Why is China leaving Singapore out in the cold?

Photo: Jacoline Schoonees/CC BY-ND 2.0

Singapore does not significantly feature in China’s diplomatic ambitions for the One Belt One Road initiative.

By Jie Ying Tan, edited by Francesca Ross

US$1 trillion is needed to finance the One Belt One Road initiative (OBOR), a recent estimate suggested. The opportunities generated from such a high-value initiative that consolidates 30% of the world’s economic output are clearly immense. So far, Singapore has been consigned to watching from the side-lines.

Lawrence Wong, Singapore’s Minister for National Development – not Prime Minister Lee Hsien Loong – was invited to represent his country at the most recent OBOR summit in Beijing. The Chinese decision to invite a lower-ranking government official is telling of their reservations about Singapore’s value to the initiative. This strategic move may also indicate lingering bilateral tensions, particularly after Hong Kong’s seizure of Singapore’s nine Terrex vehicles in November 2016.

The long-overdue 3,000 km (1,900 mile) high-speed rail line between Kunming and Singapore again points to Singapore’s peripheral position. Construction has been halted because the Thai authorities have fallen out with the Chinese over financing. A completed rail line would have given Singapore greater capacity to facilitate future OBOR projects but it seems to be no-one’s priority.

The 3,000 km railway is only one small part of China’s 21st Century Maritime Silk Route Economic Belt. The Maritime Silk Road is the first component of OBOR, the second being the land-based Silk Road Economic Belt.
The difficulties in the Chinese-Singaporean relations means the smaller nation’s position as the world’s top transhipment centre is under threat. China is instead moving closer to Malaysia in its OBOR projects. China has invested S$14 billion (US$10 billion) in the Melaka Gateway project, a mega-port that would replace Singapore as the main entry point in the region.

Alibaba founder Jack Ma announced in March he would establish an e-commerce hub in Malaysia as a way of supporting OBOR. This would “transfer the Silk Road to an e-road,” said Ma. His plan to set up in Malaysia was a surprise as tech companies usually choose Singapore for their access to Asia’s markets. This shows that Singapore’s authorities cannot take their place in the initiative for granted.

OBOR was created to help bridge the global infrastructure gap but this benevolence is motivated by China’s own concerns. President Xi is looking at ways to counter dwindling domestic economic growth and to elevate its international stature. This means that arguments for Singapore’s usefulness to OBOR based purely on its ability to contribute to infrastructure projects are flawed.

China’s control over the direction of OBOR means that Singapore’s usefulness is better measured in terms of how it matches China’s self-interest. Charles Preston, a former EU diplomat in China, explained OBOR as “a domestic policy with geostrategic consequences rather than a foreign policy.”

The OBOR summit reflected chilly Sino-Singaporean ties

Singapore’s representatives were not as engaged in the OBOR summit as diplomats from other ASEAN states. This detachment coincided with chilly Sino-Singaporean ties because of tensions in the South China Sea and strong US-Singapore military ties.

Malaysian Prime Minister Najib Razak signed nine documents during the meeting. These related to planned investments worth US$7.2 billion. Chinese President Xi Jinping later commented that Sino-Malaysian ties were the “best ever”. Vietnam also inked five documents with China on economic and technological cooperation, despite reluctance to moving closer to Chinese interests.

Singaporean officials, by comparison, left the summit with a quite empty memorandum that pledged to foster greater bilateral ties and intensify cooperation.

Sino-Singaporean relations have reached an all-time low

China’s pursuit of its territorial claims in the South China Sea is a concern for Singapore. This is because clashes in the maritime area undermine Singapore’s attempts to maintain the unity of the Association of Southeast Asian Nations (ASEAN).

Singapore’s former Foreign Affairs Minister K. Shanmugam explained that “ASEAN unity and centrality are key to the vision of the ASEAN Community” because a fragmented ASEAN would “have difficulties in playing a central role in the region.”

The Special ASEAN-China Foreign Ministers’ Meeting in June 2016 reached a muddled conclusion on the South China Sea dispute as the ministers were unable to reconcile differences on how to handle China. Cambodia consistently blocked any allusions to the International Court of Justice’s ruling on the South China Sea dispute, while the Philippines and Vietnam demanded for the final communique make explicit references to the ruling.

Singapore’s strong military ties with the US continue to be a source of irritation for Chinese policymakers. The city-state plays a critical role in how the US projects its military might in the Asia-Pacific region. This is thanks to military cooperation, such as the hosting of American troops. This upsets China’s strategic calculations as it compels Chinese leaders to “delay the resolution of the South China Sea dispute” rather than launching an immediate and all-out offensive to assert its sovereign claims.

Singapore’s economic situation makes it a less valuable partner in the initiative

Singapore does not need the trade-boosting infrastructure projects that OBOR has promised. Its infrastructure does not require intensive upgrading or reconstruction. Consulting firm Mercer recently declared it to have the best infrastructure in the world.

Singapore is also incapable of delivering what China really wants from OBOR – more energy and resources to drive its domestic economy. This is because it depends heavily on trade and investment for economic growth, not manufacturing.

Labour costs in Singapore have also been increasing since 2011 due to rising wages thanks to feeble productivity growth. This, together with an ageing workforce, has hiked up salaries by 3% each year. This means that employing Singaporean labour to complete infrastructure projects would become expensive.

Singapore’s officials should learn from previous Chinese engagements

There are parallels between Singapore’s involvement in OBOR and that of Mauritius’ in China’s Go Out policy. The Chinese set up the Jinfei Special Economic Zone (SEZ) within Mauritius but it is still a ghost town thanks to its lack of cheap labour, natural resources and small domestic market.

The Mauritian government struggled with managing Jinfei because whenever a Chinese company came up with a proposal that it had difficulty with following through the government was unable to intervene. Successive half-hearted attempts by Chinese investors, together with the Mauritius government’s impotence, eventually rendered the Jinfei SEZ unworkable.

The Singapore leadership could learn from this mistake. Officials must ensure they stay in the driver’s seat when taking up any OBOR opportunity. They must make smart decisions about opportunities that arise under the initiative, not just take whatever emerges. The Mauritius project is now “long forgotten and adjourned.” Singapore risks a similar fate.