Singapore Faces Succession Setback, but Should be Business as Usual

• On April 8, 2021, Deputy Prime Minister Heng Swee Keat announced that he will step aside as the successor to Prime Minister Lee Hsien Loong.
• Heng cited his age and the profound challenges of the COVID-19 pandemic as the main reasons for his decision; he also suffered a stroke in 2016.
• Leadership changes in Singapore are a choreographed and anticipated affair planned many years in advance.
• There are several frontrunners from the ruling party who could succeed Lee Hsien Loong, although a transition announcement is not expected to be made until at least next year.

Singapore’s carefully planned leadership transition was thrown into disarray when on April 8, 2021, Deputy Prime Minister Heng Swee Keat announced that he will step aside as the successor to Prime Minister Lee Hsien Loong. Heng will also relinquish his position as finance minister at the next cabinet reshuffle, expected to happen this month.

Heng was part of the People’s Action Party PAP’s fourth-generation (4G) leaders, which comprises 16 PAP politicians who are poised to assume power in Singapore in the coming years. His appointment as Deputy Prime Minister in 2019 cemented his position to become the country’s next leader.

Leadership change in Singapore is a choreographed and anticipated affair planned many years in advance. The country has only had two leadership changes — all from the PAP — since it became independent in 1965.

In a letter published on April 8, Heng cited his age and the profound challenges of the COVID-19 pandemic, as the main reasons for his decision; he also suffered a stroke in 2016. In July 2020, PM Lee announced that he would delay retirement indefinitely owing to the pandemic — he had initially planned to step down before his 70^th birthday. This could possibly leave Heng well into his mid-60s before the crisis is over, leaving him too short a runway at the top job in the post-pandemic era.

Previous Singapore prime ministers have all served more than 10 years (Lee Kuan Yew for 25 years, Goh Chok Tong for 14 years, and Lee Hsien Loong for 17 years).

The markets in Singapore barely budged upon Heng’s announcement, demonstrating the country’s status as one of the most politically stable markets in the world. However, prolonged transition uncertainty coupled with the economic problems caused by the pandemic can start to weigh on sentiment. Thus, businesses will be eager to see a quick succession plan and economic roadmap from the future leadership.

Who could be the next Prime Minister?

There are several frontrunners within the 4G leadership team that could succeed Lee Hsien Loong.

Chan Chun Sing, 51, and current trade and industry minister, as well as the PAP’s second assistant secretary-general (Heng is the first assistant secretary-general). Chan entered politics in 2011 after a decorated military career that saw him become Chief of the Army. A Cambridge-trained economics graduate, Chan is seen as a capable technocrat.

Ong Ye Kung, 51, is the transport minister who previously held the position of education minister in 2015 and made several changes to the education system to place less emphasis on academic results. He removed the streaming system that Primary 4 students went through, and reformed the Primary School Leaving Examination scoring system, whereby students are now scored in banded grades instead of aggregate points.

Lawrence Wong, 48, and current education minister saw his profile elevated when he was appointed to and made co-chair of Singapore’s COVID-19 task force. Singapore has seen very low numbers of new cases for months, elevating Wong’s potential as a future PM.

Desmond Lee, 44, is the national development minister. The youngest of all the contenders, he is the son of former cabinet minister Lee Yock Suan; Desmond Lee entered politics in 2011 and took just six years to become full minister at the age of 40.

These ministers hold some of the most important ministries, although the finance ministry should also be included in the list. An upcoming cabinet reshuffle should give more clues, but it is unlikely that any official transition announcements will be made until at least 2022, a reasonable timeframe before the next election in 2025.

Pressures from the previous elections

Singapore’s 2020 general elections saw the PAP secure 83 of the 93 seats in parliament with 61.24 percent of the vote share. The main opposition, the Workers’ Party (WP), took 10 seats – the most for any opposition party since elections began in 1965. Despite clinching 61.24 percent of the votes, the party saw a decline from the 2015 elections, where it held 69.9 percent of the votes.

Deputy PM Heng and his PAP team barely won his seats at the East Coast Group Representation Constituency (GRC), gaining only 53.41 percent of the votes and making it the PAP’s worst performance in the EAST Coast GRC since the constituent was formed some 30 years ago.

4G leaders Ng Chee Meng, Lam Pin Min, and Amrin Amin were ousted from the Sengkang GRC whereas the other 4G leaders saw their vote share drop from the previous elections.

The results showed that, although Singaporeans recognized the ruling party’s technocratic abilities, many voters were frustrated that the PAP did not tackle concerns beyond bread-and-butter issues, and thus did not want to give the PAP unrestricted power in parliament.

Income inequality and housing were the types of socioeconomic issues opposition parties highlighted to seek out voters.

What does this mean for business?

The PAP’s biggest task is mitigating the economic impact caused by the pandemic. More than S$90 billion (US$67 billion) of soft loans were issued last year to soften the recession, which saw the economy contract by 5.4 percent and unemployment rise to almost five percent.

Despite these challenges, Singapore is still a preeminent destination for foreign investors, thanks to its technocratic system of government.

Singapore’s business, legal, and tax regime are one of the most investor-friendly in the world and the country’s comprehensive network of more than 85 double taxation agreements (DTAs) and 24 free trade agreements (FTAs) are not matched among other ASEAN member states.

Further, the time and cost for setting up a business in the country are competitive, as foreign businesses will only need to spend S$300 (US$ US$254) to register a company and S$15 (US$10) to register the company name. This cost-effective nature has resulted in more than 37,000 international companies and over 7,000 multinationals choosing Singapore as a base of operations.

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