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Supported by free education and subsidized housing, Singapore's citizens have become among the wealthiest in the world. (Illustration by Daniel Garcia)
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Is Singapore's 'perfect' economy coming apart?

Once hailed as a model of progress, poverty and nativist resentment are on the rise

SINGAPORE -- From around 10 p.m. until the early hours of the morning, Aziz drives a private hire car through the streetlit hinterlands of Singapore. On weekdays, he shuttles from the airport to downtown condos and back; on weekends he patrols around Tanjong Pagar where the upscale bars kick out late, picking up drinkers, bar staff and other nocturnal tradespeople. On an average night, he can book upward of 150 Singaporean dollars ($111). His situation, he said, is "jialat."

Jialat, a Singlish word taken from Hokkien, literally means "drained." In his early 50s, Aziz -- not his real name -- was retrenched from his job in a professional services company two years ago, and turned to the gig economy to make ends meet, joining hundreds of other former white-collar workers in a nocturnal demimonde of midrange saloons and weary discontent. "Cannot retire. Cannot take my [pension]," Aziz said. "As soon as they let me take it, I'll buy a house in Indonesia and retire there. If I stay here, what am I going to do?"

Midlevel jobs in manufacturing and multinational companies are disappearing, and being replaced by technology and financial services roles, which are easier to fill with younger, more affordable migrants. Singaporeans like Aziz struggle to get back into the workforce. Only half of retrenched over-50s are reemployed full time within six months. Nearly three-quarters of people laid off in Singapore last quarter were what the country classifies as professionals, managers, executives and technicians, or PMETs.

A quarter of a million people are in functional poverty. The bottom 20% of Singaporean households have an average monthly shortfall of S$335 between their incomes and outgoings, according to the government's latest economic survey. Living costs have risen. Water bills are up 30% since 2017; medical costs have increased 10% in just over five years, an acute problem in a population that is aging rapidly. Technological disruption is breaking the link between economic growth and earnings. Growth has slowed to its lowest level since the 2009 financial crisis tipped the island into recession.

Singapore has long relied on migrant labor to drive economic growth. (Photo by Peter Guest)

Together, these have massed into an unprecedented challenge for the People's Action Party, which has held power in Singapore for more than half a century by delivering growth and prosperity. An election is looming, and there are no easy answers.

"I think the social compact is fraying"

Donald Low, associate partner at consultancy Centennial Asia Advisors

"The PAP's legitimacy has depended not primarily on electoral performance or democratic accountability. Its primary source of legitimacy has come from economic performance," says Donald Low, who spent 15 years in senior government roles and is now an associate partner at consultancy Centennial Asia Advisors. "I think the social compact is fraying. The PAP's capability to ensure upward social mobility as long as you work hard and get an education, that ability has been seriously eroded."

Glamour and grit

For outsiders, Singapore's progress is often measured by the way that it accessorized its strides forward. Its infrastructure is near-seamless, its airport among the best in the world.

Its network of subterranean malls is populated with high-end homogenized, globalized retail and leisure outlets -- designer clothing, luxury luggage, franchised restaurants from celebrity chefs -- of the kind found in wealthy emirates and airport departure lounges.

After separating from Malaysia in 1965, the country opened its economy to international trade and capital, rising from a middling post-colonial port city -- albeit one at the nexus of global shipping -- to the ninth wealthiest nation in the world per capita. The PAP used that growth to dramatically raise the living standards of Singaporeans through education and a radical public housing policy.

Starting in 1966, the Singapore government bought land from private owners -- who were legally obliged to sell -- to build massive public housing developments. Today, the state owns 90% of Singapore island, and 80% of Singaporeans live in "HDBs," Housing & Development Board apartments, which they own on long leases from the government.

After separating from Malaysia in 1965, Singapore opened its economy to international trade and capital, achieving rapid growth. (Photo by Ken Kobayashi)

Free public education helped to encourage social mobility, supporting a doctrine of self-reliance and meritocracy that was the cornerstone philosophy of the PAP's founding father Lee Kuan Yew.

