So, you have very antipathetic views, you have blocs being formed, and you have flashpoints. All the factors that can potentially lead to a very sticky situation are there. It’s in nobody’s interest.

TWIA: So, how viable is this concept of staying neutral?

Shanmugam: How viable is this concept of staying neutral? It’s more viable than joining one side or the other.

Southeast Asia seeking ‘balance’ between US and China in region

TWIA: Elaborate? Isn’t it fraught with difficulty because you have to make choices?

Shanmugam: It’s fraught with difficulties. But, on the other hand, we have to look at where we are, given our trading relationships and strategic relationships and our own needs. And as I have said – I don’t know if I’ve said this publicly, but as I’ve said before – a Singaporean leader doesn’t go to bed worrying about whether China or the US has military designs on Singapore. That’s not a primary concern. Singapore’s security framework doesn’t factor that in. Security framework is, how do we make sure that we have a strong defence to protect ourselves, but it’s not that you’re looking at the US or Europe or China.

So, if there’s a dispute, it’s between them, but it’s going to damage all of us. And any sensible person, whether from those countries or from outside, will say there has got to be responsible leadership. And what’s the best thing Singapore can do other than to continue to counsel responsible leadership? We are price-takers, but we can only say what is sensible. And how does it make our position better, then, to be clearly on one side or the other?

Shanmugam: I mean, to talk about Hong Kong and Singapore being likened to Cayman Islands, I think it’s another clickbait. These are serious centres. We are the chair of the Financial Action Task Force this year. When I want to transfer S$5000 (US$3,760) from one account to another, the bank asks me questions. My own money. That’s Singapore. There is so much clean money that is going around in the world, you don’t need to be looking at funny money. Those days are gone.

Hong Kong and Singapore, are both centres which are world-class, with good regulatory frameworks, and there is enough clean, good money that you can deal with.

Sometimes – and I’m not saying that about this particular FT article – sometimes, these statements are made with a tinge of envy. Because perhaps the centres which are losing out, which could be attracting this money, are not as attractive as they once were, and many of these newspapers are stationed in those countries. That’s one. Two, if you, today, look at financial centres, isn’t it obvious that there are some places in the world which have long harboured – and we are talking about top financial centres in the world – which have long harboured questionable money? And I’m not referring to Singapore and Hong Kong. So, I think when you live in glass houses, you have to be careful about throwing stones.

TWIA: Looking at the issue from another dimension, where there’s an influx of wealth and talent, are you concerned about the possibility of them imposing new pressures on divisions within Singapore society? Class divisions?

Could a ‘two Singapores’ scenario play out as middle-class residents feel the squeeze?

Shanmugam: The way I would put it is: this is a serious issue that needs to be continuously thought about. In a very small place like Singapore, where you can travel from one side of the island to the other in about 40 minutes by road, the people with a lot of wealth live right next to the people with less wealth.

I think we have done a very good job in assuring Singaporeans of their important needs, like housing, education, healthcare, jobs. So, any urban financial centre, international financial centre – you can take New York, you can take London, you can take Singapore, Hong Kong – it will attract capital. It will attract people of talent, Singaporeans as well as others, and their incomes will be on the international scale. A banker who runs a regional office will be paid according to global standards. Somebody else who doesn’t reach that position is going to be paid very differently. And this applies in all these places. The difference between Singapore and most of these places, in fact, all these places – Dubai, Hong Kong, and so on – is if you didn’t like it, from Hong Kong, you can move to other parts of China; from New York, you can go to the Midwest, if you wanted a different pace of life and a different quality of life; from Dubai, you can also move out. Dubai itself is more than 2,000 square kilometres.

So, in that sense, Singapore and Singaporeans don’t have much choice other than to compete with the world. And if we don’t compete, we are not competitive, then the quality and the standard of life in Singapore will be very different. So, there is that pressure to compete. In any such competition, there will be winners and there will be people who don’t do as well. The government makes sure that most people’s basic needs are taken care of, as long as they work hard. So it doesn’t matter if you don’t reach the top, you will still have a decent life. I think Singapore is actually quite socialist in its policies. You can quote me on that. Because from the time you’re born, you get money for being born, and long before you go to school. And then your school is heavily subsidised, and education quality is world class. Your healthcare is subsidised. Your housing, when you get married, is subsidised. Your job – money is topped up if you have low income. So which part of your life doesn’t the government come in and help? And so while the economy is capitalist, the state intervenes quite a lot, on the social side, to redistribute, with a philosophy of helping people.

And so, it is actually a socialist system in many ways, in terms of taking care of people. But, that kind of taking care cannot help everyone be at the same level as somebody who has US$1 billion to his name. Government can help with all basic needs, but there will still be differences.

So, it’s partly a question of making sure that you invest more and more in your people, and making sure that there is natural talent flow among Singaporeans to be able to reach the top, unblocked, that it’s not blocked by artificial factors.

And the pure meritocracy that worked very well, now, you need to bear in mind that families which are middle class, parents who are professional – and this happens all around the world – are able to give their children several advantages that parents, other parents who are less well educated, are not able to give.

So yes, there is a meritocracy, but at the starting line, some children are ahead, and the state has got to do what it can at the preschool years, to try and bring all the children up to a certain standard. The state can never substitute parents, but the state can support in some ways. And we are spending billions of dollars in preschool, because education is the common accepted pathway for success. At preschool, at much earlier, you try and give the children the best you can. And during school, the children who are less well performing, you also try and help them, pay a lot of attention to them. So, we’re doing all that.

Why are more parents from China enrolling their children in Singapore’s schools?

And you’ve got to continuously deal with it, explain to people, and keep that compact and trust, so that people understand. An inevitable part of being a global city is that there will be people of high talent and with access to resources, but we have to ensure that everyone can reach there if they have the ability. And even if you don’t, you will be taken care of.

TWIA: Do you think Singaporeans by and large understand that? Buy into the idea of this compact?

Shanmugam: The compact has on the whole remained good. If you look at surveys: I think going into Covid-19 and coming after, more Singaporeans now say they’re more united than before Covid-19. But understanding doesn’t mean the work is done. And understanding doesn’t mean that it is easily accepted either. It’s constant, and you’ve got to continuously look at what is possible, to make sure that people are well looked after.