SINGAPORE VERSUS HONG KONG
Singapore has been scoring points in recent weeks.

Lifestyles Residents say why they prefer their city

The Big Picture How do others stack up?

THE BATTLE BETWEEN HONG KONG AND SINGAPORE seems to be entering a new phase. In October, oil giant Caltex said it would move its global headquarters from the U.S. to Singapore, completely shutting out the frontrunner for at least some of the operations, Hong Kong. Last month, Singapore's International Monetary Exchange (Simex) resumed trading futures contracts based on Hong Kong stocks - over the strong objections of the Special Administrative Region. Singapore in the last few weeks has announced sweeping cuts in airport landing fees, shipping terminal charges and employer contributions to employee pensions - all with an eye toward boosting competitiveness. Hong Kong made headlines when employees of Hongkong Telecom protested planned bonus reductions, which were subsequently modified. Hong Kong's economy, already in worse shape than Singapore's, is in danger of continuing downward at least in the first half of next year. Some economists think Singapore will lag Hong Kong in recovery, but optimists see Singapore growing positively in 1999.

This week came the topper. Whatever else happened, Hong Kong could always point to its superior record of laissez-faire government policy toward business - the World's Freest Economy. Now the Heritage Foundation, a conservative research institute in the U.S., says Singapore will replace Hong Kong at the top of its rankings next year if the SAR doesn't retreat from its stock-market intervention four months ago. Is Singapore set to eclipse Hong Kong as a business center?

Don't be ridiculous. Hong Kong still has more than twice as many people as Singapore and a gross domestic product that is 78% bigger. Its stock market capitalization is more than three times as big. It handles more containers than any other port in the world (Singapore is No. 2). And while Singapore has forged ahead of Hong Kong in some niche financial services like private banking, the SAR remains far ahead as a regional center for loans, money management, insurance and bond trading. None of which mentions Hong Kong's greatest advantage: its position as the prime conduit to the huge China market. As for world competitiveness, Hong Kong's Financial Secretary Donald Tsang Yam-kuen noted in a speech to business leaders shortly after the Heritage Foundation's announcement that his government hasn't ordered wage cuts, a thinly disguised dig at Singapore.

That is the good news. And if some of it suggests a certain defensiveness - like a recent retiree defending his accomplished but stale résumé - that is no surprise. This Crisis year has laid bare fundamental economic problems for Hong Kong that will not be solved easily. Singapore's relative success in navigating turbulent economic waters while still planning for the future has further exposed Hong Kong's shortsightedness. Hong Kongers like to ridicule Singapore's paternal government, the supposedly acquiescent nature of its people, and their unwillingness to take risks. But in recent years, Hong Kong has become the anti-Singapore - a territory full of get-rich-quick addicts who display no stomach for the long haul. This, then, is a story not so much of the competition between Singapore and Hong Kong, but of the former's proven ability to chart a course for future success and the latter's failure to effectively boost education or invest in research and development for the future.

Both cities are former British colonies, and both are predominantly Chinese, but their similarities don't extend much further. Hong Kong has generally kept its hands off business development. Singapore has been a planner's paradise. It broke from the British empire in 1959, merged with Malaysia briefly, and in 1965 became independent for good. The government has steered the economy resolutely, providing sectoral incentives or simply ordering business to take certain directions. It has even run major corporations and banks. Business took its cue from the government, and the state was unabashedly authoritarian in its management of people's lives.

Hong Kong always had the reputation of being nimble. In the early 1980s, it transformed itself from a center of low-cost manufacturing to a financial services center mostly providing a doorway to China, a meeting point where Western and Hong Kong capital could meet wanna-be mainland entrepreneurs. "The opening of China in 1979 was a godsend," says Victor Fung, chairman of Hong Kong's Trade Development Council. "Frankly, we were becoming increasingly uncompetitive."