"Because I hailed from a poor family, my school fees were waived, and I could apply to borrow free, but used, textbooks," says Tan Ern Ser, associate professor in sociology at the National University of Singapore. "[The government] believes in investing in people through education, housing and health care. It believes that people should be given the opportunity to be educated, to acquire skills and qualifications and be rewarded on the basis of merit, and in turn do well for themselves and be self-reliant."

Through homeownership, education and almost full employment, Singapore leapt forward not just in absolute wealth, but in quality of life and aspirational potential. "Singapore has ... become a middle class society," Tan says.

The depth and pace of economic progress established the political legitimacy of the PAP for generations. The party has never been out of power. Lee Kuan Yew's son, Lee Hsien Loong, is the current prime minister.

The economic model, which began as a mixture of socialist nationalism and paternalistic authoritarianism, before veering toward Thatcherite shareholder capitalism in the 1990s, has been much mythologized by free marketeers and aspiring autocrats worldwide. Prosperous, crime-free, technologically advanced and just about free enough for comfort, the tiny city-state appeared to have found a formula to inoculate itself against the decline and division that seem to characterize other developed economies in the late stages of capitalism.

"Everybody thinks it's a perfect economy," says Yeoh Lam Keong, the former chief economist of Singapore's state investment fund GIC. "On the surface, it looks as though people must be looked after." (Photo by Peter Guest)

"On the surface of it, [the Singapore economy] looks astonishingly miraculous," says Yeoh Lam Keong, the former chief economist of Singapore's state fund GIC. "Everybody thinks it's a perfect economy. On the surface, it looks as though people must be looked after. But that's on the surface."

Yeoh is perhaps an unlikely critic of Singapore's political elite, having spent the majority of his professional life close to the heart of the establishment, stepping down from the GIC in 2011.

In an interview with the Nikkei Asian Review, Yeoh, dressed on a Saturday afternoon in a polo shirt and shorts, a faded Make Poverty History wristband dangling on one arm, sought to portray Singapore's challenges -- in his words, "the bogeyman" -- as part of decadal struggles being fought across the globe. Economic malaise and social tensions are engulfing Western democracies, he warns. Democratic socialism is facing off against nationalism, winner-takes-all shareholder capitalism against a more progressive "stakeholder" capitalism, he says, and Singapore, he warns, is far from insulated.

"If you stand back and study this, it's a global phenomenon," he says.

The roots of Singapore's current problems, Yeoh believes, were planted in the 1990s, when its politics lurched rightward. In line with the prevailing neoliberal thinking, the government moved toward a more market-based approach to the pricing and ownership of HDB flats. Many citizens bought houses, taking advantage of a government scheme that allows citizens to use the savings in their Central Provident Fund -- a compulsory pension scheme -- to do so. Property prices were booming, so in theory this meant that they would have a valuable asset in retirement, which they could sell or borrow against.

However, HDB houses are sold as leaseholds, and the leases are ticking down. The value of many older homes has peaked, and their owners face a retirement with a depreciating asset and a diminished pension pot. That means the signature social policy has gone from one of the most successful public housing initiatives of the 20th century, to a liability for some elderly citizens, Yeoh said. "It's a time bomb."

Perhaps a more consequential policy decision was made in the belief -- and up to that point, the experience -- that growth would continue to drive social mobility and job creation.

"They thought that they wanted to maximize welfare by maximizing growth. They had one huge policy lever, which was immigration," Yeoh says.

A state scheme to set up Singaporeans with housing assets is backfiring; thanks to a stagnant market in HDB sales, many elderly homeowners are now, in fact, saddled with liabilities. (Photo by Ken Kobayashi)

Between 2000 and 2010, Singapore's immigrant population nearly doubled from 755,000 to 1.3 million, not counting foreign-born citizens given permanent residence status. As of June 2019, Singapore's population was composed of 3.5 million citizens, 530,000 permanent residents and 1.7 million foreign workers, students and dependents.

"Relative to the base population, you haven't seen that anywhere else. It's unimaginable. It depressed permanently the wages of all those at the bottom," Yeoh says.

Singapore has no statutory minimum wages, and labor unions have little power, so there was nothing to cushion the blow. A generation whose incomes had loosely tracked the country's growth suddenly found it accelerating away from them.

