Thursday, 2 June 2016

Time for Singapore to invest in its 'Personality'

By Sanjeev Sanyal, Published The Straits Times, 1 Jun 2016

Singapore has exhibited extraordinary flexibility as it evolved, in less than two generations, from a British colonial outpost to one of the most successful cities in the world. At each stage, the city state was able to add a new layer to the economy as it moved up the value chain - from a port to a manufacturing cluster, then a financial centre and more recently a hub for education, research and entertainment.

This flexibility is based in no small part on the willingness to radically rethink the economic and urban strategy every 15 years or so. The last round happened in the aftermath of the Asian financial crisis and the SARS (severe acute respiratory syndrome) epidemic. It is now time for a new round.

The succession of strategies used by Singapore to develop quickly has had one common theme - the economic model was the driving force and sociocultural policy had to adjust to it.

However, the city state now has to face a very different problem: How to maintain sociocultural continuity in the face of very rapid demographic change. How the city state manages this will have a significant impact on its political and economic future.

Singapore's population is currently estimated to be at 5.5 million, 3.4 million of whom are citizens and 500,000 are permanent residents (together they are called the resident population). Foreigners make up the remainder. The problem is that the resident population has a very low fertility rate. Total fertility rate (TFR) is defined as the average number of live births a woman will have over her lifetime. The city state requires a minimum TFR of 2.1 in order to keep its resident population stable, but the current rate is 1.24, a little more than half the "replacement rate". This implies a dramatic long-term shift because the number of "native" Singaporeans will drop to half the current level over a single generation (one must also allow for the fact that, in a globalised world, many Singaporeans will opt to live abroad).

The Government has long recognised the problem of low birth rates, but despite many efforts, nothing has so far succeeded in pushing up the fertility rate. This is not a unique problem and is common to many countries in Europe and East Asia. The obvious implication is that Singapore will need to rely heavily on immigration. In other words, the resident population will have to be steadily replenished by newcomers, including new citizens, merely to maintain the current population cluster.

One option for the city state is to accept demographic decline and allow the population to shrink. Some Asian countries, such as Japan, seem to be opting for this, but Singapore is a "global city" that requires a minimum cluster of activity. As it is, Singapore has the smallest population of any major global hub and there is a non-trivial risk that a steady decline in population would trigger a process of de-clustering. Urban history shows that once de-clustering begins, it can gather unstoppable momentum that is difficult to arrest (ask Detroit).

Using immigration to maintain the urban cluster is not a problem in itself since Singaporeans, despite grumbling occasionally, are remarkably open to outsiders; after all, everyone is an immigrant within a few generations. Indeed, immigration and foreigner inflow were largely responsible for the jump in population from four million in 2000 to today's 5.5 million. The real problem is how to maintain socio-economic continuity when the anchor population begins to shrink and age rapidly.

This is not about some sentimental attachment to a "Singaporean way of life". Despite a bubbling ethnic mix, Singapore's economic miracle was made possible by an exceptional degree of social cohesion.

Therefore, from a purely economic perspective, one needs to wonder if demographic change will happen too fast for the newcomers to be acculturated and sociocultural continuity to be maintained. In other words, the debate over immigration in Singapore should not be trivialised as xenophobia but seen as a fundamental one about the city state's long-term viability.

Singapore's leaders are aware of these risks and are trying hard to manage contradictory pressures.

On the one hand, the pace of immigration has been slowed to what is deemed socially acceptable. On the other hand, the Government has recognised that Singapore's urban mass can be increased by leveraging the hinterland.

Thus, we have seen support for urban developments in the Iskandar development region in Malaysia. Also, a high-speed rail link is to be built between Singapore and Kuala Lumpur. The idea is that the urban system around Singapore could be bigger than Singapore the country.

Even if successful, such strategies may keep Singapore's economy running for no more than a decade or two. The country's abysmal birth rates will sooner rather than later force Singapore to confront the issue of sociocultural continuity.

In many ways, Singapore's problem is common to all global cities where the population keeps churning. Successful cities such as New York and London have been able to deal with constant demographic change by developing a strong urban culture. This "culture" is so strong that a newcomer quickly becomes a New Yorker or a Londoner irrespective of the colour of his passport.

In turn, the culture is derived from anchor institutions that provide a shared experience and keep the collective memory alive. Institutions that help maintain continuity in London include its universities, museums, theatres, old buildings and traditions, and even the monarchy.

Cultural factors such as literature also play an important role: No matter who buys or sells real estate in Baker Street, Sherlock Holmes will continue to live there. New York is similarly served by Columbia University, New York University, Central Park, Broadway and the street grid of Manhattan. Popular music and local eccentricities are a part of the mix. In short, Singapore needs to make the transition from being an ingenious whizz-kid to becoming a mature city with a distinct personality.

This would be a big shift in the way the city state thinks of long-term economic strategy. The good news is that the ingredients already exist for creating a distinct and lasting personality for Singapore. As a Chinese-majority city with a Sanskrit name that started out as a European outpost in South-east Asia, it is the meeting point of some of the world's great civilisations. In the past, this cultural mix was seen as peripheral to Singapore's economic model but, in the long run, it may prove to be its single biggest strength.

Sanjeev Sanyal is an economist and best-selling writer who was Deutsche Bank's Global Strategist until last year. He is a member of the Committee on the Future Economy's Sub-committee on Future City, which looks at how to anchor Singapore as a leading global city and endearing home for its people.

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