Comparing Singapore & Hong Kong

Singapore & Hong Kong

• Area– Singapore: 697 km2

– Hong Kong: 1,108 km2

• Population– Singapore: 5.7 million– annual growth 1.9%– Hong Kong: 7.1 million– annual growth 0.4%

Singapore and Hong Kong

• Each is separated from the mainland by a narrow waterway

• Singapore’s relationship with Malaysia has been volatile– brief merge in 1963-1965– disputes about water delivery, islands, etc.

• Hong Kong benefits from mainland China’s cheap labor and market

Singapore and Hong Kong

• Both are mostly ethnic Chinese societies– Singapore: 77%– Hong Kong: 94%

• both had over 100 years of British rule– Singapore: 1819 - 1959– Hong Kong: 1841 - 1997

• both were occupied by Japan– 1942 - 1945

GDP (purchasing power parity)

• Singapore:– US$445 billion (2014)– Ranked 40th in the world– per capita 7th in the world

• Hong Kong:– US$401 billion (2014)– Ranked 45th in the world– per capita 17th in the world

GDP Growth Rates (% ) of Singapore (red bars) and Hong Kong (blue bars)

-6

0

6

12

18

Singapore and Hong Kong

• Both are newly industrialized economies• GDP composition:• Sector Singapore Hong Kong• agriculture 0% 0%• industry 25% 7%• service 75% 93%

Singapore and Hong Kong

• Exports:– Singapore: 13th in the world– Hong Kong: 8th in the world

• 54% to mainland China

• Imports:– Singapore: 14th in the world– Hong Kong: 7th in the world

• 47% from mainland China

Exports of G.&S. (% of GDP)

Economic development

• Singapore and Hong Kong– have achieved similar economic success– through very different economic approaches

• path of economic development diverged after World War II– similar experience under British colonial rule– divergent political development after WWII– divergent economic models after 1960s

Colonial legacies

• Both became entry ports to mainland• both benefited from British management

and technological expertise• both attracted inflow of Chinese emigrants

– Chinese population in Singapore doubled in 1820s

– Chinese population in Hong Kong quadrupled between the two World Wars

Divergent paths after WWII

• Singapore gained independence (1959)– Lee Kuan Yew’s People’s Action Party

• economy grew at a slow pace in 1950s– still based on intermediary trade– boosted by the Korean War of 1950 - 1953

Divergent paths after WWII

• Hong Kong restructured its economy– population quadrupled 1945 - 1955– large-scale relocation of capital,

entrepreneurs, and assets from mainland China

– trade embargo against mainland China after Korean War broke out actually benefited HK

• relative political stability– popular political apathy

Divergent development model

• Singapore’s People’s Action Party– faced severe internal and external conflicts in

1960s– PAP became a elitist and paternalistic party– neo-Confucianism?

• government intervention in the economy– drew up a state development plan

Singapore’s development 1960s

• New institutions– Economic Development Board

• promote industrial development– Housing and Development Board

• develop industrial estates– Development Bank of Singapore

• provide industrial financing– Jurong Town Corporation

• acquire, develop, and manage development sites

Singapore’s development 1960s

• Restructured from trading port to manufacturing base

• government intervention to attract foreign investment– in labor market– in providing public housing– in improving educational facilities– in developing a social security system

Singapore’s development 1960s

• produced phenomenal economic growth• achieved full employment by early 1970s• ventured into high-tech, capital-intensive

industries and high value-added services

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4.E+10

5.E+10

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Singapore's GDP 1960-1984 (in constant local currency)

Hong Kong’s development

• Hong Kong also enjoyed phenomenal economic success– rapid expansion in manufacturing in 1960s– industrial diversification in 1970s

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1.E+10

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1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Hong Kong's GDP 1960-1984 (in constant local currency)

Hong Kong’s development

• government’s laissez-faire principle• reactive, selective, & reluctant intervention

– development of public housing– provide lower-middle-income families with

access to home ownership– social expenditure & community development– development of human resources

• intervention to maintain competitiveness

Convergence since 1980s?

• Singapore reconsidered its development strategy– economy diversified from manufacturing to

financial and professional services– aims to surpass Hong Kong as an

international center of finance & business HQ– government relaxed intervention in economy– free capital flows and foreign investment even

after Asian Financial Crisis of 1997

Convergence since 1980s?

• Hong Kong government moved in the opposite direction

• became more interventionist• to cope with the political uncertainty during

the negotiations between PRC and UK• intervened in stock and currency market

– has linked HK$ to US$ since 1983

Convergence after crisis?