Singapore and the Asian Century

by: Gabriel  Giovannini and Emanuele Schibotto

When, on August 9, 1965, Singapore became a sovereign state following its expulsion from the Malaysian Federation it was, without any doubt, a poor country. Yet only four decades later, the former British colony boasted the second most competitive economy in the world and a per capita income higher than that of the U.S.

The financial guru Jim Rogers told the CNN in 2012: “I have moved – I have sold my house in New York. I have moved to Asia and my girls speak Mandarin, speak perfect Mandarin … I’m preparing them for the 21st century by knowing Asia and by speaking perfect Mandarin…It’s easier to get rich in Asia than it is in America now. The wind is in your face. The U.S. is the largest debtor nation in the history of the world. The largest creditor nations in the world are China, Japan, Korea, Taiwan, Hong Kong, Singapore. The assets are in Asia. You know who the debtors are and where they are. Look at Greece. Look at Spain. I mean, I don’t like saying this. You know, I’m an American, too. But facts are facts.”

But why Singapore and not, for instance, China? What role does the city-state play – and what role will it play – within the so-called Asian Century? What does the country represent for the West in coping with its decline in favor of an emerging East? As Professor Kishore Mahbubani, former ambassador of Singapore to the United Nations, currently dean at the Lee Kuan Yew School of Public Policy of the National University of Singapore and one of Asia’s leading thinkers, explains, “Singapore has been able to exercise regional influence by generating good ideas. For example, Singapore noticed that while there were strong Trans-Atlantic institutions like NATO and OSCE and strong Trans-Pacific institutions like APEC and EAS, there were no strong institutions linking Asia to Europe. This was clearly a missing link. This is why the former Singapore Prime Minister, Goh Chok Tong, proposed the idea of an Asia-Europe Meeting (ASEM). I was then the Permanent Secretary of the Foreign Ministry of Singapore, and I made several trips to Europe to try and persuade Europe to adopt this idea. Fortunately, France was the first country to support this idea. Since then, ASEM has taken off. ASEM has also established the Asia-Europe Foundation (ASEF) in Singapore.”

From this line of thinking it emerges quite clearly how Singapore has a potential role that goes well beyond its material capabilities. Nonetheless, the very foundations of its political and social system are closely related to the necessity of being open to the outside world in order both to assure survival and to achieve development. In the view of its founding father Lee Kuan Yew, in fact, global interconnection, education (especially English proficiency), and a harmonious society were the three milestones on which a promising future could be built. The policies that were adopted began to show results from the early 1970s, enabling the country to attract foreign direct investment (FDI) from leading multinationals such as Hewlett-Packard, Motorola, Hitachi and Siemens.

Mahbubani underlines how this rapid growth couldn’t have taken place without the leadership of Lee Kuan Yew and S. Rajaratnam, whose focus hasn’t been merely on “economic development but also on human development. From day one, Singapore paid attention to the social needs of its people: from housing to health care, from education to the environment. As a result, not only did Singaporeans enjoy rapid economic development, they also enjoyed living in one of the world’s most liveable cities.” In fact, as Michael Schuman writes in his book The Miracle: The Epic Story of Asia’s Quest for Wealth, the most striking difference of Singapore’s economic strategy from the “Asian model” practiced at the time was “its use of foreign investment to generate rapid growth.” Lee Kuan Yew, Singapore’s founder and then its Minister Mentor, “turned the government into a foreign investment promotion machine that aggressively pursued international companies.”

Asian Century

But what does the Asian century actually mean? Generally, it is perceived as the outcome of Asia’s economic growth led, above all, by the emergence of China and India in the last three decades. In the West this trend is also often associated with the recent and rapid increase in investments originating from Asian countries pursuing a diversification strategy. Yet this perception misses an important point, one that conversely is fairly clear among Asians: The so-called Asian century is anything but new, but in fact has its roots in the history of the last two millennia. According to Mahbubani, “Most leading minds in the West find it hard to accept this simple but painful historical fact: The last two centuries of Western domination of world history have been a major historical aberration. From the years 1 to 1820, the two largest economies of the world were those of China and India. It was only in the last 200 years that Europe and North America took off. If you look at the past 200 years of world history against the backdrop of the past 2,000 years of world history, the past 200 years have been a historical aberration. All historical aberrations come to a natural end. Therefore, the Asian century is irresistible and unstoppable.” John West, Executive Director of the Asian Century Institute, concurs, arguing that the emerging Asian century is a de facto return to normalcy: “Asia has always had the dominant weight in the world economy, thanks to its enormous population.”

