Blackwell Publishing Ltd.Oxford, UK and Malden, USAGOVEGovernance0952-18952006 Blackwell Publishing Ltd.

October 2006194605626ArticlesNPM REFORM IN HONG KONG AND

SINGAPOREELIZA W. Y. LEE AND M. SHAMSUL HAQUE

The New Public Management Reform and

Governance in Asian NICs: A Comparison of
Hong Kong and Singapore1
ELIZA W. Y. LEE* and M. SHAMSUL HAQUE**

This article compares the New Public Management (NPM) reform in Hong
Kong and Singapore. First of all, it highlights how the macroeconomic
environment, the political system, and state traditions, factors that are
commonly identified as affecting the pattern of NPM reform in western
liberal democracies, assume different contexts and significance in affecting
reform in Asian states. With these general factors, we further compare the
NPM reform of these two Asian newly industrialized countries in the areas
of economic, administrative, and social governance, and identify the
similarities and differences in the objectives of reform, the levels of reform,
and the factors affecting such reform in these two cases.

Introduction
There has been much discussion among scholars about the global New
Public Management (NPM)2 movement and its diverse manifestations
and implications in different countries.3 The literature on the subject
includes a number of attempts to develop frameworks for comparative
analysis (Hood 1996; Peters 1997; Pollitt and Bouckaert 2000). This article
seeks to contribute to the comparative study of the NPM reform in Asia,
using two newly industrialized countries (NICs), Hong Kong and Sin-
gapore, as cases for comparison. The cause of and factors affecting NPM
reform in Asian NICs are the subjects of inquiry of this article. Especially,
consideration is given to the uniqueness of Asian states, and the factors
that might have defined the context and significance of their NPM reform.
Given the heterogeneity of Asian states, we expect the presence of multi-
ple patterns of reforms as a result of differences in the state of economic,
social, and political development. We regard Hong Kong and Singapore
as two interesting cases for comparison. Both are former British colonies
that have attained a similar level of socioeconomic development and have
a competent civil service that is highly modernized and efficient by Asian
(and even international) standard. In recent years, both countries have

*The University of Hong Kong

**National University of Singapore

Governance: An International Journal of Policy, Administration, and Institutions, Vol. 19, No. 4,
October 2006 (pp. 605–626).
© 2006 The Authors
Journal compilation © 2006 Blackwell Publishing, 350 Main St., Malden, MA 02148, USA,
and 9600 Garsington Road, Oxford, OX4 2DQ, UK. ISSN 0952-1895
606 ELIZA W. Y. LEE AND M. SHAMSUL HAQUE

stood out among Asian states in their adopting NPM reforms extensively
in various arenas of governance. Given these similarities in background,
we believe that some major patterns of NPM reform may be identified in
these two countries that will illuminate the special features of NPM
reform in Asian NICs. To further illustrate this, we compare NPM reform
in Hong Kong and Singapore in three major areas of governance, namely,
the economic, the administrative, and the social. In each of these areas,
we focus on the implications of NPM reform for the changing role of the
state, the factors affecting the level of reform, and the implications of the
reform for the organization and capacity of the state.

Factors Affecting Patterns of NPM Reform in Asia

Generalizing from the findings of Hood (1996), Peters (1997), and Green-
Pedersen (2002), four factors can be identified as affecting NPM reform
in western states. They are macroeconomic considerations, party politics,
the political system, and state tradition. Macroeconomic considerations
include the degree of fiscal crisis and economic recession. Among the
NPM reforms frequently associated with attempts to resolve macroeco-
nomic problems are the selling off of state-owned enterprises, cutbacks
in public expenditure (especially social expenditure), and measures to
improve public sector productivity and efficiency. Regarding party poli-
tics, it is often expected that right-wing parties will be more supportive
of NPM reform than left-wing parties. As to the political system, in the
western context, studies have shown that a unitary state with a majori-
tarian government has a greater capacity to carry out NPM reforms on a
large scale (Pollitt and Bouckaert 2000). A state with a tradition that is
receptive to managerial and promarket values is also expected to be more
in favor of NPM reform.
These factors have a rather different context and significance in Asia.
In the first place, Asian NICs have traditionally been developmentalist in
the sense that economic development has been the primary political
objective of the state, and the legitimacy of the state tends to be strongly
tied to its ability to ensure continuous economic growth. At the same time,
Singapore and Hong Kong represent two different approaches to attain-
ing economic development. Singapore has been a strong developmental
state since it attained independence in 1963, with state-owned enterprises
being one of its major engines of economic growth. Economic develop-
ment in Hong Kong, on the other hand, has been characterized by its
doctrine of economic noninterventionism, which entails an absence of
macroeconomic planning and the lack of an industrial policy.
Second, attention should be paid to the characteristics of their fiscal
policy. Both Singapore and Hong Kong adhere to financial conservatism
and the doctrine of “living within our means.” The size of their public
sectors and their level of public spending has been kept well below those
of western states. Third, the Asian welfare model does not recognize
 NPM REFORM IN HONG KONG AND SINGAPORE 607

