With its rapid accumulation of wealth and development, many look to the city-state as model – but there are concerns.


Singapore has attracted admirers for its success in transforming from one of Asia’s less developed countries into an international economic powerhouse. Now, with China seeking to do the same for itself and double per capita income by 2020, could the tightly controlled but economically vibrant city-state help show Beijing’s communist leaders how to maintain their grip on power?

According to an article in China’s Study Times, published by the Communist Party’s Central Party School, China’s incoming president Xi Jinping has for several years “led a team investigating the Singapore model and how it might be applied to China”.

'[Singapore’s] People’s Action Party [PAP] has won consecutive elections and held state power for a long time, while ensuring that the party's high efficiency, incorruptibility and vitality leads Singapore in attaining an economic leap forward,'' wrote Song Xiongwei, a lecturer at the Chinese Academy of Governance.

Despite the differences between the two countries, not least including China’s 1.3 billion people, Singapore’s city-state of 5.3 million has much worth emulating.

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The island nation already reportedly leads the world in GDP per capita, as well as boasting one of the most competitive international economies in global rankings.

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A report released in August 2012 by Knight Frank and Citi Private Wealth estimated the country’s GDP per capita in purchasing power parity terms at U.S. $56,532 in 2010, ahead of Norway, the United States and Hong Kong. Singapore is expected to maintain its high ranking through 2050, followed by neighbors Hong Kong, Taiwan and South Korea.

Singapore’s wealth is undoubtedly inflated by the world’s highest concentration of millionaires, with the ultra-rich including Facebook co-founder Eduardo Saverin, part of a class which is expected to increase another 67 percent over the next four years.

The Southeast Asian trading center was rated this year as the easiest place in the world for small and medium-sized enterprises to do business, according to a World Bank and International Finance Corporation report.


Measuring such factors as the complexity of procedures needed in starting a business, enforcing contracts and registering property, Singapore came in first ahead of its neighbor Hong Kong, with the United States ranking fourth.

In addition, Singapore ranked second behind Switzerland in the World Economic Forum’s 2012 Global Competitiveness Index, which compared nearly 150 economies across a wide variety of criteria including infrastructure, education, innovation and efficiency.

Ruled by the PAP since attaining self-governance in 1959, the former British colony has earned plaudits from the IMF for its “prudent macroeconomic and financial policies,” including persistent fiscal surpluses and a large stock of public sector external assets, along with “political stability and an effective rule of law.”

In an email interview with The Diplomat, ANZ economist Aninda Mitra said Singapore had set a good example for other regional countries to follow.

"Singapore is often viewed as a role model for other multi-ethnic, post-colonial small or island states which have failed to live up to their full potential, such as Fiji or Sri Lanka,” Mitra said.

“It is also seen as a model for urban planning and bureaucratic efficiency by larger states across the region.”

‘Middle income trap’

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However, if Beijing’s policymakers see in Singapore a future path to follow, they may have to look carefully, according to a recent World Bank report.

Named “China 2030: Building a Modern, Harmonious, and Creative High-Income Society,” the report by the World Bank and Beijing’s Development Research Center found that just 13 of 101 economies identified in 1960 as middle income made the transition to high-income economies.

Described as the “middle income trap,” countries are said to remain stuck when the factors that contributed to strong early growth, such as low-cost labor and early technology use, reach their limits and economic momentum slows.


Among those that broke free of the trap, including Hong Kong, Israel, Japan, Singapore, South Korea and Taiwan, less governmental intervention in both the economic and political spheres has been seen as a significant factor.

China’s outgoing Premier Wen Jiabao has argued in favor of political reform, warning his Communist Party comrades that “without successful political structural reform, it is impossible for us to fully institute economic structural reform and the gains we have made in this area may be lost. The new problems that have cropped up in China’s society will not be fundamentally resolved, and such historical tragedies as the Cultural Revolution may happen again.”

The World Bank report called for structural reforms in a number of politically challenging areas, including “redefining the role of government, reforming and restructuring state enterprises and banks, developing the private sector, promoting competition, and deepening reforms in the land, labor and financial markets.”

While seemingly on track to supplant the United States as the world’s biggest economy, China faces the risk of growing old before it gets rich, with its working age population set to peak in 2015 as reported by The Diplomat.

Democracy flight?

Singapore’s exclusive residential enclaves, luxury boutiques and multi-million dollar properties along with low taxes have helped attract the super-rich.

According to the Wall Street Journal Asia, a survey of wealthy individuals ranking cities in terms of “economic activity, political power, quality of life, knowledge and influence” found Singapore was the fifth-most popular behind London, New York, Hong Kong and Paris.

Yet even respondents in Asia put Western cities ahead of Singapore and Hong Kong – “an indication that economic growth may not be the most important factor when a high-net worth individual chooses his city of residence.”

The report by Knight Frank and Citi noted that Chinese cities “performed significantly less well for freedom of expression and human rights – something that may hinder any future ascent to the top of the overall ranking”.

Singapore has efficiently addressed two of the key domestic development issues in East Asia, comprising an excellent education system to train future leaders as well as making corruption unattractive. But can it attract and retain top global talent?

According to one recent U.S. visitor, the country’s push to “convince the global elite that Singapore is the best place to live” may be a challenge.

“In Singapore and in other parts of Asia, I heard several anecdotes of people expressing frustration with Singapore’s tightly controlled society. For how long can elites put up with partial freedom?


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“I heard several people saying that the best and brightest in Asia prefer to move to freer societies with the U.S. as the top destination, then Europe, and then Australia,” said Devin T. Stewart, Senior Fellow at Carnegie Council.

According to Peter Hartcher, the Sydney Morning Herald’s international editor, the political, media and housing controls implemented by Singapore have shown China “a potential halfway house between authoritarianism and liberal democracy”.

Economic challenges

Meanwhile, Singapore’s push to restructure itself toward a productivity-based economy less reliant on foreign workers is seen affecting its growth prospects.

Growing income inequality, rising living costs and house prices were prominent issues in the May 2011 general elections which saw the PAP secure its lowest ever share of the popular vote.

Non-resident foreign workers make up around a third of Singapore’s labor force – one of the highest proportions in the world, with the exception of some countries in the Middle East. The high number has been blamed for low productivity growth and strains on public infrastructure, fueling anti-foreigner sentiment.

“Singapore has taken on a tough task in trying to restructure itself toward a more innovation-driven model,” said ANZ’s Mitra.

“This will likely result in greater economic integration with its neighbours, and shifts in economic activity toward higher value-added sectors. But it also implies slower growth than in the past, with stronger efforts to enabling and equalizing opportunities for all its residents.”

While forecasting 4.5 percent GDP growth in 2013, ANZ’s economists note “growing downside risks” including weak labor productivity coupled with tight monetary policy, producing a “tough growth-inflation trade-off”.

Singapore narrowly avoided recession this year through a revision of its second-quarter GDP figures to growth of 0.2 percent. Its third-quarter GDP shrank an annualized 1.5 percent from the previous quarter, worse than economists’ forecasts of a 1 percent decline.

With trade amounting to four times its GDP, Singapore remains susceptible to any further weakening in global demand. Yet for China’s leaders, its success in escaping the middle income trap while maintaining political control is the real lesson to be studied.