Brexiteer fantasy of Singapore-style economy will be hard to achieve

As Britain’s political impasse sharpens ahead of its March 29 withdrawal date from the European Union, an idea has gained traction among some Brexiteers — that Britain should become a low tax, low regulation and low public spending paradise in the same mold of the tiny Southeast Asian city state of Singapore.

Singapore’s admirers include Britain’s most vociferous of Brexiteers, like Boris Johnson, Michael Gove, Conservative MP Owen Paterson, and entrepreneur James Dyson. The “Singapore model” was lauded by Foreign Secretary Jeremy Hunt on his recent visit to the island nation, which is smaller in size than New York City. “Britain can draw encouragement from how Singapore’s separation from the Peninsula did not make it more insular but more open,” he said during a news conference.

Even some Remainers are advocating for it. Former advertising guru Martin Sorrell told Sky News at Davos this week that Singapore’s independence “was not dissimilar to some of the things you hear around Brexit…[Singapore’s founding Prime Minister Lee Kuan Yew] took Singapore to a level that people never anticipated and made it extremely successful on a much smaller scale — 5 million people as opposed to 60 million people in Britain.

“But the lessons are there,” he added.

At face value, it is easy to see why. Singapore was among the world’s poorest nations in 1965, when it became independent of Malaysia. Although it has limited natural resources, the country has become one of the world’s most advanced, ranking higher in 2017 than the UK for GDP per capita (at $57,714 versus $39,720), according to the World Bank; and ranking near or at the top of global indexes for health efficiency, education and competitiveness — to name but a few.

State spending

While flattered by the new-found attention, Singaporean policy-makers seem baffled by the comparisons between two countries with wholly different demographics, population size, histories and regional locations.

The top tax rate for earners in the UK is 45%, compared to 22% in Singapore. Slashing tax, be it corporate or personal, in Britain will incur a number of knock-on effects to its state spending model, explained Singapore’s Prime Minister Lee Hsien Loong in an interview with Bloomberg’s editor in chief at the New Economy Forum in November.

“Britain has developed a system of state welfare, of government role in the system where the government accounts for 40 to 45 percent of the GDP,” he said.

“The Singapore government accounts for 16% of the GDP, maybe 17%. So to say that you’re going to be like Singapore, are you going to give up two-thirds of your government spending, state pensions and national health?”


And Singapore’s successes go much deeper than just a low tax rate. For foreign multinationals, whose buildings loom high on the country’s skyline, “the tax rate is one very small plank in a giant raft of attractive things about the country,” Singaporean author, and Economist contributor, Sudhir Thomas Vadaketh told CNN.

Singapore straddles one of the busiest commercial shipping routes in the world. Its geographical location is what drew British colonialists to it in the 19th century. Two centuries on, it has become a major global maritime and financial hub; and an integral part of the Asian supply chain.

While the UK is also an important hub itself, what it lacks is Singapore’s strategic advantage of drawing in companies and investment due to its strong rule of law in an otherwise unstable region. “There are not many places in Southeast Asia that can offer that much stability and a well educated, working population,” Vadaketh said.

Looking towards its neighbors has played a major part of Singapore’s success, Kishore Mahbubani, Singapore’s former ambassador to the UN and professor of public policy at the National University of Singapore, told CNN.

The country is one of the founding members of ASEAN, which is now a trading bloc of 10 member states, and “no Singaporean government would contemplate [leaving ASEAN] because that would be suicidal,” he said. “The ASEAN ecosystem is very important for Singapore’s economy and to leave a peaceful and prosperous neighborhood is not what you want to do.”

The UK meanwhile will find it hard to compete against the EU, which, even amid the current populist surge, is arguably the world’s most stable and largest economic bloc.

Small arm, small state

Singapore’s small population size, of about 3.5 million Singaporean citizens, has led to a reliance on about 1.6 million foreign nationals (equating to close to 36% of the 5.6 million strong population). Something the British government will struggle to sell to the 17.4 million people, nearly 52% of those who voted to leave the EU, many of whom cited immigration concerns as their motivation.

Nor is Singapore some small-state nirvana. Its government has taken a highly interventionist approach to its economy, investing deeply in its nascent industries. Much of Singapore’s land is nationalized and more than 80% of the population lives in well-built, state subsidized public housing that has ethnic quotas, which are rigidly enforced — something that will be hard to swallow in democratic polities. “It has a level of intrusiveness that doesn’t come comfortably to the liberal mind,” Singapore’s Deputy Prime Minister Tharman Shanmugaratnam told the BBC in 2015.

But some say the high level of social cohesion in Singapore has come at a price for freedom of expression. Human Rights Watch has accused the government of curtailing political speech, launching defamation suits, enforcing draconian limits on public protest and prosecuting critics of Singapore’s judiciary under the country’s broad contempt of court law.

That approach has raised the hackles of Britain’s opposition. “Singapore is a country where basic freedoms of peaceful assembly, free speech and even sexuality are not respected but criminalized, and where the rule of law routinely means the brutal use of the cane,” Emily Thornberry, the shadow foreign secretary, told The Times of London.

The Singaporean government rejected this criticism in a statement to CNN. “We fully respect the fundamental human rights enshrined in the UN Charter and the Universal Declaration of Human Rights,” a spokesman for Singapore’s Ministry of Foreign Affairs said. Those rights “are achieved through our laws and judicial process which are internationally respected.”

Singapore’s constitution guarantees the right to freedom of speech and expression, but the spokesman said the right has constitutional restrictions. “Given that Singapore is a multi-racial and multi-religious society, an individual’s freedom of speech must be exercised with mutual respect and accord with the need to preserve a harmonious society.”

Singapore’s authoritarian-lite system has allowed its ruling party to stay in power since independence and see through long-term policies rather than the short-termism seen in democratic countries.

“Why did the IBMs of the world come here very early on?” Vadaketh said. “Part of the reason is we offered them [multinationals] lots of transparency and tax incentives, but we also gave them clarity,” Vadaketh added. “Singapore said, ‘hey, we are not going to have a change in government in five years… some nationalists are not going to come in and steal your assets.'”

But at the same time one could argue that the government has prevented reasonable and rational discourse in the public arena, which makes it “not conducive for the kinds of jobs and industries they are trying to promote here — from basic start-ups to pharmaceutical research and development,” he said.

That aside, companies are looking to Singapore as the technological center of gravity shifts to Asia. This week, Dyson’s eponymous business, which makes vacuum cleaners and hair dryers, announced the relocation of its headquarters to Singapore.

For all the talk of Britain becoming the Singapore of the West, the proponents of that dream are choosing the real Singapore instead.