welfare as a social right. Both Singapore and Hong Kong have an anti-
welfare ideology and emphasize the values of self-reliance and familial-
ism. The levels of social spending are relatively low, and social policy is
often used as a tool to complement other measures for the achievement
of economic objectives. In sum, the macroeconomic contexts that define
the significance of NPM reform in Asian states are developmentalism,
financial conservatism, and antiwelfarism.
As to political system, while some Asian NICs such as South Korea
and Taiwan have recently been democratized, neither Singapore nor
Hong Kong is a full-fledged liberal democracy. Singapore is sometimes
characterized by some scholars as an illiberal democracy (Zakaria 1997).
It has been under the one-party dominance of the People’s Action Party
(PAP) since 1959. The marginal role of opposition parties has meant that
PAP has been able to win the majority of the parliamentary seats in every
election since independence. There is limited space for civil liberties, and
civil society is restricted to nonpolitical activities (Tan 2001). Hong Kong,
on the other hand, has been characterized as a liberal autocracy (Zakaria
1997), especially since the later years of colonial rule. Although the gov-
ernment was unelected and dominated by administrative elites, civil lib-
erties have been fairly well protected. This situation persisted after Britain
handed Hong Kong back to China in 1997. The HKSAR government
consists of a partially elected legislature and an unelected government
headed by the chief executive. In both cases, NPM reform has been largely
planned and implemented from the top. As such, the determinants of
successful reform are the autonomy and capacity of the state, together
with the consensus among the political and administrative elites.
As to the compatibility of NPM reform with state traditions, it is fair
to say that many of the NPM reform measures have been closely associ-
ated with the rise of neoliberalism in western states, and such measures
may be naturally attractive to Asian states with a promarket tradition.
However, managerialism may be either compatible or in conflict with
other political values inherent in the governance tradition of Asian states
that may mold the mind-set of the elites and the public. It is thus impor-
tant to investigate the uniqueness of Asian state traditions and how they
have affected the successful implementation of NPM reforms. For Hong
Kong and Singapore, the history of colonialism and postcolonial devel-
opment has certainly shaped their state traditions. A comparison of the
factors affecting the patterns of NPM reform in western liberal democra-
cies and Asian NICs (Hong Kong and Singapore) is summarized in
Table 1.
In what follows, we compare NPM reforms in Hong Kong and Sin-
gapore in the areas of economic, administrative, and social governance.
By governance here, we refer to the mechanisms, processes, and institu-
tions through which political authority is exercised in the management of
a country’s affairs. Our study aims to explore how NPM reform has
changed the mechanisms, processes, and institutions through which the
608 ELIZA W. Y. LEE AND M. SHAMSUL HAQUE

TABLE 1
Factors Affecting the Pattern of New Public Management Reform in Western
Democracies and Asian NICs (Singapore and Hong Kong)
Western Liberal Asian NICs (Singapore and
Factors Democracies Hong Kong)

Macroeconomic Fiscal crisis Developmentalism

factors Economic recession Financial conservatism
Antiwelfarism
Political systems Party politics Autonomy and capacity of the
state
Majoritarian versus Consensus among political and
consensual government administrative elites
Unitary versus federal state The state of political
development
State traditions Affinity with neoliberalism History of colonialism and
and managerialism postcolonial development

NIC, newly industrialized country.

two Asian states manage public affairs. For each area of governance, we
will employ a qualitative comparison of the extent of reform through
making a comprehensive assessment of the scale of reform and the effec-
tiveness of the measures in attaining the objectives of reform. By analyt-
ically studying NPM reforms in three areas of governance, we also show
that both across countries and within a country, NPM reform may have
different causes, employ different measures, attain different levels of suc-
cess, and may be carried out to different extents in different areas of
governance.