If one looks at the data that Mahbubani provides in his most recent book, for example those regarding the regional share of global middle class, the direction is clear. While in 2009 the Organisation for Economic Co-operation and Development (OECD) estimated that North America and Europe accounted for the 54 percent of the global middle class, it forecasts that by 2020 this figure will plummeted to 32 percent. Meanwhile, the share represented by the Asia-Pacific region will rise from 28 percent to 53 percent, underscoring how global wealth is shifting East.

However, if there is little doubt about the Asia’s rise, it does not necessarily imply a world shaped and ruled by Asia, but could rather mean a more balanced world, as suggested by Federico Donato, Chief Executive Officer at FFA Asia and President of the Italian Chamber of Commerce in Singapore. “Certainly” Donato explains, “rapid economic growth in Asia paved the way to a more prominent position in the global arena, however we are in 2015 and the so called Asian century has not actualized yet and I think that it may hardly happen before 2050. In turn we observe an ever more multipolar world.”

Still, whatever the dimensions and the relative balance of power are, the reality of the Asian resurgence should not be underestimated.

A Vital Hub

In this perspective, if the continent as a whole is becoming richer and geopolitically ever more important, how does Singapore contribute? Located in the heart of ASEAN, one of the most stable and dynamic sub-regions of Asia, Singapore is a vital hub at the crossroads of the Indian and the Pacific Oceans, providing a platform for transport, financial, trading, educational and medical services. Apart from being blessed by geography, Singapore has built its success on a multilingual, multiethnic, highly skilled and educated society. All these factors are of great relevance in Mahbubani’s view to the country’s potential role within the Asian Century, which could resemble that of London in Europe or New York in America in the 19th and 20th centuries, respectively. Moreover, Singapore, with its Chinese, Indian, Islamic and Western citizenship, represents a rich and diverse environment being concurrently the “most Westernized city in Asia, even compared to Tokyo, Seoul or Shanghai” and “the most Asian global city in the world, far more Asian than New York, London or Paris.”

As Mahbubani puts it, “[Singapore] is also geographically located within six hours of the major cities in China and India, the biggest powers in Asia. These features make Singapore the ideal crossroads between East and West, and the best choice for an Asian ‘capital’ in the coming Asian century. On balance, I am very optimistic for Singapore’s future because in the first fifty years, we have put together strong physical and human infrastructure that has enabled Singapore to become a key global city on our planet. As the Asian century unfolds, no other city can benefit as much from Asia’s growth as Singapore can. Hence, great times lie ahead for Singapore.”

But how do all these great opportunities translate into practical terms? First, it is necessary to assess what Singapore means for Southeast Asia and Asia more generally, and second, how it manages its relationship with the two biggest powers in the international system: China and the U.S.

At the regional level, even though Singapore can’t be defined as a “regional” power, nonetheless it has nonetheless achieved a high degree of influence. In 1965, the country’s GDP per capita was slightly above $500. Since then it has risen 107-fold and when calculated in purchasing power parity terms the figure today is $65,000, behind only Qatar in the world rankings. And in the last nine years alone, the figure has almost doubled. Moreover, the model offered by Singapore is not one based on economic growth alone, but also on human development. It is the only Asian country to be ranked among the top ten on the UN Human Development Index. As Mahbubani notes, the city-state has achieved these outcomes by applying “the seven pillars of Western wisdom namely: free market economics, science and technology, meritocracy, pragmatism, a culture of peace, the rule of law, and education. Now that other Asian countries are following Singapore in implementing these pillars of Western wisdom, it is not surprising that more and more Asian countries are succeeding.

The guiding role of Singapore is visible in the Singapore-led industrial parks in China, such as Suzhou Industry Park and the Tianjin Eco City. It can be fairly said that the country won what former British Prime Minister Gordon Brown famously described as the “global skills race” and thanks to this commendable achievement, especially taking into consideration its starting point, now Singapore’s education system is, as Mahbubani says, “universally admired… Its maths textbooks are used in places as distant as California, South Africa, and the Netherlands. Singapore students have done well in PISA tests and the National University of Singapore (NUS) is now ranked as the top university in all of Asia.”

