SINGAPORE: “In my generation, things were simpler … if you worked hard enough, you gained admission to university, more or less you’d be able to find a good job with a good salary, and then a career path in front of you.”
These words could easily pass off as those of an older Singaporean reminiscing about the past and lamenting the stiff competition that young Singaporeans entering the workforce today face.
“But now with the globalisation of the economy, with a lot of competition and other things – that becomes a bit difficult,” Hong Kong Chief Executive Carrie Lam continued, in a recent interview with Channel NewsAsia.
Lam was in Singapore at the invitation of Prime Minister Lee Hsien Loong, and the sentiments she expressed over the challenges resonated with many Singaporeans.
It is clear from Lam’s statement that Hong Kong and Singapore face similar economic challenges. However, their responses to these challenges differ.
SPEED BUMPS IN HONG KONG’S GROWTH
Both Singapore and Hong Kong have followed a similar growth trajectory, with both emerging to become Asia’s leading financial powerhouses, riding on the rapid expansion of financial services in Asia over the past three decades.
While Hong Kong’s financial sector has a much longer history than that of Singapore and remains larger in terms of market capitalisation and depth, it is beginning to experience speed bumps in its growth.
As I discussed in an earlier commentary, much of Hong Kong’s current challenges are a result of deficiencies in its public administration.
Once the leader of the pack as the leading Asian tiger economy, it has since fallen behind its competitors. Its fall in prominence as a global financial centre is particularly striking, since financial services have always been Hong Kong’s forte.
Hong Kong’s economic decline is rooted in its falling productivity and innovation. The city fell from 11th position to 14th in the 2016 Global Innovation Index, while growth in labour productivity has fallen to 0.8 per cent over the past four years, compared to an average of 3.6 per cent before the 2009 global financial crisis.
It is striking how similar Hong Kong and Singapore are in so many ways, in terms of the common challenges that both seem to be collectively facing. Given these similarities, are there lessons that Singapore can draw from Hong Kong’s ongoing decline?
Hong Kong and Singapore resemble each other in many other ways, if only because of their remarkably similar history. Both are functioning city-states that have emerged from a history of British colonialism and have retained their British-styled common law and public administration systems.
Although Hong Kong now exists under China’s One Country Two Systems principle, it nonetheless possesses significant autonomy in economic policy.
In terms of economic development, both cities started out as manufacturing bases and shipping hubs but subsequently developed strengths in financial services, tourism and services.
However, this is where the similarity ends.
For Singapore, some of our biggest competitors come from all across the globe, with Seoul and Dubai rivalling our air hub status, and Ireland increasingly giving us a run for our money as an alternative business location. In a highly globalised economy, this is, as they say, par for the course.
However, if we look at the cause of Hong Kong’s economic challenges, we may be surprised to find that the strong competition that Hong Kong faces emanate from places much closer to its shores. Emerging Chinese financial centres such as Shanghai and Shenzhen in particular are threatening Hong Kong’s traditional role as “gateway” to China.
A case in point is that of container throughput. While Singapore continues to be ranked second, Hong Kong has fallen from fourth to fifth place on the World Shipping Council’s list of top 50 world container ports. It was replaced by Ningbo-Zhoushan, a rising transshipment hub with excellent port infrastructure and strong connectivity to Zhejiang, an emerging economic centre.
While China has long served as Hong Kong’s economic hinterland, it is now ironically throwing up powerful new port cities and financial centres that threaten to eclipse the territory.
LESSON IN DIVERSIFICATION
Hong Kong’s economic decline and the challenges it faces hold important lessons for Singapore.
Hong Kong’s struggles with emerging competition highlight an ineluctable fact: As the Chinese economy continues to develop and mature, it will be increasingly difficult to compete with Chinese ports and financial centres that are more competitive, more efficient, and more integrated with the rest of China’s economy.