Reform in Economic Governance

In economic governance, privatization, liberalization, and deregulation
are the common policy elements in NPM reforms, and are often regarded
as part of the neoliberal trend in many states during the past two decades.
Neoliberalism is marked by a widespread belief that state intervention
should be kept to a minimum and that any unnecessary restrictions on
the operation of market forces should be removed. In the case of Sing-
apore and Hong Kong, we find that NPM reform in economic governance
is employed as a measure for allowing the state to cope with the challenge
of economic globalization. The reform is aimed at maintaining the state’s
economic competitiveness in the global market, but without the state
relinquishing its role in economic management.
In the case of Singapore, its economic policy has been geared toward
development led by a strong state. Apart from its heavy reliance on the
investment of multinational corporations (MNCs), Singapore’s economy
is distinguished by the presence of numerous state-owned enterprises
 NPM REFORM IN HONG KONG AND SINGAPORE 609

(termed “government-linked companies” [GLCs]) and statutory boards

set up by the state as the engine of economic development. For instance,
Temasek Holdings Ltd. (THL), a wholly owned subsidiary of the Ministry
of Finance, has managed hundreds of GLCs. Currently, its total invest-
ment is worth U.S.$40 billion, and now accounts for one-tenth of Sin-
gapore’s total output and one-third of the market capitalization of its
stock exchange (Bellman 2004). THL’s investments straddle key sectors
such as banking, telecommunications, technologies, airlines, technologies,
utilities, port, and the media (LaMoshi 2002; Low and Haggard 2000;
Turner 2002).
In recent years, the Singapore government has undertaken NPM-
related reform in its economic management, notably in its marketization
measures such as deregulation, divestment, liberalization, and privatiza-
tion. A number of its statutory boards and GLCs were privatized (Low
2000; Phua 1991). Liberalization also took hold in various sectors such as
utilities, telecommunications, finance, banking, and the insurance indus-
try, relaxing market restrictions and allowing more foreign ownership
(Low 2000, 2001).
The significance of these NPM-type reforms in Singapore has to be
understood in the context of continuity and change in the developmental
state. The privatization of GLCs was not forced by any fiscal crisis in the
state or any inefficiency in the state-owned economic enterprises. Indeed,
some studies have claimed that the GLCs have long been run strictly on
a commercial basis, and that many of the GLCs privatized are enterprises
that have been highly profitable (Low 2001). The programs of privatiza-
tion and liberalization are partly directed by the new international eco-
nomic order under the auspices of the World Trade Organization (WTO).
It is also a strategic choice on the part of the state to boost private entre-
preneurship. Low (1998) points out that as the government divests, it also
invests in new industries for developmental purposes (159). While priva-
tizing some enterprises, the government actually merges them with other
GLCs.4 Privatization also serves an important domestic policy purpose,
which is to enable companies to be listed on the local stock market, thus
increasing the shareholding of citizens in the assets of their country.
The restructuring of the GLCs is also related to Singapore’s policy of
regionalization, a project in response to globalization (Low 2001; Yeung
2000). Since the early 1990s, the government has been trying to encourage
enterprises to make overseas investments and to relocate some of their
production sites to neighboring countries to reduce production costs,
essentially turning them into MNCs. Liberalization is thus a tactic
designed to reduce the “state-owned” image of GLCs, so as to better
enable them to expand overseas, especially by making acquisitions. The
cases of Singtel and DBS well illustrate this. The government is still the
largest shareholder in both of these enterprises after privatization, and
they have since been investing aggressively in the telecommunication and
banking industries of neighboring countries (Low 2001).
610 ELIZA W. Y. LEE AND M. SHAMSUL HAQUE

