A Tale of Three Cities: Shanghai, Hong Kong and Singapore
A Future Scenario Explored

Amb K. Kesavapany
Director, Institute of Southeast Asian Studies

Asia Society, Hong Kong
August 2, 2006

Mr. Chairman,

Excellencies,

Ladies and Gentlemen,

Thank you for your kind introduction and your warm welcome. I am delighted to be here at the Asia Society in a vibrant Hong Kong.

For reasons I now fail to recall, I agreed to share my views with all of you about three great cities of the world - Shanghai, Hong Kong and Singapore. The audacity to travel to Hong Kong and to speak to an expert audience of the Asia Society on Hong Kong and the other two cities is undoubtedly an impulsive act of courage I did not realise I had.

Maybe, it would be neater if I began by first looking at Singapore and Hong Kong in perspective. Both are intimately linked and nurtured by common links of British colonialism, which gave both cities the rule of law, an effective Civil Service and the English language. Likewise, too, the active immigrant ties with China and prospects of the China trade, which was the raison d'etre for the founding of first Singapore in 1819 and then Hong Kong in 1842.

Over the years the links have remained with the two cities developing a healthy competitive spirit, and learning from and cooperating with each other.

Lee Kuan Yew's Views on Hong Kong's Future

In this context, I recall the Li Ka Shing 1992 Lecture at which then Singapore Prime Minister Mr Lee Kuan Yew spoke about " A Tale of Two Cities: 20 Years On." In that lecture Mr Lee noted that

· by design, both were chosen as trading beach-heads to vast hinterlands;

· they became dissemination points not only of western manufactured goods but more vitally of social values and disciplines, skills and expertise;

· as pioneers in modernization of their regions, Hong Kong and Singapore could act as catalysts;

· in terms of differences, Singapore had been nation building in order to develop a separate and distinct identity, Hong Kong had not; Singapore's geographic distance from China plus its demographic composition has helped the process of moulding a Singaporean identity;

· the more Hong Kong penetrated China's economy, the more Chinese economic well being would affect it; the trend was to revert to its traditional role of servicing China; the more international links Hong Kong had, the more useful it would be to China; Hong Kong had a useful network of links with the Chinese diaspora; these were its intangible assets, a precious network for trade, investments, mutual help and sustenance;

· Mr Lee noted that Hong Kong's English language skills and legal system were vital for continued growth and prosperity; the role of the government was to act as a referee and to provide a level playing field

· Mr Lee pointed out that Singapore's policy was to support Hong Kong and increase confidence in it; to help Hong Kong overcome periods of stress during periods of uncertainty in China, as China needed decades to industrialize and modernize, with the help of Hong Kong;

· Interestingly, Mr Lee also pointed out that t here was no need to challenge the PRC politically; China would leave things as they were in Hong Kong because the expertise of the professional class was needed and would be irreplaceable for a long time. Hong Kong would boom because it served China's industrialization and China would boom.

Not Comparable

Ladies and Gentleman,

Mr. Lee spoke in 1992. How valid are these views today? I will leave that to the discerning listener to judge, but will adapt some of his ideas to a contemporary context. Hong Kong's strengths have remained constant over the decades; they include an experienced and skilled work force; the flexible system; the entrepreneurial talent; a remarkable trading tradition and service know how; the supportive Government and the geographic location vis-à-vis China.

As we are all aware, there has long been a traditional game amongst commentators and pundits to compare and contrast Hong Kong and Singapore. There is indeed a surfeit of literature on this well flogged subject. With the rise of Shanghai in the early 1990s, this quickly graduated to a more seductive three-cornered comparison game - which city would rise, which would stagnate and even, which city would fail.

I would suggest that such comparisons lacked a sound basis, even if only because two are Chinese cities and the other, Singapore, is an independent and sovereign city state. Thus the pundits are basically comparing two sovereign countries, China and Singapore - again not a seriously balanced comparison. We need to compare lychees with lychees: thus we can, for example, compare three Chinese port cities: Hong Kong, Shanghai and Tian-tsin. Likewise, Singapore would be more aptly compared to fellow Asean capitals like KL, Bangkok, Jakarta or Manila.

I would argue that the reality is that all three cities are economic dynamos. The GDP of Singapore in 2005 was US$110.6 Billion with a population in mid-2006 of 4.5 million. The GDP of Shanghai in 2005 was US$109 billion, with a population of 17.5 million. Hong Kong had a GDP in 2004 of US$166 billion and a population of 7 million. This, however, has not discouraged the media from playing their comparison game.

In this context, an April 2006 study by Jones Lang LaSalle concluded that the 5 factors which attract MNCs to invest in a particular city, are: the business environment; the living environment; infrastructure; business costs and human resources, and office market dynamics. Not surprisingly, some of the criteria the media has used in the three-way comparison include the following:

· Which city has the tallest skyscraper, the flashiest bank tower; the latest theme-park; clean/green garden city-environment, is most stimulating?

· Which city has the most modern cultural center, designed by the best/most famous architect; trend setting culture or outstanding scholarship? Which city has the potential to spark a cultural renaissance?

· Which city has the highest level of economic freedom, the greatest ability to attract FDI, foreign talent, latest technology;

· Which city has the better food/restaurants/most reputable hotels?

· Which city has the best airport/busiest seaport/most modern mass transit?

· Which city has the highest quality of life, lower office rents, and the least pollution?

· Which city has the best housing, health care, education, and work force?