"You're earning your adult life in a middle-income country, and you end up having to retire ... in one of the richest developed countries in the world," Yeoh says. "It's like working in the Philippines and retiring in London."

Inevitably, this led to social tensions, which have simmered close to the surface for years.

Late last year, they boiled over.

Rising nativism

In October, an Indian-born Singaporean citizen, Ramesh Erramalli, was videoed verbally abusing a security guard at his upscale condo block. Stories of foreigners behaving badly are red meat for Singapore's tabloids, but this clip, in which Erramalli is heard to shout: "I bought your f------ property for S$1.5 million, you know?" went viral.

Erramalli's salary, address and phone number were circulated online. A petition was started urging his employer, the investment bank JPMorgan Chase, to fire him, as he became an avatar for Singaporeans' worst view of immigrants -- entitled, overpaid, unwilling to integrate. A few days later, several hundred people gathered in Hong Lim Park, the country's only designated protest spot, to demonstrate against the government's labor policy. It was hardly a mass protest, but in a country that tightly regulates public shows of dissent, it was significant.

"People are struggling. They see the foreigners living in a posh condo, while I'm struggling in an HDB, driving Grab," says Gilbert Goh, the protest's organizer.

Goh is a fringe political figure, but has built a following on social media, and through his blogs, where, like his analogues in other countries, he purports to speak for the squeezed middle-aged, middle-class and mostly male workers displaced by social change. On stage, he is not a firebrand orator; his delivery style is more reminiscent of a corporate presentation than a political rally. What he mostly talks about is immigration, which he insists is compounding the economic problems faced by average Singaporeans.

"It was already tough for people in their 40s and 50s to find a job, but with the influx of foreigners it has made it harder," he says.

In an interview with Nikkei he denied being "anti-foreigner" and sought to portray the debate as a purely economic one. However, he drifted unbidden into questions of identity, and raised the specter of unrest.

"People like Ramesh [Erramalli] don't help. ... He has citizenship, but we don't view him as one of us," he said. "The sentiment will get worse, I can assure you. ... There's not much collaboration, there's not much integration. I think that will blow up one day. There will be fights."

"Call me xenophobic if you like," he said in parting, his tone more melancholy than angry. "I'm used to it."

Yeoh interprets this kind of nativism and nationalism, which is on the rise around the world, as a demand for social protection that is not being met within the current political system.

"When people hurt ... they go back to their animal way of looking at things, which is totally irrational, primitive, which is what you have in the U.S. and U.K. right now," he says.

Yeoh insists that the inevitable impacts of globalization and technological shifts on average people need to be mitigated by governments through social safety nets. Time is running out, and the threats are mounting.

"These forces of the gig economy, [artificial intelligence,] technological unemployment, competition from China and India, the breakdown of the global trading system, the disintermediation of manufacturing chains around the world ... the aging of our population -- are going to gradually immiserate the average voter. It's a slow fuse time bomb," he says. "We've got to think: Social protection is the key."

Self-reliance

Welfare is a hard sell in Singapore, where meritocracy is still a mantra. The country has no unemployment insurance, very limited unemployment benefits or in-work benefits for low wage earners, little state support for pensions. This is partly a function of its early success. As it moved rapidly through the stages of development, people's livelihoods improved enough that welfare was not a consideration.

"Singapore, for the first 40 years, never needed robust social safety nets," Donald Low says. "Now that society is a lot more mature, and all the low-hanging fruit in terms of progress up the socioeconomic ladder ... have been harvested. With or without growth, social mobility is going to slow."

The government has made some concessions, with support packages for some elderly and poorer Singaporeans, and tighter migration controls. Critics like Low and Keong argue that these are still inadequate, and that the government could afford a lot more. Singapore runs a structural fiscal surplus -- S$2.1 billion in fiscal 2018. Almost uniquely among developed economies, Singapore has the financial firepower to tackle its problems.

"We are so parsimonious. We save everything for a rainy day," Yeoh said. "But we need to use that surplus to stave off the bogeyman. ... It's raining like hell."

In the coming election, the fragmented opposition has a new figure to rally around: Tan Cheng Bock, a former 26-year veteran of the ruling People's Action Party. (Photo by Peter Guest)

Nikkei contacted several government departments seeking comment. None agreed to be interviewed. However, in his New Year's speech, Lee said that the government would look for "practical measures" to deal with households that are struggling.