The close linkage between political, administrative, and business per-

sonnel also ensures that the state will not lose control over the GLCs that
are privatized. There is a long history of exchange of personnel between
the private and the public sector. As Hamilton-Hart (2000) puts it, the
GLCs are a “mechanism of amalgamation between public and private
sphere” (200). She observes that since the late 1980s, there has been more
movement of state personnel “into business as advisers, directors and
entrepreneurs” (200). Thus, GLCs, even after they have been “privatized,”
are frequently headed by retired civil servants and ex-politicians. This
close linkage in personnel between the government and business corpo-
rations helps ensure that corporate policies are “in line with state macro-
economic direction” (Low 2001, 428). Given this integration in personnel
between the private and the public sectors, privatization does not neces-
sarily mean a decline in state influence over the privatized corporations.
In the case of Hong Kong, its government has long upheld the doctrine
of economic noninterventionism. The government has not set up any
national industries, nor has it played an active role in macroeconomic
planning or industrial policymaking. As such, state-owned economic
enterprises have been practically nonexistent, so that naturally, there has
been little need for NPM-type reform such as privatization. In the 1980s
and 1990s, however, there were measures of liberalization and deregula-
tion in the areas of finance, banking, and telecommunication mainly
compelled by the international trend of neoliberalism and the WTO
requirements. Interestingly, after the Asian financial crisis, the state rec-
ognized the structural problems of the economy and felt compelled to
play a more proactive role in the formulation of long-term strategic goals
and initiatives for business. To that end, some NPM-type measures such
as public–private partnership in economic projects are now more com-
monly adopted. Prominent examples are the cases of Hong Kong Disney-
land, Cyberport, and the West Kowloon Cultural District Project.
Hong Kong Disneyland is a joint venture between the HKSAR govern-
ment and Walt Disney, which involves a commitment of over U.S.$2.9
billion in infrastructure, land, and loans, the hope being that it will boost
the tourist industry in the next two decades. Cyberport is a U.S.$2 billion
joint venture between the government and Cyber-Port Limited (a com-
pany wholly owned by Pacific Century CyberWorks [PCCW]). The West
Kowloon Cultural District Project is part of a strategic initiative to turn
Hong Kong into Asia’s World City through constructing world-class cul-
tural infrastructure. The U.S.$3.2 billion project has invited open bidding
from the private sector, and the successful bidder will be responsible for
planning, constructing, operating, and managing the cultural facilities for
a period of 30 years. In exchange, the project is to be funded by real estate
projects developed by the contractor.
All these joint ventures in large economic projects of unprecedented
scale represent an attempt by the state to increase its capacity in economic
development through collaborating with private corporations. Many of
 NPM REFORM IN HONG KONG AND SINGAPORE 611

these public–private partnership projects, however, have run into political

problems, as public discontent has been aroused over their lack of
accountability. The Cyberport project was assigned to PCCW without
competitive tender. PCCW is chaired by Richard Li, the son of Hong
Kong’s richest tycoon, who is also personally close to Chief Executive
Tung Chee-Hwa. Richard Li is alleged to have reaped massive profits
from the real estate part of the project, which was meant to be used to
fund the construction of Cyberport (BBC News May 17, 2000). Similarly,
the West Kowloon Project is currently the subject of similar public ques-
tioning, as the final contestants who have submitted their proposals are
all real estate developers, and it is estimated that they will earn immense
profits (estimated to be around U.S.$13 billion) from the projects. These
cases show that in Hong Kong, the state has not been successful in estab-
lishing an effective collaborative linkage with the business sector that
would allow the state’s strategic economic goals to be realized. The civil
society finds such collaboration to be politically unacceptable and is exer-
cising political pressure against the government.
In sum, in both Singapore and Hong Kong, the NPM-style reforms in
economic governance are strategic choices of the state to restructure the
economy in the face of the challenge of economic globalization. The state
has certainly not used these measures to withdraw from economic man-
agement. In the case of Singapore, the relative autonomy of the state and
the close linkage between the political, administrative, and business elites
make it possible to augment the capacity of the state in economic man-
agement by establishing collaborative linkages with the private sector and
with other states (Weiss 1998) through utilizing NPM-related reform mea-
sures such as privatization, deregulation, and divestment of its GLCs. As
a city-state that has always upheld economic nonintervention, Hong
Kong’s attempts to engage in economic projects through partnerships
with the private sector signify the state’s intention to augment its capacity
in economic management. On the other hand, the liberal autocratic nature
of its regime generates demands for political accountability that make
closed collaboration politically infeasible. Thus, in economic governance,
Singapore has attained a larger scale of NPM reform and higher effective-
ness in attaining reform objective compared with Hong Kong.

Reform in Administrative Governance

NPM-type reforms in public administrative institutions have been carried
out in many western liberal democracies in the past two decades. The
reason commonly advanced for the reform is the inefficiency of public
bureaucracy and the general wish to control public expenditure through
downsizing the public sector. Reforms pertaining to this include the
privatization of public services, outsourcing through competitive tender-
ing or noncompetitive contracting, creation of autonomous agencies,
reducing public sector pay, the use of contract staff, decentralization of
612 ELIZA W. Y. LEE AND M. SHAMSUL HAQUE

