hong kong and singapore remarkable success stories of city states
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Hong Kong and Singapore
Remarkable Success Stories of City States
Singapore & Hong Kong
• Area– Singapore: 697 km2
– Hong Kong: 1,104 km2
• Population– Singapore: 4.7 million–median age 40– Hong Kong: 7.1 million–median age 43
Singapore and Hong Kong
• Each is separated from the mainland by a narrow waterway
• Singapore’s relationship with Malaysia
had been volatile– brief merge in 1963-1965– disputes about water delivery, islands,
etc.
• Hong Kong benefits from mainland in China’s cheap labor and market
Singapore and Hong Kong
• Both are mostly ethnic Chinese soci-eties– Singapore: 77%– Hong Kong: 95%
• Both had over 100 years of British rule– Singapore: 1819 - 1959– Hong Kong: 1841 - 1997
• Both had been occupied by Japan– 1942 - 1945
Singapore and Hong Kong
• Both are successful ‘newly industrial-ized economies’
• Now they are regional hubs respec-tively.
• GDP composition: Sector Singapore Hong Kong agriculture 0% 0.1% Industry 28% 8% services 72% 91.9%
Hong Kong
• Gate port to ShenZhen industrial district.• 51% of export to and 46% of import from
mainland China.• Industrial base in 1960-70s was trans-
formed into service and financial industry.• Open and laissez-faire policy upgraded
Hong Kong up to a regional hub : Most businesses in the region are basically made in Hong Kong
Peoples Republic of China and Hong Kong
• Hong Kong had been vital to the interna-tional economic links of the PRC.
• Hong Kong’s imports of food and water from the PRC were a vital source of foreign exchange revenue that ensured Hong Kong’s usefulness to the mainland.
• In turn, cheap food helped to restrain the cost of living in Hong Kong thus to keep wages low during the period of labor-in-tensive industrialization.
After WWII
• Hong Kong restructured its economy– large-scale relocation of capital, en-
trepreneurs, and assets from mainland China– trade embargo against mainland China after
Korean War broke out actually benefited HK
• Hong Kong’s textile industry was founded in the 1950s before gradually diversifying in the 1960s to clothing, electronics, plastics and other labor-intensive goods for export.
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 only to maintain competitiveness
continued
• Industrialization was undertaken by local SMEs. No FDIs.
• Government did not engage in active industrial planning until 1970s with low taxes, lax employment laws, ab-sence of government debt, and free trade.
More Interventionist since 1980s
• Hong Kong government became more interventionist to cope with the political uncertainty during the negotiations between PRC and UK
• And intervened in stock and currency market– has linked HK$ to US$ since 1983
• Manufacturing moved out to PRC in 1980-1990s.
Singapore
• Singapore had been enjoying entre-pot trade based on hinterland Malaysia.
• Malaysia intended to bypass Singapore after its separation in 1965, jeopardizing the entire Singaporean economy.
• Furthermore, retreat of the UK navy force in latter 1960s had put 30% of workforce into a sudden unemployment.
Import Substituting Industrializa-tion?
• The cornered Singaporean govern-ment decided to launch her industri-alization for survival.
• Industrial activities were needed to provide jobs, but import substituting industrialization was not feasible since her domestic market was so small.
• Must aim at world market.
continued
• As protection of domestic market was meaningless, FDI would not do any harm anyway.
• Inviting FDI was urgent and in-evitable in order to provide Singa-porean people with jobs.
• Problem is “Will they come?”
FDI Aiming at Export Base
• Multinational Corporations were not in-terested in tiny domestic market of the city state, but in potential of produc-tion-and-export base for the region.
• Needed : High quality of local work-force at reasonable wage rates, good infrastructure, alignment of business environment to global standard, and good living conditions.
Singaporean Policy
• Infrastructure building in addition to pre-existing excellent harbor.
• Manpower training, including college education, complied to scheduled FDIs.
• Each scheduled FDI project forecasts needed manpower, and manpower training and college education is op-erated to meet this demand.
continued
• Young students were sent abroad to study under state scholarships.
Economic Development Board
• A highly efficient Economic Devel-opment Board (EDB) was established to take charge of inducing FDIs.
• EDB is an one-stop institution which takes care of everything of FDIs.
• EDB contacted every foreign investor and provided her with customized support.
Metamorphosis of FDI
• Until early 1970’s, any FDI was wel-comed in order to give jobs to local workers.
• In late 1970’s, the Singaporean gov-ernment began to screen out ‘low wage FDIs’, shifting the nature of in-dustry into high value added ones.
• As of 1980s, only clean high-tech FDIs were accepted, such as R&D centers.
Emergence of Local Entrepreneurs
• MNCs encouraged local employees with good performances to start their own businesses that produce related parts and components, extending technical and financial assistances.
• A group of Singaporean indigenous en-trepreneurs was formed in this manner.
• But these firms were to meet the needs of not Singaporeans but MNCs.
Government-Linked Compa-nies
• Singaporean government began to establish many firms, GLCs, which would address to needs of Singa-poreans, which MNCs had not cared.
• GLCs employed entrepreneurs trained in either MNCs or foreign schools abroad.
• GLCs covered from taxicabs to semi-conductors.
Capital
• MNCs brought their own capital.• Foreign exchange gap did not matter,
since MNCs brought in their own ma-chinery-facility-materials and ex-ported their outputs.
• Investment savings gap in GLC sec-tors was solved by the accumulated fund of social security from wages of employed workers.
Technology
• MNCs transferred some technology.• Singapore invited foreign experts for
training local manpower.• Sending young students to the uni-
versities abroad.• As a regional hub, Singapore hosted
many R&D centers.
Strong Political Leadership
• Lee Kuan Yew : Prime Minister, Senior Minister, Mentor Minister
• High pay with exact penalty on cor-ruption for government bureaucrats created ‘the cleanest’ government.
• Established and operated GLCs. Temasek
continued
• Government intervention– in labor market– in providing public housing– in improving educational facilities– in developing a social security systemin order to attract foreign investment.
• Open fine city with many Fines and Regulations!
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