Moreover, the strategic centrality of Singapore in Asia in all probability will increase even further when the infrastructural interconnection of Southeast Asia with the rest of Asia becomes reality. It is difficult to overstate the relevance of the planned Kunming-Singapore railway project, which will constitute a crucial link between China and Southeast Asian countries. Mahbubani is clear on the advantages offered by this project, observing that, “It is expected to increase regional economic integration and increase China’s economic ties with Southeast Asia. Singapore would benefit enormously from the establishment of this railway. Firstly, the railway will provide a cheap and efficient way for Singapore to acquire resources. Meanwhile, other countries can use it to take better advantage of Singapore’s technical expertise and entrepôt status to earn more gains from trade. Secondly, the railway would enhance Singapore’s status as a logistics hub. Each year, the Port of Singapore has a throughput of more than 550 million tons of cargo. Much of it will continue to travel around the region on ships, but Singapore’s hub status will be further enhanced if some of the cargo can be distributed to Malaysia, Thailand, Vietnam, Laos and Cambodia by rail as well. This is why Singapore strongly supports this Singapore-Kunming link.”

Asian Switzerland?

In the coming decades Singapore is poised to take full advantage of one of its other intangible assets: its diplomatic skills and capacities. With the rivalry between the U.S. and China on the rise, Singapore has the potential to work as a broker and cultural facilitator between the two superpowers, a sort of “Asian Switzerland,” as Donato suggests. Donato argues, in fact, that the country could be defined as “less neutral than Switzerland in Europe, but more equidistant.”  Singapore maintains close relations with both countries, as it is not a traditional ally of either. This is crucial point, which Mahbubani reinforces with an anecdote: “When I spoke to a group of retired Chinese generals in Beijing last year, it was clear that they were concerned about Singapore’s close defence relationship with the U.S. In fact, our defence relationship is so close that American leaders and commentators have referred to us as an “ally” even though, strictly speaking, we are not treaty allies with the U.S. This is dangerous, because in a crisis, American leaders may expect us to behave like an ally. However, we will not be able to take a strong pro-American stance if U.S.-China relations sour, as 75 percent of the Singapore population is Chinese. Similarly, some Americans are upset by Singapore’s close economic relationship with China. For instance, we supported the creation of the AIIB, even though the U.S. had lobbied against it.”

As John West argues, the increase in Asia’s economic weight is fundamentally changing economic and political power relationships between Asia and the rest of the world, especially the West. But “it is also changing power relationships between the West’s Asian allies (like Japan and Korea) and other Asian countries, notably China.” In this respect, Mahubani’s reference to the AIIB, the China-led Asian Infrastructure Investment Bank, appears very pertinent. Indeed the AIIB process seems to show a divide within Southeast Asia, with close allies of the U.S. acceding to Washington’s requests to stay out of the body, while demonstrating once more the capacity of Singapore to apply an independent foreign policy. Mahbubani, in fact, stresses that “The ADB has estimated that Asia will need to invest about $8 trillion in national infrastructure and $290 billion in regional infrastructure between 2010 and 2020 to sustain its growth trajectory.” Given this need for more infrastructure, the region as a whole welcomes China’s initiative. This is why most Asian countries attended the launch in Beijing. Unfortunately, the U.S. misunderstood the goal of this AIIB initiative and saw it as an effort to diminish the role of U.S.- and Japan-led regional and global banks like the World Bank and the ADB. This led to the U.S. Treasury launching a major initiative to persuade its friends to stay away from the AIIB launch. This is why South Korea and Australia did not participate, even though it was in their national interest to do so.”

Clearly, Singapore could be important for the West, especially during periods of economic turbulence. It is worth noting that the first free trade agreement negotiated by the European Union with an ASEAN country has been with Singapore. Now, with the world becoming ever more Asian-centred, the West should accept and accommodate this power shift. In doing so, it should look to Singapore as a potential partner and crucial facilitator – the country that will be at the heart of the Asian century.

Gabriele Giovannini is a PhD Candidate in IR at Northumbria University in Newcastle and was a Visiting Researcher at the ASEAN School of the Yunnan Finance and Economics University. Emanuele Schibotto has a PhD in Geopolitics from Marconi University in Rome. This article was first published in Longitude, the Italian monthly on world affairs.