Singapore could show UK the way Ambrose Evanspritchard
If you consider it daunting to wrench a divided nation from its economic moorings and launch into the unknown, remember what Singapore had to face when it was born in trauma at the height of the Cold War. Founding premier Lee Kuan Yew literally broke into tears as he explained to a medley of distraught peoples – Hokkien Chinese, Malay, Tamils and Eurasians – that all attempts to keep the island entrepôt in the Malaysian federation had collapsed.
His foes had warned during months of bitter wrangling that Singapore would have to accept subordinate terms imposed by Kuala Lumpur or else lose the Malaysian rubber trade and access to its core peninsula markets. It would be reduced to a “tropical slum”; it was even threatened with the loss of its fresh water supplies from the mainland in one infamous warning.
“The idea that a small island city-state of 2m people with no hinterland could survive in what was then a difficult and troubled region – the ‘Balkans of Asia’ – seemed manifestly absurd,” said Kishore Mahbubani, the dean of Lee Kuan Yew University.
This is not the place to rehearse the causes of that complex crisis in 1965. Suffice to say that the Malaysian leader – the Tunku – in the end thought it preferable to “amputate the gangrenous limb” in order to preserve ethnic Malay dominance, rather than having to share a federation with the “Straits Chinese”.
Lee Kuan Yew had to assuage aggrieved Malays, recently embroiled in deadly sectarian riots and prime candidates for irredentist resistance. Many thought him a crypto-communist, sympathetic to the Maoist revolution that was so stirring the passions of the Chinese diaspora.
Westerners feared he would draw Singapore into the Sino-soviet orbit. The British high commissioner of the day more shrewdly thought him a “crypto-anti-communist”, as he most certainly proved to be. But defeating communist subversion was no easy task either.
“It is nothing short of a man-made miracle that Singapore has enjoyed 50 years of continuous peace and prosperity. Its society might easily have been torn apart by ethnic strife,” said Prof Mahbubani.
This is the fate that befell the small multiracial states of Guyana, Cyprus and Sri Lanka when the British Empire withdrew.
As we all know today, Singapore is a wirtschaftswunder. It is at peace with itself and its neighbours, with perhaps the best-educated teenagers on the planet, and very rich. Its leaders defied the import substitution orthodoxies of the post-colonial “Bandung generation”, which failed to varying degrees almost everywhere. It pioneered the free trade strategy that catapulted the country from third world to first world.
When foes of Brexit deride the notion of a “Singapore on the Thames” they typically equate such a strategy with hyper-deregulation, a low-tax
‘Behind the soft images of the shopping malls is a ruthless process of meritocratic selection’
race to the bottom; or perhaps some sort of free marketry run amok, with over-reliance on finance. But that is to do this disciplined, cohesive and essentially Confucian-socialist nation a disservice on several levels. It is also ill-informed.
“Singapore continues to maintain regulatory and supervisory standards that are among the highest in the world,” states the International Monetary Fund in its latest Article IV report. Corporation tax is light at 17pc – where Britain is already heading – but not super-low like Ireland.
Rolls-royce builds Trent engines for the Airbus A380 and Boeing’s Dreamliner at the old RAF fields at Seletar. Keppel has grown from the Royal Navy yard to become the world’s biggest producer of drilling rigs for oil and gas. Manufacturing makes up 22pc of GDP, comparable to Germany or Japan. “And we want to keep it that way,” said Chng Kai Fong, the Trinity College, Cambridge, alumnus in charge of economic planning.
The ruling party clamped down on mass immigration after an election upset in 2011, a protest of sorts by Singaporeans feeling the crush on scarce resources. The island’s new “labour-lean” model offers a template for what Britain may face as it curbs inflows of unskilled migrants after Brexit. The IMF says the manufacturing sector has shed workers for 10 consecutive quarters, and productivity is recovering briskly after a period of stagnation. “Tighter limits on foreign workers have led to a permanent increase in real wages relative to the cost of capital,” it said.
This refutes academic claims in the UK – already under fire for lack of rigour – that low-skilled immigration does not compress the real wages of British indigenous workers. The IMF says firms in Singapore are being forced to boost investment in laboursaving equipment, leading to “higher optimum capital intensity levels”.
