x Abu Dhabi, UAETuesday 23 January 2018

Strait-laced Singapore plans a future with fun

The former 'nanny state' that soared to world-leading modernity and wealth through toil and rigour feels a modified approach is needed to keep it ahead.

The Marina Bay Circuit in Singapore.
The Marina Bay Circuit in Singapore.

The former 'nanny state' that soared to world-leading modernity and wealth through toil and rigour feels a modified approach is needed to keep it ahead. When Singapore hosted its first Formula One Grand Prix in September last year, many residents were thrilled, and others perplexed. Why, they wondered, had an island-state famous for its strait-laced, buttoned-down approach to business and government suddenly become seduced by a spectacle of such obvious extravagance?

The answer lay in the very pragmatism Singapore's government applies to the country's economic management. Though not necessarily fans of fast cars, Singapore's leaders years ago realised that, with China and other nations nipping at the country's lead in manufacturing, the best way to keep boosting incomes for their 3.2 million citizens was to become a lifestyle capital that would continue to draw the world's best, brightest and wealthiest.

The tiny nation derided as the "nanny state" would have to become fun. "A lot of people would have preferred if Singapore stayed nice and quiet and not very expensive," said Edward Teather, the South East Asia economist for UBS in Singapore. "But a globally competitive city has to compete to get the top tier of wealth generators." The parallels between Singapore's ambitions as a metropolis and those of Abu Dhabi and, more broadly, Dubai and the UAE, are obvious.

Having run up against the limits of its natural advantages in global trade and being too small to generate growth domestically, each has determined to become its own urban magnet, a modern-day equivalent of Italy's medieval city-states of Florence, Genoa, Milan and Venice. Five hundred years ago, these cities ruled over maritime empires despite having no large resource-rich territories of their own.

That's where the similarities between Singapore and the Gulf end, though. Hosting a GP is part of a trend that has in recent years seen Singapore loosen its apron strings, easing censorship of films, restrictions on gays, allowing clubs and bars to stay open around the clock and even lifting a long-standing ban on casinos in order to build two integrated casino resorts. Singapore's ability to reinvent itself stems in part from its own sense of insecurity. Ejected in 1965 from the federation that now comprises Malaysia, Singapore was left to forge its own path, an ethnic-Chinese Lilliputian nestled between two ethnic-Malay giants, Malaysia and Indonesia.

"To understand Singapore and why it is what it is, you've got to start off with the fact that it's not supposed to exist and cannot exist," said Lee Kuan Yew, who served as the prime minister of Singapore from 1959 until 1990, in an interview in 2007. Now 86, Mr Lee remains a member of the Cabinet as a "minister mentor." His son, Lee Hsien Loong, is now the prime minister. Singapore had been a flourishing free port since its establishment almost 200 years ago by Britain's Sir Stamford Raffles. Mr Lee, the first prime minister of the independent nation, set out to turn the country into a haven for multinational corporations and to make it clean, safe, incorruptible and efficient.

In came tough laws on littering and spitting; out went frivolities such as chewing gum and the original Singapore Grand Prix, which was discontinued in 1973. Mr Lee's gamble paid off. By the 1990s, Singapore was, among other things, the world's largest producer of computer hard disk drives, and foreigners made up about a quarter of its population. But growing competition from other Asian nations awakened it to the danger of relying on manufacturing.

When Asia recovered from the financial crisis of 1997 and 1998, the recovery was led by high-tech electronics and the internet. Singapore strove with mixed success to clamber up the value-added chain and encourage a people moulded to serve multinationals to become entrepreneurs and critical thinkers. In 2001, Singapore suffered a double blow: the tech bubble burst, and China joined the World Trade Organisation.

The government convened a special economic review committee of senior government planners and private-sector executives to draft a new economic blueprint. The result was a plan to open Singapore further to immigration in the hope of building the population by one third to 6 million and shifting the economy beyond electronics, refining and shipping. Since then, Singapore has made a major push into pharmaceuticals and biosciences, luring major manufacturers such as GlaxoSmith Kline and Pfizer to build plants.

It has also attracted top researchers from companies such as Novartis and from major universities in the US and UK with offers of generous funding and little interference. Another focus of Singapore's new direction has been private wealth management. To lure Asia's new rich and their money, Singapore made its tax laws even more favourable, eliminating taxes on foreign-earned income and establishing tougher new trust laws.

The result was an explosion of private wealth managers, with banks poaching candidates from each other and even grabbing tennis pros and musicians - anyone who might have contacts and a knack for catering to the super-rich. While some have derided Singapore's efforts as contrived, calling for a more laissez-faire approach similar to Hong Kong's, others say Singapore's managed economy still works.

"Singapore's planned industrial development has been very successful," said Takahira Ogawa, director of sovereign ratings at Standard & Poor's in Singapore. "In a small country with not many resources, the government needs to choose the allocation of resources." Along with regulatory inducements, however, Singapore's leaders also spoke openly about the need to enliven Singapore and turn it into a lifestyle hub.

Along with quietly lifting restrictions on homosexuals and eliminating a bans on bar-top dancing, Singapore began allowing some bars to stay open all night and even allowed a topless revue to open. Entertainment quarters were spruced up and parts of a theme park island were converted into a marina resort for the wealthy, complete with mooring for super yachts. But perhaps most dramatic was Singapore's decision in 2005 to lift a long-standing ban on casinos. Now two integrated casino resorts are under construction in Singapore, including one by Las Vegas Sands.

Singapore began lobbying for a slot on the F1 calendar in the same year. "The government saw that F1 could make a difference and boost the profile of the place," said Nels Friets, a banker who has lived in Singapore for 20 years. In 2007, Singapore clinched its spot on Formula One's 2008 calendar, following in the footsteps of Malaysia, which began hosting its own GP near the capital, Kuala Lumpur, in 2000.

But Singapore earned the distinction of being the first city to host a night race. The race had only moderate impact, drawing about 40,000 visitors for an event that lasted just one night and generated slightly more than US$120 million (Dh440m) in spending, more than half of it from the government itself. This year, the global recession kept revenues even lower. For the government, though, the most important thing was the spotlight the race shone on the city.

"The F1 continues to improve Singapore's international branding and improves mind-share," S Iswaran, Singapore's senior minister of state for trade and industry, told the country's parliament last week. "It also serves as a very good platform for business networking, innovative activities and the creation of new opportunities." @Email:warnold@thenational.ae