Thomas Chow is a postgraduate student studying in the MA International Political Economy programme. He grew up in Hong Kong, and his research interests include Asia-Pacific affairs, international trade, and macroeconomic policies.
In late September, Canadian think-tank The Fraser Institute released its annual “Economic Freedom of the World” ranking. Hong Kong, a city that had remained on top of the chart since the think-tank’s inaugural report in 1996, saw its ranking drop from 1st to 2nd. Replacing Hong Kong was its Asian peer, Singapore.
Such rankings are only a few examples of how Hong Kong and Singapore often get compared. Understandably so, as the two cities share many similarities. Both were colonised by the British, with Singapore ending its colony status in 1967 and Hong Kong ending its in 1997. Both experienced rapid growth in the second half of the 20th century and were considered parts of the “Four Asian Tigers” alongside Taiwan and South Korea. Both are international financial hubs today, anchoring countless business activities around the world.
The two cities’ colonial history provided them an edge when it comes to engaging in international commerce and cross-border ventures. Both categorised English as one of their official languages, and most Singaporeans and Hongkongers can converse in English on an above-average level. This reduces the language barriers when multinational corporations set up their headquarters in these cities and helps attract foreign talents. Their low-tax and laissez-faire business environments also encourage financial activities. According to Statista’s “Global Business Cities Report” in 2022, Hong Kong led the world in the “Global Business Cities Ranking”, while Singapore came in 7th behind other major financial hubs such as London and Frankfurt.
The Political Factor
In 2020, following a series of pro-democracy protests, the Hong Kong government enacted the National Security Law of Hong Kong, effectively criminalising most anti-government demonstrations while bringing the city’s independent judiciary system into question. This marked the beginning of a more draconian ruling style from the Hong Kong government akin to China’s. Pro-democracy media such as Apple Daily and Stand News were forcibly shut down not long after, and the arrest of 47 pro-democracy lawmakers in 2021 shattered the city’s remaining electoral freedom.
Singapore, on the other hand, has a long history of suppressing civil liberties. Freedom of assembly is practically non-existent, and citizens tend to avoid criticising the leader publicly or engaging in anti-government activities. The People’s Action Party (PAP), Singapore’s ruling party, has secured the majority in the Singaporean Parliament ever since the country’s first election. Although there does exist some form of political pluralism in the legislative system, and elections are generally free of fraud, according to Freedom House.
Ironically, Hong Kong’s dwindling political freedom made its political-economic system resemble Singapore’s more than before. The “Singapore Model”, labelled by some scholars, refers to a system that prioritises “good governance” while maintaining an authoritarian rule. One could argue that China has been pushing for this model since the Tiananmen Square Massacre in 1989. The recent development in Hong Kong, therefore, can be seen as an effort by the Chinese Communist Party (CCP) to replicate the Singaporean Model in the city.
Singapore, despite being an authoritarian state, is generally perceived by foreign firms and investors as a stable location for business activities. The PAP’s unchallenged tenure as the ruling party and the lack of civil movements in the city mean that businesses need not to worry about large-scale protests or strikes that hinder daily operations. In this regard, Hong Kong’s tightening of political control could create a more politically stable environment for business akin to Singapore’s.
But does it work?
Internally, Hong Kong’s political changes have already caused home-grown talents to leave and find opportunities elsewhere. Emigration figures skyrocketed, as Hong Kong’s census department recorded a 1.6% population loss between mid-2021 and mid-2022, the largest population drop since records began in 1961. Many core values that Hongkongers hold, such as freedom of speech, went up in vain as the Security Law curb stomped the city’s remaining civil liberties. As a result, some decide to look elsewhere for places offering more political freedom. Many move to countries like Canada, Australia, and the United Kingdom, which opened new immigration schemes for Hongkongers in response to the political crackdowns. The UK, for example, has welcomed more than 100,000 Hongkongers under the British National Overseas route since the scheme was introduced in 2021.
Many foreign expatriates have also departed the city. Between 2020 and 2023, the number of expats in Hong Kong dropped by around 200,000. Many lefts because of the government’s strict “zero-covid” policy that was only lifted in late 2022, whereas Singapore announced the easing of restrictions a year earlier. Many said expats moved from Hong Kong to Singapore. In 2022, the number of foreign professionals in Singapore increased by 16%.
The situation reflects a bigger picture. Singapore does not offer the political freedom that Hong Kong once had, and the expats who moved across the South China Sea considered factors more than internal stability. Factors that look beyond how capable the local government can be.
Playing the (Geo)politics Game
One of the most striking differences between Hong Kong and Singapore is their sovereignty status. Singapore is a sovereign state, capable of making its own political decisions. Hong Kong, on the other hand, is a special administrative region under China. While Hong Kong’s Basic Law grants the city a good degree of autonomy, the government still needs to ensure that the political decisions made would appeal to the higher-ups, which is the CCP. Whereas the Singaporean government emphasises on “good governance” and ensures that each policy decision is made to the country’s benefit, the Hong Kong government needs to follow Chinese political doctrine and appease the CCP Officials, which might not always align with what’s best for the city itself. The two cities’ covid policies in the past few years provide a good demonstration.
Singapore, along with most other major economies, reopened its economy and resumed business in 2021. Meanwhile, Hong Kong was still following China’s “zero-covid” doctrine, enacting strict quarantine measures and social distancing policies. Such decisions are economically insensible, as the availability of vaccines should allow Hong Kong to reopen and regrow its economy just as the rest of the world did. Instead, the Hong Kong government continued to enforce lockdowns and pursue the “zero-covid” goal, practically wasting a year of valuable business opportunities. Donald Low, a Singaporean scholar at the Hong Kong University of Science and Technology, described the Hong Kong government’s response to covid as a reflection of a “less competent and autonomous state, combined with a weakened, disempowered society”.
Beyond the governance comparison, Hong Kong and Singapore’s situation could be viewed as an episode of the shifting geopolitics in the Indo-Pacific region. Hong Kong has long been the gateway to China, as the city’s Western-friendly institutions fostered a great environment for corporations and individuals looking to invest in mainland China, especially as the Chinese government still retains control over capital flow. Singapore is located at the centre of Southeast Asia, making it an ideal place for investors looking to expand business in the ASEAN region.
The ASEAN region in recent years has become a popular destination for foreign investors.
According to analysis from the Economist Intelligence Unit (EIU), Southeast Asian countries such as Vietnam and Thailand saw great improvement in business environments compared to last year. Many global firms are pursuing the so-called “China+1” policy, setting up supply chains in China plus another Asian market to diversify production and mitigate geo-political tensions between China and the West. Meanwhile, China ran on an opposite trajectory, with its business environment significantly worsening according to the EIU due to covid restrictions and an increasingly statist economic policy. It then becomes clear who is benefitting from this geopolitical turn of events. The economic development of ASEAN countries brings opportunities into Singapore, while Hong Kong loses some of its competitiveness as China’s economy stagnates.
Given the sheer size of the Chinese market, Hong Kong will remain a crucial player in global finance soon. After all, Hong Kong still reigns supreme among all Asian cities in areas such as capital markets and investment banking. But in the long-term, as China’s economy folds more inwards, Hong Kong’s importance will slowly fade. Singapore’s future looks slightly brighter, as its proximity to the rapidly growing Southeast Asia creates lots of business opportunities. The Singapore government will look to make the most out of such a geopolitical trend. Hong Kong might lack the agency to do so.
Photo credit: The Online Citizen
