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Singapore's family feud complicates fight against bad economic news

Lee Hsien Loong should have enacted reforms when GDP growth was still buoyant

| Singapore

Terrible news on Singapore's economy could not come at a worse moment for Prime Minister Lee Hsien Loong.

Word that growth in his trade-reliant city-state fell 3.3% in the second quarter from the previous one rippled through world markets. Singapore's open, sizable market often portends sudden shifts in global trade flows. For all of 2019, Lee's statisticians now expect gross domestic product to come in between zero and 1%, compared with 1.5%-2.5% before.

Combined with the U.S.-China trade war and public rivalries in the Lee political dynasty, all signs point to a desperate need for the prime minister to enact serious reforms.

Despite the poor economic numbers, the spat getting the headlines in Singapore has more to do with the Lee family than Donald Trump versus Xi Jinping.

The prime minister's father, Lee Kuan Yew, created Southeast Asia's answer to Japan over more than 30 years in power from 1959. Even after passing the reins to a new leader in 1990, Lee still played an outsized decision-making role -- first as "Senior Minister," then as "Minister Mentor" -- before his death in 2015.

In death, though, Lee Kuan Yew's shadow is in some ways clouding Singapore's future.

Since 2015, Lee Hsien Loong has been embroiled in an increasingly nasty spat with his younger siblings over the family compound. Their father wanted the residence at 38 Oxley Road demolished after his death. Prime Minister Lee Hsien Loong opted to turn it into a national monument, leading his siblings to allege he is exploiting their dad's legacy for political gain.

The brouhaha broke into public view in 2017, and now is intruding into political discourse as the prime minister's younger brother, Lee Hsien Yang, backs the rival Progress Singapore Party. This Lee versus Lee spectacle coincides with a fast-slowing economy and talk that an election may be just months away.

The prime minister's People's Action Party has ruled the nation since its independence over half a century ago. But cracks appeared in the veneer of PAP omnipotence in 2011. One of the presidential candidates backed by Lee Hsien Loong nearly lost. Overall, it was the toughest election for Lee's party since 1965.

That wake-up call had much to do with a stagnant economy. Singapore was hit particularly hard by the 2008-09 global crisis. The sharp drop in demand for everything from semiconductors to petrochemicals drove Lee's economy into recession. The 7%-10% annual growth Singapore enjoyed in the four years before the crash slumped to less than 1% in 2009.

Now it is back at that level, and explanations transcend the trade war, highlighting how Lee should have delivered on his pledges to reinvent the economy.

In October 2011, for example, Lee said: "We need an inclusive society that leaves no one behind. We need a vibrant economy that improves all our lives and we need a constructive politics that puts Singapore first."

Unfortunately, Lee's high rhetoric collided with a low bar for actual structural reforms. There have been several waves of policy initiatives to champion higher-value-added industries and produce more startups. Absent, though, have been the scale, focus and audacity needed to reduce Singapore's reliance on exports.

If efforts to cut red tape and curb the outsized role of government-linked enterprises had been more assertive, Singapore would be less vulnerable to Trump's tariffs. Singapore might not be trailing Hong Kong and far less developed Indonesia in Asia's race to found tech "unicorns."

Power is still too concentrated among state-linked companies. Temasek Holdings, Singapore's state investment fund, holds majority stakes in several of the nation's largest names -- Singapore Airlines, Singapore Telecommunications, Singapore Technologies Engineering and MediaCorp.

Social fissures have worsened, too, fanning anti-immigration animosity. To most, "Crazy Rich Asians" was a fun cinematic romp that happened to be filmed in Singapore. To locals, there is nothing entertaining about the widening gap between rich and poor.

Lee's party, meantime, would be less vulnerable to the political upstart associated with his brother. The newly formed Progress Singapore Party is led by Tan Cheng Bock, the former lawmaker who almost defeated the prime minister's preferred presidential candidate in 2011. It is quite a coup that Tan has the backing of Lee's brother, who claims the prime minister's party has "lost its way."

It is quite a coup that Tan Cheng Bock has the backing of Lee's brother.   © Reuters

Tan speaks of an "erosion of trust" between the government and Singapore's 5.6 million people. In Tan's view, accountability and transparency -- long hallmarks of local politics -- are eroding.

The prime minister did himself no favors in May with a new "fake news" law giving Singapore sweeping powers to police social media -- and, potentially, posts critical of his leadership.

Lee, 67, has until early 2021 to call an election. Speculation is rife that a snap poll could be just months away. One motivation might be to safeguard the ruling party's hold on power before GDP growth slows even further. Even though Trump is delaying his latest China tariffs until December, the mercurial U.S. leader is not done tossing grenades at markets.

Yet this slowdown could not be more ill-timed for a leader embroiled in a public family feud, while also trying to buttress a rather modest economic legacy. It is high time Lee thought bigger and bolder about getting Singapore's house in order, too.

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."

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