Policymakers in Singapore have concluded that labour-intensive growth may have been a trap, raising the risk that they would miss a crucial jump at the development frontier. This is revealing: if you make such a claim in the British debate, you are accused of Brexit delusion – or worse – by free movement ideologues.
The architect of Singapore’s post-independence economy, Goh Keng Swee, studied Japan’s Meiji Restoration in the 19th Century. He targeted strategic sectors in an East Asian form of hybrid dirigisme with market signals, whether precision engineering or seizing on Singapore’s nodal position in the Malacca Strait to control shipping. Laissez-faire it is not. “The government takes an equity stake to de-risk projects and show it is in the game,” says Chng.
The UK cannot copy the model but a country like ours living chronically beyond its means – with a current account deficit near 6pc of GDP, and a household savings rate at post-war lows – should certainly heed the message posted in giant letters at schools: “No one owes Singapore a living.” Behind the soft images of the shopping malls is a hard machine, a ruthless process of meritocratic selection, all held together by a communitarian eco-system.
The basics of life are cheap. My plate of rice, beef and Asian spinach today cost £2.40 from the food stall of a “hawker centre”, the gathering spot of
‘Let Britain be a world nation, more at home with rising Asia and a little freer from the European Union’
Singapore neighbourhoods. Prices are capped by fiat. The produce is imported tariff-free from wherever it is cheapest, often Australia. There are no EU “Corn Laws” here.
The metro is automated, without human drivers, and costs a trivial sum, while cars are ferociously discouraged. Road certificates cost around £25,000 for 10 years. New issuance is to be frozen. The aim is to halve car ownership per household from 40pc to 20pc. The government owns most of the land. It builds the leafy mid-rise blocks that house 80pc of the resident population, mixing small and big flats together and carefully managing racial quotas – 74pc Chinese, 13pc Malay, 9pc Indian, etc – to prevent ghettoes. Cultural balance is handled with enormous care. There is none of the liberal carelessness – bordering on anthropological nihilism – that has led to Europe’s unassimilated banlieues.
The state sells property on a lottery basis, with the highest numbers getting first choices for their bracket. Prices average £62,000 for a tworoom flat, £104,000 for three rooms, £160,000 for four rooms, and so on. If you buy directly from the government, you cannot sell for five years.
This system has prevented a housing shortage in a city with a population density that is 60pc higher than in London, keeping prices well within the range of young couples.
Counter-cyclical tools such as adjustable loan-to-value caps (currently 80pc) and variable stamp duty are used aggressively to prevent booms. Prices have been falling gently since 2013.
The aim is to stop them rising, unlike the deranged British practice of trying to push them higher with incentives. “The Chinese are studying our model very long and hard,” said Khoo Teng Chye, Singapore’s urban planning guru. Perhaps the Tories should do the same.
Citizens are docked 20pc of their income at source for the Central Providential Fund, matched by an equal contribution from employers. Young couples – singles forbidden, mind you – can draw on their named account as the fund for mortgages.
This system creates a colossal pool of national savings for investment. It is a key reason – indirectly – why Singapore runs a current account surplus of 19pc of GDP, and why it has amassed Norway-sized external assets through its sovereign wealth funds Temasek and GIC even though it has no oil. The level of compulsion is not for the Anglo-saxon psyche. There is a dark side to Singapore’s hierarchies, a tier system of differing rights for citizens, permanent residents and lesser pass-holders. Maids from the poor-abroad, Myanmar or the Philippines, are deported within days if found to be pregnant in routine health screenings.
Yet there are potent lessons in this success that Jeremy Corbyn might usefully study for his own dirigiste drive, if he can overcome his affinity for ruinous Bolivarian caudillos. Prof Mahbubani says Singapore achieves the extraordinary feat of tapping into four major “civilisational streams” – Chinese, Indian, Islamic and Western – without conflict and to multiplying economic effect.
That perhaps is the best guidance as Brexit looms. Let Britain be a world nation, more at home with rising Asia and its peoples, and a little freer from the clammy embrace of that defensive white cartel we call the European Union. “Singapore in the Atlantic” is not a bad rallying cry at all.