The city-state is not the regulation-light model Brexiteers believe it isby Guy de Jonquières / November 14, 2019 / Leave a comment
I know Martin Sorrell, the advertising tycoon, has visited Singapore because I saw him at a conference there about 15 years ago. But you would never guess he had been anywhere near the Asian city-state from the gushing enthusiasm with which he—and many Brexiteers—lauds it as a model for Britain’s economy after it leaves the European Union.
“I look for a Singapore on steroids… a regulation-light, tax-light UK economy, open for business in a way we haven’t seen before,” he said recently. “It has to be the home of Amazon, Google and Facebook, not the regulatory nightmare.”
However, like most of the visions bandied about by Singapore’s British fan club, Sorrell’s is somewhat detached from the reality. To be sure, the city-state boasts an enviable growth record—averaging 7.1 per cent annually since 1970, though it has slowed to a crawl of late—and its income per head at market rates is 50 per cent higher than Britain’s. It also has efficient modern infrastructure, good basic education, stable government and a business-friendly environment.
A key reason for Singapore’s economic success is its role as a major regional trading hub, most of whose domestic goods exports go to the rest of Asia, and its tight linkages with the cross-border supply chains that are the arteries of modern manufacturing. Brexit, in contrast, threatens to cramp Britain’s trade by impeding businesses’ access to the large single market on their doorstep and disrupting or severing their vital supply chains.
But Singapore has not prospered by being a small-government laissez-faire economy, as its British admirers seem to believe. Far from it. All its major domestic industries, from banking to telecommunications, are dominated by companies in which the state is the controlling shareholder. In 2017, those companies accounted for 37 per cent of the stock market’s capitalisation. Indeed, China’s Communist leaders were so taken by the system that they once seriously considered it as a model for their own country’s development.
The Singapore government has also long engaged in elaborate economic planning, backed by muscular industrial policy intervention. It designates industries such as electronics, biotechnology, pharmaceuticals and financial services as strategic growth sectors and offers foreign companies lavish financial inducements and other forms of assistance to help build them from…