By Li Xueying, Hong Kong Correspondent

Ups and downs in Singapore-Hong Kong ties

One spring day in April, 1958, a tanned 35-year-old Singaporean wandered the narrow, steep alleys of Hong Kong, deep in thought.

There would have been much to occupy Mr Lee Kuan Yew: it was the year before a political upstart called the People's Action Party won at the polls, setting the stage for its rule over Singapore for at least the next half century.

At one point, he decided he wanted a suit tailored, in this city famed for its Shanghainese tailors who had fled communist rule in China.

He was measured in the morning, fitted in the afternoon and the suit was delivered that night.

"It made a deep impression on me," he recounted in a speech in 1992 in Hong Kong. "Singapore tailors do not work at that speed."

That first visit was the beginning of a lifelong personal attachment that Singapore's first prime minister had for the Pearl of the Orient. He visited nearly every year, most recently in 2012.

Over the decades, as the two cities charted their separate but interwoven destinies - at times collaborators, at times competitors - relations have evolved as well, waxing and waning in phases.

Last week, Prime Minister Lee Hsien Loong spent three days here, his first visit as head of government. It was the culmination of a flurry of high-level visits between the cities in recent years.

As PM Lee noted to the Singapore media at his visit's conclusion: "In its society, economy and city planning, Hong Kong faces many challenges similar to ours. So in the past two years, we have received many of their senior officials. Many of ours have also been to Hong Kong to learn. Thus, my trip this time is aimed at understanding their situation."

Words like "twin cities" and "special relationship" have long been used to describe ties between Singapore and Hong Kong, both of whom are former British colonies with a majority ethnic Chinese population.

The elder Mr Lee found Hong Kong a source of inspiration. As he said in 1968: "Singapore is indebted to the example of Hong Kong. It is like the four-minute mile. Until someone broke the barrier and made the mile in four minutes, it was doubted whether anybody could make it."

Free-wheeling Hong Kong taught Mr Lee Kuan Yew the limits of the welfare state: "Through Hong Kong watching, I concluded that state welfare and subsidies blunted the individual's drive to succeed."

Hong Kong helped train Singapore engineers and doctors. Its tycoons helped too: When Singapore suffered its first recession in 1985, a consortium led by Sir Run Run Shaw and Mr Li Ka-shing invested $2 billion into building the Suntec convention centre.

The traffic was two-way. British governor Murray MacLehose visited the Corrupt Practices Investigation Bureau and, in 1974, set up Hong Kong's Independent Commission Against Corruption.

The personal relationship was extended when then prime minister Goh Chok Tong and chief executive Tung Chee Hwa assumed leadership respectively in 1990 and 1997; both had known each other far back from their days in shipping. Mr Tung's first overseas trip as chief executive included Singapore.

But the two cities' relationship was not without friction.

As then minister for information and the arts George Yeo noted in 1991 on the stereotypes on both sides: "Singaporeans thought Hong Kongers calculating and impatient. Hong Kongers thought Singaporeans controlled and bureaucratic."

The two were competitors in the 1980s and 1990s. Singapore's economy had begun to catch up with Hong Kong's by then.

Recounts Mr Chan Heng Wing, who was consul-general to Hong Kong from 1997 to 2002: "Every time we did something, they will come down and look. And when they did something, we went up and looked."

When Hong Kong faced an uncertain future as its handover from Britain back to China in 1997 became imminent, Singapore launched a special scheme offering permanent residency to Hong Kong's tycoons and professionals. Hong Kong viewed the move as one that tried to lure Hong Kong's creme de la creme away at a time of crisis.

Post-handover, Hong Kong focused its energies on the Chinese market, leading then PM Goh to urge it not to "ignore" the South. A free trade agreement broached by Singapore was dismissed by Hong Kong. A SingTel bid for Hong Kong Telecoms in 2000 led some commentators to even regard Singapore "as an enemy".

The simmering tensions were unaided by public exhortations by mainland leaders for Hong Kong to "learn from Singapore" in retaining its economic edge.

Recent years have seen an uptick in ties. There remains a competitive streak between the two cities, especially in financial services and inward investments.

But cooperation is at a high.

Trade and investment figures are rising, as are exchanges between the two governments. Last year, the stock exchanges inked a deal to cooperate on areas such as the internationalisation of the Chinese yuan.

One reason for the warmth in ties is that Hong Kong increasingly sees the need to diversify the eggs in its basket. As costs in China rise, Hong Kong factories are looking to relocate elsewhere.

A rising middle class in Indonesia and Malaysia also makes Singapore a potential place from which to set up business. This is a driving force behind Hong Kong's hard push for a free trade agreement to be signed with Asean.

Hong Kong also hopes to be used as a base for Singapore companies keen to move beyond the territory into Southern China.

On whether this means benefiting a rival, Singapore Consul-General Jacky Foo says simply: "The issue is how best to help our companies thrive in China."

It also helps that the administration now is headed by Mr Leung Chun Ying, a man familiar with Singapore who has sat on the Keppel board and even attended a National Day Parade as former consul-general Chan's guest. Over half his Cabinet has visited Singapore in the last two years, even though he himself has yet to.

Singapore ministers are also keen to learn about Hong Kong's experiences in areas like eldercare and urban building. The next due here is Minister in the Prime Minister's Office S. Iswaran, to look at how Hong Kong manages online gambling.

Economics aside, perhaps the best way to sum up the tale of the two cities is how Mr Tung put it at a banquet for Mr Goh in 2000.

He mused: "Well, Prime Minister, you know we are competitors but let us, ladies and gentlemen, think about it this way: If there is only one place in Asia, instead of having Hong Kong and Singapore, if there is only one of us, how dull Asia will become."