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Singapore and Hong Kong: How two small cities diverged in policy choices

From diversification of trade and the domestic economy to managing housing, policy choices in Singapore and Hong Kong have been markedly different, explaining their different outcomes today.

Singapore and Hong Kong, two cities that were part of the initial group of high-growth Asian tiger economies, have had much in common and are frequently compared with each other. Both Singapore and Hong Kong have attracted substantial amounts of foreign direct investment (FDI) by providing a high-quality business environment, low tax rates and world-class infrastructure. Both have long histories as transport hubs, with ports and airports that are among the busiest and best in the world.

Singapore and Hong Kong are highly externally oriented, with gross domestic product shares of exports and foreign direct investment that are among the highest in the world. GDP growth in both economies is highly sensitive to variation in the strength of the global economy. Indeed, GDP growth in both Singapore and Hong Kong for the second quarter was negative (minus 0.8 per cent and minus 0.4 per cent respectively) partly due to global headwinds, and the outlook is also sluggish. The official GDP growth forecast for this year is just 0 per cent to 1 per cent for both economies.

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A version of this article appeared in the print edition of The Straits Times on September 14, 2019, with the headline 'S'pore and HK: How two small cities diverged in policy choices'. Print Edition | Subscribe