This is particularly the case with nearby Shenzhen, which has emerged to become a thriving finance and innovation hub. In 2014, the Chinese Academy of Social Sciences ranked Shenzhen above Hong Kong in its ranking of the most competitive cities in China.
It is said that imitation is the highest form of flattery. Yet, imitation can ring the death knell for a successful global city, as copycats with easy access to information and expertise can replicate a global city’s strategy for success in a shorter time and possibly with less effort.
Hence, once a city like Hong Kong or Singapore attains economic success in a particular industry, it must quickly move onto another sector to keep ahead of the curve. Unfortunately, such constant movement is the fate of small city-states.
Taking a leaf from the challenges and competition that Hong Kong faces, Singapore needs to enact a paradigm shift and not rely solely on its pole position as the gateway to Southeast Asia. Rather than simply being a gateway to any particular region or emerging market, Singapore needs to continuously rebrand itself as a truly global city that can serve a diverse array of markets and services.
With second-tier cities growing in both market size and expertise, traditional strengths in trade and finance will not be enough to guarantee Hong Kong’s and Singapore’s survival in the global economy.
BEING A SMART CITY CAN OFFER A QUANTUM LEAP
One way both cities have sought to diversify their offerings is to encourage the growth of innovation and technology, with FinTech being a case in point, so as to bolster their financial services sector, and hedge against potential disruption in this field. In doing so, they are transforming themselves into smart cities.
Yet, in contrast to Singapore’s Smart Nation initiative, Hong Kong’s smart city policy initiatives are much less coherent and Hong Kong continues to lag behind Singapore. While Singapore had introduced its Smart Nation initiative back in 2014, Hong Kong is only just releasing its Smart City blueprint, having spent the past few years commissioning studies and mapping out development plans.
However, smart cities cannot be the silver bullet for sustainable economic growth. Successful global cities such as London and New York are more than simply places to do business. Rather, they are also highly vibrant and liveable cities that are attractive to innovators, movers and shakers of the future global economy.
This will in turn lead to a natural clustering of companies seeking access to highly skilled labour as well as links to other companies, giving rise to new and innovative business solutions. More than simply a clean and aesthetically pleasing environment, however, a successful global city needs to possess a strong cultural identity.
HE(ART) OF GOVERNANCE
As Singapore’s thriving arts scene shows, a city’s cultural activities can both generate economic revenue, in terms of tourism, and perhaps more importantly, strengthen its cultural identity. It is this cultural identity that imbues great cities with long-term economic vibrancy and grants them confidence on the global stage.
At a more fundamental level, a vibrant arts and culture scene also serves to attract both top talent and industry leaders who are able to shape emerging cultural and economic trends. More than simply providing recreation and aesthetic value, the arts can truly build up Singapore’s cultural milieu and attractiveness as a global city.
The challenges faced by Hong Kong suggest that in an increasingly competitive global economy that is dominated by large and better-resourced nation-states, the survival of any city-state cannot be taken for granted.
Going forward, this softer aspect of urban economic development will prove crucial to both Hong Kong and Singapore. There is an urgent need for urban differentiation and for a new economic strategy.
This will require moving up the value chain to provide services that these emerging cities are not yet able to through a form of a smart city transformation. Hence, Singapore needs to move beyond the hamster wheel of economic upscaling to truly rethink what its value proposition is, especially in light of other competing cities that can easily replicate our recipe for success.
Fostering a vibrant and unique cultural milieu will set Singapore apart from other economic powerhouses and enhance its attractiveness as a global city. A vibrant arts and culture scene will be essential for this.
In order to do this, the city-state must master both the art and the heart of governance. While Singapore’s physical infrastructure is crucial for its economic performance, it is the city-state’s cultural identity that will give it soul and long-term vibrancy.
Woo Jun Jie is an assistant professor in the Public Policy and Global Affairs Programme of Nanyang Technological University and Rajawali Fellow at the John F Kennedy School of Government, Harvard University. He is the author of the newly released book, 3-in-1: Governing a Global Financial Centre, published by World Scientific.