Why Singapore’s government and economy are outperforming Hong Kong’s

Around this time last year, Singapore loosened its pandemic restrictions decisively, catalysing a brisk recovery that saw its economy grow by 3.6 percent in 2022. Hong Kong, by contrast, was still in the middle of its Omicron nightmare that resulted in about one in a thousand residents dying of Covid-19 in just over three months, the highest Covid mortality rate in the world then. Its economy shrank by a shocking 3.5 percent last year.

Also around this time last year, questions began to be asked by investors, bankers, business leaders and others about the longer-term viability of Hong Kong as Asia’s business hub. Was it losing its coveted position as the leading financial centre in Asia to Singapore? These doubts have not abated even as pandemic-era restrictions in Hong Kong were (belatedly) removed, and even as Hong Kong claims to be back in business.

Between the summer of 2020 (when China introduced a wide-ranging National Security Law) and last summer, more than 200,000 expats left Hong Kong, not least to escape pandemic restrictions that were increasingly seen as archaic and excessive. Singapore was one of the favoured destinations.

The contrasting fortunes of Asia’s two richest economies (by per capita income) in the past year are symptomatic of a longer-term trend. Since Hong Kong’s handover to China in 1997, and especially relative to Singapore, the Hong Kong economy has become less diversified and international, its government less capable and credible, and its previously robust civil society more cowed and fearful.

For all the hype that Hong Kong’s governing and business elites put out about the city being the world’s gateway and super-connector to mainland China (and vice versa), the fact remains that Hong Kong’s links with the fast-growing mainland economy have not helped it grow as fast as Singapore in the last quarter-century.

This also raises troubling questions about how useful it is to market Hong Kong as (simply) the gateway to mainland China. At one level, it is of course an obvious and trivial fact that Hong Kong is the main gateway to China. At another, the fact that Hong Kong still uses this positioning after more than 25 years shows how little the Hong Kong economy has been reinvented or transformed over the decades.

One might counter that Hong Kong’s links to mainland China, and particularly to the vibrant Pearl River Delta—now rebranded as the Greater Bay Area—were significantly enhanced in the years just before the pandemic, and that it is now only a matter of time before Hong Kong reaps the agglomeration benefits that such connectivity brings. Perhaps so. But such optimism must be tempered by the fact that in recent years the Chinese state has become much less pro-business and economically pragmatic, and far more concerned about national security and political ideology. These changing priorities are reflected in the recent crackdown on China’s booming consumer-tech sector, arguably the most productive and innovative part of the Chinese economy in the last decade.

One might also argue that GDP growth is not the only, or even the main, metric for comparing economic performance. But even on other measures of well-being—such as inequality reduction, home ownership, and economic stability—there is little doubt that Hong Kong’s performance has lagged Singapore’s in the last 20 years or more.

At the heart of Singapore’s superior economic performance over the last two decades has been its success in maintaining a far more diversified economy, anchored by a strong manufacturing base that is nearly 20 percent of the economy (compared with less than one percent of Hong Kong’s), and by continuous investments in innovation and technology. By comparison, Hong Kong’s efforts in these areas have been inadequate, sporadic, or belated. The result has been an economy that is overly concentrated in the less technology-intensive and innovative sectors of finance and insurance, real estate, trade logistics, professional services, and tourism. Even in these sectors, Hong Kong depends on Chinese demand much more than Singapore does. The overall result of this lack of diversification—whether in terms of sectoral mix or sources of demand—has been a more fragile, less resilient economy.

The second factor that explains Hong Kong’s lagging performance has been a less competent and credible government, demonstrated most saliently in terms of housing affordability and the government’s handling of the pandemic. That Singapore has outperformed Hong Kong in delivering affordable and accessible public housing over the last two decades is not in doubt. Waiting times for a public flat in Hong Kong far exceed those in Singapore. Just as important is the fact that whereas owner-occupied public housing caters to the large majority of Singaporeans, it does not in Hong Kong.

To be sure, Singaporeans in the past year have become a lot less optimistic about public housing remaining affordable in the coming years. But this is a relatively recent phenomenon. Compared with Hong Kong’s long-standing housing problem, Singapore’s recent problems are far less structural and deep-seated, and hence far more solvable.

