Hong Kong and Singapore City-States in Transition Kelly

Hong Kong and Singapore: City-States in Transition Kelly Kolker

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

~Differences~ SINGAPORE Economic Policy = Interventionist Foreign Investment Weak domestic private sector People’s 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

Singapore Industrialization: Manufacturing Industries: Tin & Rubber: Weak People’s 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)

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

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

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.

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

2 nd Generation of PAP and Downturn Technocrats = Little if any political experience: bureaucracy, academia, private sector Downturn: short-term factors and government’s 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

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

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

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

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 noninterventionist policy

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

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)

Question/Discussion Proposition: Successful export-led growth demands state-intervention? True or False? What was the fundamental reason for Singapore’s downturn in the 1980’s? 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?