Hong Kong and Singapore: CityStates in Transition

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Hong Kong and Singapore City-States in Transition

• Kelly Kolker

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Similarities

• Externally oriented industrialization
• No contention with rural-based elites
• Free operation of labor markets
• Government STRONG and independent executives
  Weak subordinate legislatures.

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Differences

• SINGAPORE
• Economic Policy Interventionist
• Foreign Investment
• Weak domestic private sector
• Peoples Action Party (PAP) social conflicts

• HONG KONG
• Laissez-Faire
• Local Firms
• Large entrepreneurial capability in domestic
  sector
• No one contested political authority Power in
  Financial Secretariat

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Singapore

• Industrialization
• Manufacturing Industries Tin Rubber Weak
• Peoples Action Party 1959) Control Structure
  under Lee Kuan Yew
• Independence from Malaysia Shift from ISI to,
  Export Oriented system
• The government used an external crisis to impose
  both a new dev. Strategy and a new level of labor
  discipline. (113)

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State Institutions Economy

• Economic Development Board (EDB)
• Desirable Industries
• adversely affect other industries
• fill a gap in the industrial structure
• generate linkages with other industries
• Investment Promotion Division (IPD)
• Attract foreign investment

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Hong Kong

• Industrialization
• Laissez Faire non Interventionist
• Developed manufacturing sector
• Developed commercial and banking establishments
• Political Structure Similar to EA Pattern
• External Shocks Chinese Revolution and UN
  Embargo on trade with China

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Political and Institutional Foundations of
Laissez Faire

• Macro-level no trade restrictions, no central
  bank
• Micro-level Industry not a function of
  government loans, subsidies or protection
• No distinction between local and foreign firms
• Government LAND, water, postal system, and
  airport services.

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The Second Industrial Revolution 1979

• Singapore Upgrading its exports
• Control of labor
• Ten Year Economic Development Plan
• Goal increase the share of the manufacturing
  sector in GNP
• Second Industrial Revolution confirmed dominance
  of multi-nationals

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2nd Generation of PAP and Downturn

• Technocrats Little if any political experience
  bureaucracy, academia, private sector
• Downturn short-term factors and governments
  management of economy balance of power between
  the public sector and foreign and local firms.
• Over 100 state-owned enterprises that competed
  directly with the private sector
• Result Still interventionist

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Hong Kong Positive Non-Interventionism

• State Intervention 4 areas
• Control of monetary policy and the foreign
  exchange markets
• Regulation of the Financial Sector
• Extending basic social services education,
  medical services, public housing
• Sponsor industrial and economic advisory boards
  to maintain a dialog with the private sector over
  economic policy

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Hong Kong Financial Center

• Contributing Factors
• Location rapid economic development of the
  region
• Demand for an international financial center in
  an East Asian Time Zone

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Political Environment

• Sino-British Agreement 1984 Guaranteed the
  continuity of the capitalist system for half a
  century after sovereignty had been reverted to
  China in 1997. (154)
• Created a Crisis of Confidence
• HK dollar pegged to US dollar
• Growing relations with China
• Joint Declaration

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Singapore v. Hong Kong

• Importance of domestic structures and ideologies
  in shaping national responses to external
  pressures
• Singapore aggressive toward industrial
  adjustment
• Hong Kong Maintained a non-interventionist policy

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Political Liberalization

• Domestic Pressures
• Members of the bureaucracy who believe in
  government activism
• Private Sector Support v. Unnecessary
  Direction
• Speed and direction of adjustment will be
  affected expanding scope and level of political
  participation

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What Next?

• Emergence of an attentive middle-classs
• Increasing organizational capacities of societal
  actors more players, more demands on the state
• Haggard Greater politicization will reduce the
  coherence of policy and the speed with which
  adjustments can be undertaken. (160)

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Question/Discussion

• Proposition Successful export-led growth demands
  state-intervention? True or False?
• What was the fundamental reason for Singapores
  downturn in the 1980s?
• Liberalizing Reforms Good Idea or Bad?
• Greater political opportunities to oppositions
  over the long run, or will it serve as a
  deterrent to the coherence of policy and the
  speed with which adjustments can be undertaken?
  What does Haggard think?