Governmental performance can also be assessed in terms of the capacity to anticipate, plan and prepare for the future. Not only did the Hong Kong authorities fail to plan and prepare for the Omicron surge—in terms of ensuring high elderly vaccination rates, and increasing hospital and ICU bed capacity—resulting in a far higher Covid death toll than Singapore, but the current administration’s continuing refusal to set up a comprehensive inquiry into Hong Kong’s response to Covid-19 points to a certain inability to learn from past mistakes.

What makes Hong Kong’s poor handling of the pandemic all the more galling is the fact that by the second half of 2021, it was clear to a growing number of analysts that Singapore would come out of the pandemic earlier and in better shape than Hong Kong. All Hong Kong had to do was simply mimic what countries like Australia, Malaysia, New Zealand, Singapore and South Korea were already doing in terms of moving (gradually) towards living-with-Covid. That the Hong Kong authorities failed to do so is not just an indication of incompetence, but also of a certain smugness, arrogance and wilful blindness.

The third factor behind Hong Kong’s relative decline has been a weakened civil society. Hong Kong’s comparative advantage was never a strong and highly competent state. Rather, Hong Kong thrived because of its enterprising, self-reliant, and risk-tolerant society, even if this meant that its people were sometimes boisterous and rambunctious. Whereas Singapore’s success depended more on a strong state, Hong Kong’s (past) success was driven (more) by a strong, more self-reliant society.

In the context of what makes the respective cities tick, one could hardly have expected the Hong Kong authorities to persist with Covid suppression measures so much longer than the famously paternalistic Singapore government did. By promising zero-Covid, the authorities undermined personal responsibility—the very quality that makes Hong Kong society resilient—by creating the delusion that the government can protect people from a disease that was fast becoming endemic everywhere else in the world.

Persisting with zero-Covid also meant that Hong Kong was increasingly isolated and out of step with global best practice, an unimaginable state of affairs for a self-proclaimed global city. In short, Hong Kong sacrificed its standing as an open, international city for something that was always of dubious value—alignment with the mainland’s zero-Covid stance. Whether such alignment was independently chosen by the Hong Kong government or was forced upon it is somewhat of a moot point. Either way, it reflects a less competent and autonomous state, combined with a weakened, disempowered society.

That the mainland eventually but abruptly ended zero-Covid shows how futile and myopic Hong Kong’s “choice” always was. Instead of being a role model for how mainland China could have exited the pandemic, Hong Kong’s Omicron nightmare this time last year foreshadowed China’s own nightmare at the start of this year.

Given its inability to learn from Singapore in its handling of the pandemic, it is quite ironic that Hong Kong state has in recent years been learning from Singapore on how to curb civil liberties and suppress civil society. In short, where it should be learning from Singapore (in terms of industrial policy, development of innovation and technology capabilities, economic diversity, public housing, handling of the pandemic), Hong Kong hasn’t been able to. Where it should be much less keen to learn from Singapore (in terms of reducing media freedoms and civil liberties, excessive governmental interventions and paternalism, the demonisation of political opponents), Hong Kong’s ruling class has been overly enthusiastic students. Again, whether this enthusiasm is driven by a need to please Beijing does not alter the fact that civil society in Hong Kong has been considerably weakened.

The things that the Hong Kong authorities are learning from Singapore do not make for a stronger, more competent state. Rather they make for a more repressive one, and a society that is increasingly intimidated into submission. What we are likely to see in Hong Kong in the near future is not the emergence of a strong state with a weaker society, but of a weak state and a weak society.

Based in Hong Kong since 2019, Donald Low is senior lecturer and professor of practice, and director of leadership and public policy executive education, at the Hong Kong University of Science and Technology. He works in the areas of economics and behavioural economics, inequality and social policy, complexity in public policy, and the politics and governance of Singapore. He is the lead author of Hard Choices: Challenging the Singapore Consensus, co-written with Sudhir Vadaketh, editor-in-chief at Jom, and the co-author of PAP v PAP: The Party’s Struggle to Adapt to a Changing Singapore, co-written with Cherian George, professor at the Hong Kong Baptist University's School of Communication.