The resistance to deeper change, insiders say, is ideological. Speaking privately to Nikkei, current and former PAP members as well as government employees used the terms "ossified" and "calcified," as they lamented that a system once known for its flexibility and willingness to debate internally has hardened, and is no longer willing to challenge its core ideologies. Reformists have been sidelined, in favor of a more conservative, nostalgic core.

"I do think you see signs of atrophy and decay in what has been a highly successful, highly competent, professional, technocratic regime," one said.

Another argued that the combination of a state-controlled media and nervous academia, both prone to self-censorship, lead to an illusion of consensus that leaves policymakers "drinking their Kool-Aid" and blind to the concerns of people on the ground. Several pointed with varying degrees of exasperation to a sudden ban on the use of electric scooters on pavements -- commonly used by delivery riders -- in November, which led to protests and accusations that the government was out of touch with working class voters, and no longer listening to them.

"To a large extent, Singapore's ability to continue succeeding will be determined by the party's ability to respond and adapt to these demands from dissenting and oppositional voices, which are growing," Low says.

The ruling PAP has always made the case that Singapore's economic prosperity and stability are dependent on near-total political control. (Photo by Peter Guest)

The PAP has always made the case that economic prosperity and stability are intertwined with the near-total control that it wields politically and socially. The economic model comes with an implicit contract -- that Singaporeans give up a substantial amount of personal liberty in exchange for prosperity and security.

While elections are held, the PAP has always cannily used the levers of government to retain power, suppressing political opposition and civil society and using its financial resources to give itself an insurmountable advantage.

An election is coming, although when is still not clear. In September 2019, the government formed its Electoral Boundaries Review Committee, which draws up the constituency lines on which the polls will be run. Historically, that has meant an election within six months.

The poll has to be held by April 2021. Lee Hsien Loong has said that he will step down before he turns 70 in February 2022, and hand over power to a successor, likely to be Finance Minister Heng Swee Keat.

This time, the fragmented opposition has a new figure to rally around. Tan Cheng Bock, a 26-year veteran of the PAP and former member of its executive committee, has formed a new party, the Progress Singapore Party, to contest the election. Having spent so long inside the system, he is realistic about his chances. The PAP will win the next election; the question is by how much. If the opposition can dent the ruling party's lead, it can force a change of course.

"It is difficult for us to make really deep inroads into government. But we are content if we can get a sizable number [of votes]." Tan says. "Once we get a foothold, I hope ... we can point out where things can get better."

Limited change at the ballot box has happened before. In 2011, in the aftermath of the 2009 recession and with mounting discontent over the PAP's population policy, there was an unprecedented swing away from the ruling party, which won 60% of the votes -- although that still translated to 93% of the available seats in parliament. The result led to a degree of introspection inside the government. Unpopular policies, including immigration policy, were revised. Activists said that civic space for public conversations opened slightly.

"There was a kind of flourishing of dissenting views," says Jolovan Wham, a prominent social activist. "That was very short-lived."

In recent months, independent news outlets, opposition politicians and activists, including Wham, have been hit with a variety of criminal and civil charges.

In 2019, the government gave itself sweeping new powers to limit "fake news" with the Protection from Online Falsehoods and Manipulation Act, which allows ministers to demand corrections or takedowns of stories that they deem to be "false or misleading."

The act has now been used a handful of times, mainly against social media posts by opposition figures, and mainly on areas identified as vulnerabilities: migration, education, and the running of the state-owned funds. The prime minister's wife, Ho Ching, is the CEO and executive director of state investment fund Temasek Holdings. Her compensation is not disclosed.

In one case, which is currently going through an appeal in the courts, the Singapore Democratic Party was accused of misrepresenting statistics on PMET unemployment.

This closing of the political space is concerning for those advocating for a rethink of the government's role in the economy.

"There's a lot of self-affirmation," Yeoh Lam Keong says. "And because [the government] mistake criticism for dissent, they muzzle it. That's why it took them 20 years to change their immigration policy. If you're improving at that rate, it's not fast enough for the bogeyman. The bogeyman is coming."

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