the financial sector. These funds shall be aimed at Fintech and financial digitation projects, including artificial intelligence for financial services. With the National University of Singapore and the National Research Foundation, MAS has also established the Asian Institute of Digital Finance which aims at promoting and coordinating innovation between universities, research institutions and businesses in order to promote projects ranging from Fintech, blockchain, digital financial platforms up to next generation financial services on 5G networks. It’s starting its operations by the end of this year.

It seems that Singapore is setting up the basis to become a hub of technological innovation in the digitization of finance. The idea is to promote public and private synergies to cultivate the digital financial environment of Singapore, and this strategy may very well lead to a successful outcome.  

By Luca Annone

Innovation and Renewal in Singapore

In the current global context, the future of the Singapore model will depend on its ability to harness new technology and its own capacity for change  

The extraordinary transformation of Singapore from small trading post of the British Empire into vibrant centre of the nascent global economy is a source of pride for Singaporeans and a matter of interest for the rest of the world. At the time of its expulsion from the Federation of Malaysia in 1965, the ‘City of the Lion’ was a small island at the far end of the Malay peninsula, without natural resources, leave aside its strategic geographical position and the still unexplored potential of a young and diverse population (mostly made up of Chinese migrants). Yet, in the two decades immediately after independence, the Singaporean economy grew every year at an average rate of 8.5% and the fledgling city-state went from third world to first in just one generation. 

Several experts and scholars have tried to identify the secret of Singapore's success: geographic location or demographic structure; cultural identity or political regime; all very important factors but perhaps not the decisive ones. "The simple answer - according to former Singaporean diplomat Kishore Mahbubani - is extraordinary leadership." A ruling class educated in the best universities in the United Kingdom and returned to Singapore with the ambition of putting traditional British pragmatism at the service of the nascent national sentiment. Lee Kuan Yew himself, founding father and Prime Minister of Singapore, the man who ruled the city-state directly and indirectly for over 50 years, argued that the success of the Singapore model stemmed from its ability to respond effectively to new situations.

Indeed, Singapore's grandiose development might not have been possible if its leaders had not been driven by an abiding faith in technological innovation and a firm belief that economic success also depends on the ability to innovate and renew oneself. It is also due to this 'faith' that a city-state known all over the world as a commercial and financial hub never wanted to renounce to its manufacturing sector. Manufacturing, a major growth engine in the 1960s, has undergone a major technological transformation and it represents today a high added value sector worth around 20% of GDP. Meg Whitman, CEO of Hewlett Packard Enterprise, one of many big companies which have decided to bet on Singapore, has dubbed the city-state a miniature Silicon Valley. Very recent news seem to confirm this view: forced out from the Great America of Donald Trump, Chinese tech companies ByteDance and Tencent have decided to throw in their lot with Singapore and invest several billion dollars in the ‘Little Red Dot’.

For many years now Singapore has ranked in the top spots of the Global Competitiveness Index and the Ease of Doing Business Index, just to name two of countless global indicators celebrating the city-state as one of the best places in the world for doing business. The result is partly ascribable to its advanced financial and judicial system, but cutting-edge physical and digital infrastructures also play a role. It is precisely on the latter that the government wants to focus to overcome the Covid-19 crisis, which is dragging the city-state into the worst economic recession since 1965. Singapore, in the words of Prime Minister Lee Hsien Loong, must prepare for "a very different future," one which, according to a senior official, will be made of "bits and bytes, submarine cables and data", not just cargo and containers.

The cabinet had been working on it for some time: Covid-19 made it necessary to accelerate. In fact, already a year ago, the Enterprise Development Board, the government agency that guides the country's industrial development, presented to potential foreign investors some of the early achievements: the highest concentration of submarine cables in the world, the fastest broadband connection and a mobile penetration rate of 159%. The Digital Readiness Index 2019, an indicator developed by Cisco to identify the countries which are best prepared to accept the challenges of digitization, placed Singapore in the first place. Thanks to the growing tension between the United States and China and the exasperation of the situation in Hong Kong, even large multinationals of the likes of Amazon and Alibaba could not resist the call.

Five years ago, Kishore Mahbubani, in a book with a very suggestive title, "Can Singapore Survive?", singled out three major perils that the city-state would have to face in the years to come: a challenge from populist politics, the geopolitical clash between the United States and China , and a 'Black Swan', an extremely rare and hardy predictable event that would have put the Singapore model into question. The prophecy may have come true in 2020, at least with regards to its international dimension. After an initial moment of loss, Singapore seems coming to his senses: a city-state connected to the world, albeit through new digital ways, without giving up on the ambition to be everyone's friend and nobody's enemy. The faith in innovation which made possible Singapore’s astounding growth could now allow its survival.

By Francesco Brusaporco

Singapore and the Covid-19 emergency

Singapore’s experience with the virus reveals the complexity of the pandemic and the importance of a cautious approach to its management.

On June 25th the Italy-ASEAN Association organized a webinar on Singapore and its response to the pandemic with the Italian Ambassador in Singapore, Raffaele Langella and the President of the Singapore Institute of International Affairs, Simon Tay. 

When Singapore confirmed the first case of Covid-19 on January 23rd, the government rapidly implemented effective measures that contributed to contain the virus and significantly limit the number of infected people. Subsequently, between February and March, Singapore experienced a second moderate wave of contagion, attributable to flows of Singaporeans repatriated from abroad. Until the beginning of April, Singapore had less than 1000 cases and only 3 deaths due to the virus. However, in April, Singapore was hit by a third wave of Covid-19. This time the vast majority of cases occurred among the more than 300,000 migrant workers living in large dorms at the outskirts of the city, and the number of infections increased rapidly within a few weeks. As a result of this new surge, the Singaporean government was forced to impose more restrictive measures on the movement of citizens. Since 7 April, Singaporean citizens have had to comply with preventive measures called circuit breakers, which include the closure of all non-essential activities and the obligation to respect social distancing measures.circuit breaker​, che prevedono la chiusura di tutte le attività non essenziali e l’obbligo di rispettare il distanziamento sociale. 

In economic terms, Singapore's GDP is expected to fall by between -7% and -4% this year. Therefore, the government has responded with a significant increase in public spending, through four economic stimulus packages to support the economy, amounting to about 19% of Singapore's GDP. The intervention aims at supporting families, businesses and workers with measures such as subsidies, moratoria, tax deductions and favorable financing conditions for the most affected sectors (in particular tourism and aviation).  

The evolution of the health emergency in Singapore has shown both strengths and weaknesses of the city-state. Technological infrastructures and high level scientific research have enabled the government to respond effectively to the first cases of coronavirus in the country, revealing a certain scientific reactivity. This has allowed many economic activities to continue despite the pandemic, reducing the impact of the virus on the productive fabric of the country. However, the pandemic also showed some weaknesses of Singapore’s country system. As a commercial and financial hub, its dependence on regional and global interconnections has weighed and will weigh heavily on the government's ability to revive the country. Air and naval traffic has dropped dramatically, and this threatens to create serious problems for Singapore's economy. Moreover, the case of the immigrant workers has revealed one of the few weak points of the city-state: a direct dependence on foreign labor that is fundamental for the effective functioning of a smart-city like Singapore. 

It will be crucial for Singapore to reopen its economic system to international trade as soon as possible, in order to intercept new trends and strengthen the global dimension of the Singaporean economy.

Article edited by Tullio Ambrosone