How then can we explain this incessant need to compare and contrast? One simple explanation is the curiosity factor, to find out what innovative strategies the neighbors are currently employing; another is the competitive urge to keep up with the Joneses. A third positive reason is the urge to benefit from each other's experiences but not to follow these unquestioningly. Thus, for example, Hong Kong's Chief Executive Donald Tsang who after fact-finding tour of Singapore stated that he had no desire to blindly copy Singapore policies, as Hong Kong had its own special characteristics and advantages.

So then what are the pluses and minuses for each of the three cities and is there any way out of the zero-sum game of competition and one-upmanship?

To answer this question, it is important to remember that Hong Kong plays a vital role in China's economic development, as there are many business entrepreneurs with the capital, the management skills, international connections, networks and vision, which are vital assets to China. But inevitably as China develops rapidly, it too will acquire these skills and assets. So the relative 'value-addedness' of Hong Kong to its hinterland and to China will diminish over time. This process is also happening to Singapore as our neighbors rapidly catch up and surpass us. We are following the example of Hong Kong, which has re-invented itself, in the wake of the Asian Financial Crises of 1997/98 and the hollowing out as Hong Kong industries relocated to cheaper-wage locations in the Pearl Delta. The re-inventing of Hong Kong into a service economy-hub for Southern China and later as a vital part of the Greater Pearl Region, is testimony to the entrepreneurial spirit and creative solutions of Hong Kong. Similarly, Singapore has both enhanced its links with its ASEAN neighbours and simultaneously worked towards becoming a global hub in select niche areas

Here, let me relate a story told some years ago by Foreign Minister George Yeo who quoted the then Israeli Air Force Commander, Major-General David Ivry, on the challenges facing small states. General Ivry used the metaphor of uncorking a bottle of whisky, which I am all in favour of, and throwing the bottle into a swimming pool, which I will most certainly refrain from. The whisky will soon mix with the water and lose both its identity and its usefulness. The challenge is to keep what is inside the bottle different from what is in the pool. This can be done by not uncorking the bottle, but then it will have no impact upon the outside world, and will remain stagnant and non-progressive. It will have no value to the outside world. So the challenge is to allow contact but not allow ourselves to be completely diluted. The trick is to keep our identities strong, our institutions efficient, our values wholesome.

Over the next decades, the gap between Shanghai and Hong Kong will surely widen, as Shanghai improves not only its hardware, like port/airport/infrastructure, but also its software in the form of talents and people's know how. Shanghai will boom even more as the benefits of the Three Gorges and other Dams, in terms of improvements to navigation, flood control, power generation, and kick in. Then truly Shanghai will boom as the hub of the entire Yangtze Valley.

The more dynamic and successful Shanghai becomes, the more reason there is to believe that it can have a positive impact on both Hong Kong and Singapore.

Moving to a win-win approach

All three cities will continue to serve as hubs for their respective hinterlands: Shanghai for the Yangtze Valley; Hong Kong for South China/Pearl delta; and Singapore for S. E. Asia. There should be enough economic growth and sustenance for all three as the Asian Boom continues, powered by India, Japan, S. Korea, ASEAN and China. The challenge is how to transform a zero-sum mentality into a win-win approach.

Each of the three cities can play key roles as hubs/nodes in helping to build the East Asian community. They are already serving as transport and logistics bases in the production and logistics chains created by foreign MNCs and Asian MNCs. All three are key Asian ports and airports and communications nodes. By working together, their synergy will help improve the efficiency and competitiveness of Asian industries and exports. Naturally, Shanghai and Hong Kong will work within a Chinese national/political framework, whilst Singapore will work with its ASEAN partners. There is adequate room for municipal creativity, just as Singapore cooperates with Chinese provinces, cities and SEZs as well as with China at the national level. Overall, there is more to gain from cooperation than competition.

One very large area where the three cities can play a key role is helping to raise the vast sums of finance needed to develop Asian infrastructure. This is in fact a natural role as the three cities are financial hubs. The joint Report entitled: “Connecting East Asia: A New Framework for Infrastructure”, released on 16 March 2005 by the World Bank, the ADB and the Japan Bank for International Cooperation, stated that developing countries in East Asia needed to spend more than US$1 Trillion on improving infrastructural needs of 21 countries, to cope with rapidly expanding cities, increasing populations. China alone is expected to require 80% of the total investments. Development banks such as DBS in Singapore, HSBC in Hong Kong and Chinese banks could jointly raise funds, and some have already done so, in the AIG (American International Group, an affiliate of the GIC of Singapore) Asian Infrastructure Funds 1 and 2. Thus the three cities could play cooperative and catalytic roles to mobilize capital and resources.

Conclusion

In this context, one suggestion would be for the Three Cities, and others, to increasingly cross-invest in each others' economies. By doing so, they will create vested interests in each others' success. Secondly, all three can act as catalysts of modernization to help their respective hinterlands progress. They can serve as dissemination points of modern science and technology and as hubs of education, knowledge and culture to the hinterlands, and by networking between themselves and with other modern cities, enhance the rate of progress. Thirdly, all three can help to build a regional identity; in this respect, Singapore has over 40 years of nation building experience, and some of the lessons are relevant to region-building, such as the stress on tolerance and harmony, on consensus, on respect for other people's values, religion, language and different culture. Fourth, all three cities have excellent networks and connections, which they can put at the service of the EAS, to promote trade, investments, connectivity and knowledge. Fifth, the experience of Hong Kong and Singapore with the rule of law, with creating and maintaining a level playing field can also be exploited for the benefit of the regional community, working with other members which have equally rich and deep experience.

By working together in a larger Asian context, all three cities become stronger, richer and more progressive.