Singapore and the Hong Kong Special Administrative Region used to be very close in terms of per capita GDP and rate of economic growth. But since the 1980s, Hong Kong has lagged Singapore by far. There are many lessons that we can learn from Singapore.
An important reason why Singapore grew much faster than Hong Kong after the 1980s is that Singapore successfully avoided the two bottlenecks that had hindered Hong Kong’s growth.
One is land supply. Singapore aggressively increased its land supply through reclamation. Hong Kong also had expanded its land area through reclamation, but typically not for industrial development. The scale of Singapore’s Jurong Industrial Estate was mind-blowing. Hong Kong’s three industrial estates, in Yuen Long, Tai Po, and Tseung Kwan O, have a combined area of 214 hectares, versus the Jurong Industrial Estate’s 6,900 hectares. The Hong Kong Industrial Estate Corp was assimilated into the Hong Kong Science & Technology Parks Corp, which had on its own an area of just 22 hectares. In 2016, Singapore’s minister for finance announced the government’s plan to develop the Jurong Innovation District (JID), which was officially launched in 2019. The 600-hectare industrial estate will be developed in phases to foster advanced manufacturing and innovation. Singapore’s aggressive land development is part of its strategy to keep the manufacturing share of the GDP above 20 percent. Today, Hong Kong’s manufacturing share of the GDP is a mere 1 percent.
The other bottleneck is labor supply. Singapore’s Ministry of Manpower reported in March a foreign workforce of 1,576,500 as at December 2024. Imported workers presently represent almost 40 percent of the Singapore labor force. Hong Kong also imports labor, but the scale is tiny. Evidence for a labor-supply bottleneck holding up Hong Kong’s growth is the fact that the city’s inflation rate kept rising, from 5.6 percent in 1987 to 11 percent in 1991, while the unemployment rate lingered from 1 to 2 percent from 1987 to 1994.
Two important lessons that Singapore offers Hong Kong are: While thinking outside the box, we need to understand economics and human nature, and we need to be forward-looking. Singapore’s labor importation levies are very smart. Protecting our domestic workers with labor importation levies is a better bet than requiring our employers to pay premium wages that are just too attractive for low-wage countries
The restrictions on imported labor in Hong Kong serve to protect local workers’ livelihoods. Singapore also protects its local workers. But Hong Kong does this in different ways. In Hong Kong, employers must pay comparable wages to those of domestic workers. In Singapore, heavy levies are imposed on employers for imported workers, so employers need to pay additional expenses each month in addition to the wages. The levy varies from sector to sector and rises with skill levels. In addition, Singapore sets foreign-worker dependency ratios. For construction, it is at 83.3 percent; for manufacturing, it is 60 percent. The levies range from S$330 ($256) to S$800 per month. For domestic workers, the levy is S$300 for the first helper hired and S$450 for the second.
Worth noting is that Singapore does not have a statutory minimum wage nor a requirement to pay wages that match local workers, as Hong Kong does. This makes Hong Kong a particularly attractive place to work for nonlocal workers. However, the huge premium Hong Kong offers to nonlocal workers over their home wages has created much room for middlemen (recruitment agencies) and cunning employers to tap for profit. The heavy levies and the absence of a minimum wage in Singapore for imported workers virtually destroyed all these opportunities.
Given Hong Kong’s high wages (employers have to pay wages not lower than the median wage paid to local workers), some foreign workers from very low wage countries are willing to borrow large amounts of money to pay recruitment agencies that charge fees under different pretexts. After coming to Hong Kong, they need to repay their debts. Under much financial pressure, some might need to borrow or to take up extra work illegally or to steal from their employers. There was a recent case in which a restaurant was charged for laying off some senior local employees and replacing them with imported workers. That restaurant was punished by the revocation of the quotas for importing workers for two years.
Interestingly, Singapore’s labor importation program is even more pro-market than Hong Kong’s because Singapore’s does not impose any wage floor. The variation in the labor importation levy removes much room for exploitation by recruitment agencies and by employers.
By aggressive labor importation and land reclamation, Singapore has kept labor and land costs down. By aggressive industrial land development and other favorable policies, Singapore was able to entice top manufacturing companies to invest in the country. Examples are Applied Materials, GE, Siemens, Procter & Gamble, and Zeiss Group. Singapore’s forward planning and strategic thinking are not unlike the Chinese mainland’s. The development of the Xiong’an New Area in Hebei province is both forward-looking and strategic. Similarly, the development of our Northern Metropolis is making history in Hong Kong, both in its scale and infrastructure on the one hand, and collaborative effort and knowledge-driven planning on the other. Two important lessons that Singapore offers Hong Kong are: While thinking outside the box, we need to understand economics and human nature, and we need to be forward-looking. Singapore’s labor importation levies are very smart. Protecting our domestic workers with labor importation levies is a better bet than requiring our employers to pay premium wages that are just too attractive for low-wage countries.
The author is an honorary research fellow at the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University, and an adjunct professor at the Academy for Applied Policy Studies and Education Futures, the Education University of Hong Kong.
The views do not necessarily reflect those of China Daily.
