Singapore Confronts Rising Risks as Lawrence Wong Takes Helm

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In few countries is the transfer of power as meticulously planned as in Singapore, which has had just three prime ministers from the same party in nearly 60 years. But as Lawrence Wong becomes the fourth on Wednesday, the challenges facing the financial hub are growing.

The 51-year-old Harvard graduate will be sworn in during an evening ceremony at the Istana, Singapore’s presidential residence, and immediately have to manage pressures that include high living costs, mounting geopolitical risks and the repercussions of a corruption scandal that tainted the image of the ruling People’s Action Party.

Wong “faces an unprecedented challenge of navigating a constantly evolving landscape, with a more diverse electorate and heightened expectations for transparency and accountability,” said Nydia Ngiow, managing director at business consultancy BowerGroupAsia in Singapore. The evolving dynamics could “disrupt the most well-laid plans.”

Tensions between the US and China — two countries on which the island nation depends — aren’t going away, while the conflicts in the Middle East and Ukraine have buffeted the city-state’s trade-focused economy and stoked unease in Singapore’s ethnically and religiously diverse society.

All of that will weigh on voters’ minds as Wong spearheads the so-called “fourth generation” of political leaders toward a general election that outgoing Prime Minister Lee Hsien Loong, 72, pledged would coincide with the handover — and which by law must happen by the end of November 2025.

There’s little doubt the People’s Action Party will extend its unbroken grip on power when elections take place, but an early stumble by Wong and his team that erodes public support could undermine confidence in the new leadership right out of the gate. The PAP dominates the legislature, but its share of the popular vote has been sliding.

Singapore’s electorate expects “greater transparency, and a greater say in public policies," the opposition Workers’ Party said in a statement on Wednesday. "A greater diversity of voices by way of elected opposition members in Parliament can be an important stabilizer for our politics."

Wong — who was Lee’s principal private secretary before rising to become deputy prime minister and finance minister — has acknowledged the challenges confronting him, and the debt he owes his predecessors who turned Singapore from a British trading outpost to a high-tech financial hub rivaling Hong Kong and Dubai.

“I stand on the shoulders of giants,” he said last month.

Read: Singapore’s PM-in-Waiting Embodies Broader Shift in Finance Hub

Wong has for years burnished a man-of-the-people vibe, urging students not to get caught up in a “rat race” for better grades and strumming a Taylor Swift song in a viral social media post. And like the majority of Singaporeans, he was brought up in public housing estates and didn’t attend one of the elite local schools that several of his counterparts in the Cabinet graduated from.

His reputation for competence rose during the pandemic, when he co-headed a Covid-19 task force that was praised for keeping infections and deaths in Singapore relatively low.

Since being tapped for Singapore’s top job two years ago, Wong has sought to project a sense of continuity with Lee — the son of the nation’s founder, Lee Kuan Yew — while nodding to the pressures the island’s citizens increasingly feel.

With the cost of living ranked as the top concern among Singaporeans, Wong has pledged to boost safety nets and re-skilling programs as part of a national strategy focusing on income and wealth inequality.

Even with inflation pressures easing, “there's a lot of grumbling on the ground, in food courts and taxis,” Pushan Dutt, a professor of economics and political science at INSEAD, said on Bloomberg Television. “Envy is building up so Singapore has to care about wealth inequality and keep it within manageable boundaries.''

As finance minister, Wong pitched a budget this year that included S$5 billion ($3.7 billion) for measures including cash payouts and tax breaks, a figure that will reach nearly S$40 billion by the end of the decade.

But the handouts come at a price: The government has raised the value-added tax to 9% from 7% two years ago and collected higher tax revenue from companies.

Then there’s the matter of foreign labor. During Lee Hsien Loong’s tenure, the non-resident population in Singapore leaped 135%, fueling unhappiness over foreign workers that cost the PAP at the ballot box. Addressing those concerns, the government has raised the minimum qualifying salary for foreigners while implementing a progressive wage credit model for lower-paid workers.

Read: Singapore Prime Minister Lee’s Scorecard: A Look at the Numbers

The government is also seeking to keep houses affordable, said Tamara Henderson, Southeast Asia economist at Bloomberg Economics, mentioning subsidies and adjustments to the real estate stamp duty. The city-state has also been spurring the development of both public and private apartments.

“Wong’s government is likely to continue, if not expand upon, these initiatives,” she said. But “the most challenging economic risks that Singapore will face in the years ahead are external – stemming from de-globalization and global warming.”

A delayed easing in global interest rates could undercut an economy that expanded just 1.1% last year, the central bank warned. The Asian Development Bank forecasts 2.4% growth for Singapore this year, the second lowest in Southeast Asia.

When it comes to geopolitics, Wong says Singapore isn’t seeking to choose sides between Beijing and Washington. China has historically been Singapore’s biggest trading partner, but the US is the largest foreign investor and a critical military partner.

“This is not about balancing between America and China,” Wong said last year. “Ultimately, we make decisions based on our own interests and our national interests will very much be guided by principles of international law.”

While there are looming risks for the nation of 5.9 million, it remains the envy of many. Singapore’s per capita income climbed to about $105,000 last year, according to IMF data, making it one of the world’s wealthiest countries. It has a vast and efficient public transport system and a resident home ownership rate of 89.7%, one of the highest in the world. It also made it to the list of “Blue Zones” — places that have the healthiest and longest life expectancy on the planet.

Yet even with public support for Wong appearing strong, internal scandals over the past year, including a corruption case against a former cabinet minister, have rattled the PAP’s reputation for clean governance. The opposition may emphasize those issues, as well as cost-of-living complaints, to get more traction when the next election takes place.

“If the opposition gains more than what we thought, confidence in the leadership internally and externally will be shaken,” former PAP lawmaker Inderjit Singh said.

Wong will be able to seek counsel on those challenges from Lee, who will serve as a senior minister and has said he’ll be at the “new PM’s disposal.”

Wednesday’s handover may come off as a relatively low-key affair, but the power shift is historic, said Bilveer Singh, deputy head of the department of political science at the National University of Singapore. The Lee family, which provided two of the country’s first three leaders, is stepping back from center stage after dominating the nation’s politics for decades.

“One of the changes I expect to see is more of a collective leadership,” he said. “A strong man figure is no longer on the horizon.”

--With assistance from Claire Jiao, Karthikeyan Sundaram, Avril Hong and Anand Menon.

(Adds opposition party’s statement and analyst’s comment starting from seventh paragraph.)

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