Looking East in Singapore

Economic success has made Singapore a strategic player in Southeast Asia, as it navigates between the United States and rising powers China and India. But as the city-state grows more prosperous, it becomes more vulnerable to terror.

"We stumbled on the fact that if we had stability, safety, good health standards, efficient working environment and industrial peace, we can get American multinationals like Hewlett-Packard and Texas Instruments" to use the island as their manufacturing base, Minister Mentor Lee Kuan Yew told a packed auditorium in Suntec City last Friday. The rest is history.

Discussing the "branding of Singapore," Lee said that even today, Singapore's "rule of law, integrity of its systems, efficient working environment, rational policy decisions" keep making it the "better environment in the neighborhood" compared to cheaper locales.

Today, the Singapore brand's value has been recognized by other nations. The city-state is booming but the great realists of Southeast Asia are already looking into the future-seeking to balance the strategic and economic order of the United States with rising powers China and India.


Global City

Despite cranked-up room rates, the luxury and high-end hotels are booked. Colorful shopping malls along orchard roads are bustling. In the evenings, wealthy expats crowd the restaurant rows of the Boat Quay, while bohemians swarm the coffee shops of Holland Village.

Marina Bay, close to the financial district, is a jungle of cranes as a huge casino goes up. At Sentosa Island, a second casino is surfacing from what looks like a moon crater. While unemployment continues to haunt the advanced economies in North America and Europe, Singapore's labor market is at its tightest in a decade, with unemployment barely 2 percent. With over 300 retail outlets and 250 awards, the "world's most beautiful and efficient" Changi Airport now has an annual handling capacity of more than 70 million passengers-an extraordinary accomplishment for a city-state of just 4.7 million people the size of San Jose, California.

"Singapore is transforming itself into a new kind of city-a Global City," wrote Foreign Minister S. Rajaratnam in 1972. "Earlier, cities were isolated centers of local civilizations and regional empires. But the Global City is the child of modern technology. It is the city that electronic communications, supersonic planes, giant tankers and modern economic and industrial organization have made inevitable."

Today, that vision is a reality. But Singaporeans have never been content with complacency.

After the downturn of the mid-1980s, Singapore has successfully diversified into new sectors. Along with electronics and information technology, which tend to be sensitive to the U.S. business cycle, its growth engines now comprise financial services, biomedical and pharmaceuticals, construction and tourism, which are less sensitive to the U.S. business cycle.

Recently, strong worldwide economic growth has boosted the fortunes of several Southeast Asian countries, but the most impressive performer is Singapore.

Lee Hsien Long's first few years as prime minister were about big visions. But the government is now addressing the widening income gap, the aging population and Central Provident Funds reforms. Growth is expected to slow to about 6 percent on moderating external demand, tightening global financial conditions and supply constraints. At the same time, government leaders seek to contain overheating as well as inflationary pressures, driven by higher fuel, food and rental costs.

 "Rising costs, price hikes top concerns of MPs," headlined a recent Straits Times. Housing, transport and food prices fueled inflation to a 26-year high in January. After the Asian financial crisis of 1997 and the U.S. stagnation of the early 2000s, America's stagflation prospects also trigger intense debate on the future.

During the past five years, GDP per capita has grown more than 50 percent, from less than $22,000 in 2003 to the estimated $38,048 in 2008, according to CEIC and Citibank.

When Lee Kuan Yew and the first generation of leaders took power in the 1960s, Singapore was poor, dirty, corrupt, divided by racial animosity and surrounded by premodern, hostile nations. Today, it is prosperous, beautiful, honest, multicultural and surrounded by China, India and Southeast Asia, which will grow into an ASEAN single market by 2015.


Between Globalization and Regionalism

"The rise of China and India is transforming the entire region," said Prime Minister Lee Hsien Long in 2005. He was seconded by Senior Minister Goh Chok Tong: "The rise of China and India will shift the global economic center of gravity from West to East." Minister Mentor Lee Kuan Yew thought that globalization was about to reach a new stage: "China and India will shake the world."

The twin shift is transforming Southeast Asia's strategic and economic order.

In the past, Singapore's foreign policy was dictated by the imperatives of a small state. Its primary purpose was to ensure Singapore's survival. This logic dictated a realpolitik approach to foreign policy and national security. But today, Singapore's foreign policy is also influenced by the positive effects of economic interdependence and regional institution building, instruments that the city-state has tried to promote as instruments of regional order, as Amitav Acharya has argued.

Besides, the emergence of exclusionary trade blocs is not in Singapore's strategic or economic interest. In the cold-war era, U.S.-led globalization prevailed. The pressure was toward unilateralism and bilateralism. A U.S. military presence accounted for the regional balance of power. Consequently, international engagement meant defense and strategic relations with external powers.