personnel management, the use of performance indicators, and quality

assurance exercises. The central aim of these reform measures is to
improve the efficiency, productivity, and service quality of the public
sector through the creation of market competition, flexibility, and an
emphasis on results.
Both Hong Kong and Singapore have adopted many of these NPM-
style reform measures. One important goal shared by the two cases is to
use NPM reform as a means to contain if not to reduce the size of the
public sector through contracting out, corporatization and privatization
of public service, and change in the civil service pay system. Depending
on the context, the decentralization of personnel and financial manage-
ment may also be used as strategies of cutback. These attempts to keep
the public sector lean can be seen as part of an ongoing exercise to uphold
a public financial ideology that is also closely related to the two countries’
developmental and economic objectives. Their leaders have long upheld
the doctrine of “living within our means” and the values of “efficiency.”
Such thinking is reflected in the pride they take in their ability to maintain
a small public sector. In 2003–2004, public expenditure as a percentage of
gross domestic product (GDP) was 18.9% for Singapore and 22.6% for
Hong Kong.5
Another common theme is the emphasis on performance, productivity,
and accountability by results. These are to be achieved through giving
managers more flexibility and autonomy in personnel and financial man-
agement, the use of performance measurement and merit pay system, the
extensive borrowing of private sector practices, and so on. In the western
context, these reforms are often about satisfying the popular demand for
better service in a situation of shrinking resources. For Asian NICs such
as Hong Kong and Singapore, these reforms take on special significance
in relation to their state of political development. By the 1990s, they were
both high-income economies faced with a declining rate of economic
growth and rising popular demand for more political responsiveness and
participation. Not making much advance in terms of further democrati-
zation, their state leaders have resorted to NPM reform as a way to cope
with rising popular aspirations through measures that embark on the idea
of inculcating a public service culture and of changing the bureaucratic
mind-set. In this sense, NPM reform appears to serve as a substitute for
political reform.
In Singapore, the Budgeting for Results (BFR) initiative was launched
in 1994 by the Ministry of Finance. The BFR requires every administrative
unit to specify its output and set performance targets. Each unit’s oper-
ating budget depends on its output levels, and ministries can carry for-
ward a portion of their savings to the next financial year. All ministries
and departments are given considerable freedom in financial and person-
nel management in exchange for greater accountability for results. Per-
manent secretaries are now operating like chief executive officers in the
 NPM REFORM IN HONG KONG AND SINGAPORE 613

private sector. They develop strategic directions and make their own
decisions in hiring and motivating people (Low 1998). Similarly, the gov-
ernment has restructured various statutory boards into autonomous
agencies (Tay 1999), with their chief executives being given considerable
managerial freedom, and they are expected to behave like private corpo-
rate managers (Haque 2002; Low 1998). Services such as printing, office
cleaning, and clerical and technical services are all contracted out (Com-
monwealth Secretariat 1998).
There is some degree of decentralization in personnel matters, as the
recruitment and promotion authority has been transferred from the Public
Service Commission (PSC) to ministries, departments, and statutory
boards, which now manage their respective personnel boards in coordi-
nation with the PSC (Haque 2002; Quah 1996). Starting from the late
1980s, a flexible pay system was introduced, and bonus-related pay was
first practiced among senior officials. At present, the merit pay system is
widely instituted among the middle- to senior-level public managers.6
For a strong developmental state like Singapore, such reforms like
agencification and decentralization of financial and personnel manage-
ment do not seem to have compromised state capacity. In fact, the relative
ease with which reforms can be carried out is attributed to the strength
of the state. The explanation lies in the relationship between the political
and administrative domains. As Hamilton-Hart (2000) observes, the
postindependence Singaporean bureaucracy “has remained entirely sub-
ordinate to the political leadership” and bureaucrats “are integrated into
a wider system of government which does not support bureaucratic cen-
tres of power” (198). There is also close affinity between political and
administrative personnel in the sense that the higher civil service has been
the “recruiting ground for political leadership” (Chan 1981, 11). The rela-
tionship between the political and administrative domains is one of not
only a high level of integration between political and administrative
elites, but also of a high level of integration between the party and the
government machinery as a result of long-term one-party rule by PAP. In
this “politico-administrative regime” (Pollitt and Bouckaert 2000, 40–41),
the decentralization of power through NPM reform is carried out with a
high degree of institutional continuity and is not likely to compromise the
capacity of the state. There is also much emphasis on changing the admin-
istrative culture, as shown in Public Service for the 21st Century (PS21),
a public service reform project launched recently. It is pointed out that
confronted with “a public that is increasingly demanding of higher stan-
dard of service,” there is a need “to foster an environment which induces
and welcomes continuous change” through “transforming mindsets and
creating different organizational culture and norms” (PS21 Office 2003).
PS21 recommends that a new bureaucratic culture be inculcated, one that
is client centered, emphasizes service excellence, and welcomes continu-
ous change. In line with this thinking, the government has been encour-
614 ELIZA W. Y. LEE AND M. SHAMSUL HAQUE

