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For Singapore's next leaders, coronavirus is only half the battle

5 years after Lee Kuan Yew's death, election nears as headwinds hit economy

SINGAPORE -- One British man, one Malaysian and two South Koreans. Four cases of the new coronavirus had something in common: All of the patients had been to a business conference at the Grand Hyatt Singapore hotel in late-January.

At the time, there were only around 200 confirmed infections outside China. The Malaysian man became his country's first case. The British visitor is believed to have transmitted the virus to several others while skiing in France. Three Singapore residents are also thought to have been infected at the meeting, which involved 109 participants from across the globe, including some from the Chinese province of Hubei.

These consequences, spread 10,000 km apart, underscore Singapore's status as an international economic hub -- one that must now grapple with a host of challenges, not just the pandemic.

As the city-state marks the fifth anniversary of founding father Lee Kuan Yew's death on Monday, his long-dominant Peoples' Action Party faces a stuttering economy; a prime minister on the verge of retirement; an election against some unusually personal opposition; an aging population; and the effects of unresolved tensions between the U.S. and China.

Since independence in 1965, the PAP has defied the disadvantages of the tiny, resource-poor island. It built a gleaming trade and financial center with world-class infrastructure. Over the years, the party has been criticized internationally for prioritizing the economy over democracy, but it has been difficult to argue with the statistical results.

Last year, however, gross domestic product growth slumped to 0.7%, from 3.4% in 2018, as the U.S.-China trade conflict interrupted flows of goods and weighed on the global economy. This year is likely to be even worse: The official projection points to a range of -0.5% to 1.5% growth.

A containership docked in Singapore: The city-state's trade-driven economy was already hurting from the U.S.-China tensions before the virus hit.   © Reuters

Singapore's largest bank, DBS Group Holdings, on Thursday revised its GDP growth forecast for this year to -0.5% from 0.9%. "Being a small and open economy, Singapore will not be spared" from a global recession stemming from the coronavirus, said Irvin Seah, an economist with the bank. "A recession in Singapore appears inevitable."

The government has gone to great lengths to keep the outbreak in check, winning praise from the World Health Organization and others. Its thorough tracing of potential cases and strict enforcement of quarantine orders -- rather than disruptive business and school closures -- has limited the case count to 455 as of Sunday with two deaths.

Moreover, 98% of multinational companies said they remained confident in Singapore as a business hub, according to a survey by the American Chamber of Commerce in Singapore in February.

But Singapore is simply so dependent on trade and transshipment -- with exports equivalent to 170% of GDP -- that it may well suffer its first negative annual growth since 2001 as the coronavirus chokes the global economy.

Though some say a crisis favors the incumbent, many leaders might be reluctant to call an election when the economy is tanking. Yet Prime Minister Lee Hsien Loong, Lee Kuan Yew's eldest son, appears close to pulling the trigger despite the virus and even though the deadline is not until April 2021.

"This outbreak will continue for some time -- a year, and maybe longer," Lee said in a televised address on March 12, after the WHO declared a pandemic. The very next day, his government released revised electoral boundaries, considered a clear sign that a poll will be called in the coming months.

This is likely to be the last hurrah for Lee, 68, who has said he intends to step down soon after the vote. And while Singaporean elections are not exactly known for their drama -- the PAP has never lost -- this one could be more intriguing than most.

The PAP will be up against not only the Workers' Party, the lone opposition with seats in parliament, but also a new group formed last year by PAP veteran Tan Cheng Bock. His Progress Singapore Party has the backing of Prime Minister Lee's estranged brother, Lee Hsien Yang.

Few, if any, observers think the opposition has a shot at forming a government. But it will be hoping to erode the PAP's majority by snagging a chunk of the 93 contested seats.

The PAP, meanwhile, aims to lay the groundwork for a smooth leadership transition and present its younger politicians as steady hands capable of navigating the rough seas ahead.

Singapore's fourth generation or "4G leaders" are generally considered less charismatic than their predecessors, but the coronavirus may bolster their credentials. They are at the forefront of the fight on an 11-minister virus task force, including 58-year-old Deputy Prime Minister Heng Swee Keat -- widely seen as Lee's heir apparent.

"Singapore's PAP stands to be one of the world's few governments to benefit politically from COVID-19," Meredith Weiss, a professor of political science at the State University of New York in Albany, told the Nikkei Asian Review. "The PAP has been exemplary in its handling of the outbreak, earning global kudos, clearly distinguishing itself among its neighbors, and showing itself able to manage an epidemiological crisis rationally and effectively."

Weiss said the PAP is likely to highlight the "political messes in Hong Kong and Malaysia" and stress its health and safety record "as it coaxes voters not to value 'democracy' over the more tangible ends of governance, nor to take their chances with 'untested' alternatives."

But even if the PAP comes out of the election as strong as ever, and even if multibillion-dollar stimulus packages limit the economic damage from the virus, the 4G crew will still have to confront a changing global order.

A survey by the ISEAS-Yusof Ishak Institute, a Singaporean think tank, found that 94% of pundits in the city-state think the U.S-China trade war has hurt the country -- the highest ratio among the 10 Association of Southeast Asian Nations members.

"The key long-term challenge for Singapore is the Sino-U.S. rivalry," said Ramon Pacheco Pardo, associate professor of international relations at King's College London. This will be true regardless of who wins the U.S. presidential election in November, he said.

The failure of global governance to deal with crises only adds to the burden. "The existing global system, in place since the end of the Cold War, is shifting," the professor said. "Singapore cannot really rely on global institutions to support trade and financial flows anymore, or to address issues such as pandemics or climate change."

Instead, Pardo suggested, "Singapore will have to strengthen its autonomous resilience" and also "strengthen bilateral and regional cooperation with like-minded countries willing to support each other."

It might also add more daylight between itself and China, another academic suggested.

Alan Chong, associate professor at Singapore's Nanyang Technological University, said the city-state has leaned a bit more toward China economically in recent years, despite keeping its distance on foreign policy. But "COVID-19 would have flagged so many red lights," he said.

"We may continue with existing arrangements with China, but we better hedge on a lot of fronts."

Deputy Prime Minister Heng Swee Keat and other next-generation politicians have played prominent roles in Singapore's coronavirus response.   © Reuters

Then there are Singapore's internal challenges, many of them common to mature economies. The population is aging fast -- the ratio of residents aged 65 or older was 14.4% last year, up from 8.8% in 2009. Health care spending, which surged 16% in the fiscal 2020 budget and accounts for 16% of total outlays, is weighing on government finances.

So even with the coronavirus threatening the economy, Deputy Prime Minister Heng recently told parliament that the government would not change its plan to raise the goods and services tax to 9% from 7% by 2025.

All this gives the upcoming election and leadership change extra significance.

"As the example of the current pandemic shows, state capacity and capable leaders in which the general public can trust helps in times of crises. It is the same when it comes to dealing with long-term challenges," said King's College's Pardo.

"So it is crucial for Singapore to get the transition right."

Additional reporting by Dylan Loh.

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