aging qualified business executives to join the public service, even at some
of the highest ranks (Straits Times 1996). At the same time, public servants
are posted temporarily to private companies so that they can gain expo-
sure to business practices and the “corporate ethos” (Jones 2002).
The idea of performance-based governance is highly compatible with
Singapore’s state tradition. Financial prudence, performance, and produc-
tivity are values that are integral to the ideological basis for the legitimacy
of the state and the ruling PAP, which has rested on its ability to achieve
good performance and produce good results in public service (Hamilton-
Hart 2000). The emphasis of NPM reforms on flexibility, performance, and
results (rather than procedural accountability) has much affinity with
Singapore’s governance culture. Characterized by the former Senior Min-
ister Lee Kuan Yew as the “trustee model of democracy,” this governance
culture justifies entrusting wide discretionary power in the hands of polit-
ical and administrative authority in return for good results (Low 1998,
64–65).
In Hong Kong, especially after the Asian financial crisis, NPM reforms
were conducted on a larger scale, and many of the reforms have been
budget driven. The Asian financial crisis caused an economic slump, and
in 2002, the deficit snowballed to a record high of HK$65 billion, or 5.2%
of GDP. To increase public revenue, plans were announced to sell major
government-owned enterprises, including the Mass Transit Railway Cor-
poration and the Airport Authority. Even water supply was among the
items considered for privatization. To control public expenditure, the
government sought efficiency gains through the Enhanced Productivity
Programme in 1998, which required all administrative units to achieve a
5% improvement in productivity from 2000 to 2003. In 2002, the financial
secretary announced an ambitious plan to eliminate the budget deficit by
2006–2007 by reducing public expenditure from 22 to 20% of the GDP
(Hong Kong Government 2003). More substantial reforms were then car-
ried out to control the size of the public sector by reducing the number
of civil servants and cutting their salaries. Measures such as a voluntary
retirement scheme, a hiring freeze, and the use of contract staff of noncivil
service status have been adopted. To facilitate financial cutbacks, the
responsibility for financial management is devolved to policy secretaries
and directors, who are given full autonomy to deploy the resources allo-
cated and to carry over unused resources to the subsequent year. Depart-
ments are also encouraged to outsource their services to private
contractors as much as possible, and to engage in organizational restruc-
turing and business process reengineering.7
Many of these reform measures went against the sectoral interests of
the civil servants, and thus were strongly opposed. For instance, in 1999,
the consultative document entitled Civil Service into the 21st Century pro-
posed completely overhauling the personnel system. Many of its ideas,
such as performance pay and the widespread use of contract staff, were
met with strong resistance from the civil service unions. The level of cuts
 NPM REFORM IN HONG KONG AND SINGAPORE 615

in salary and fringe benefits was compromised as the labor unions held
demonstrations, and individual civil servants sued the government.8
Likewise, attempts to extensively outsource public services were strongly
resisted by civil servants, who feared losing their jobs and deterioration
in their employment terms.
There are also signs that decentralization might have resulted in dis-
articulation among political officials. To understand this issue, one needs
to see the reform in the context of Hong Kong’s political history. Under
the old colonial system, governance was in the hands of administrative
elites. In 2002, the Principal Officials Accountability System was imple-
mented, which is a de facto ministerial system. Under the new system,
policy secretaries are all political appointees, and they collectively consti-
tute the “cabinet” of the chief executive. The new system also gives the
chief executive a freer hand to bring in people from outside the civil
service as members of his own team. On the other hand, the move toward
ministerialization was not accompanied by the development of political
parties. Tung and his cabinet members are not united by common party
backgrounds. In fact, most of them do not belong to any political party.
Under these conditions, the decentralization of financial management
power means giving the policy secretaries the full authority to distribute
resources within their policy portfolios, as well as the space to advance
their own political agendas and gain political capital.
Aside from using NPM reforms as tools for cutting back, there is also
equal emphasis on the use of NPM reform to improve the performance
of the government in order to tackle the governance crisis. In the early
1990s, the Serving the Community program was launched, one major
theme of which was to develop a culture of service. The practice of the
Performance Pledge was instituted, mandating administrative units to
make known their standard of service to their “customers.” Performance
indicators were extensively introduced. The Target-Based Management
Process launched in 1997 focuses on managing for results through a top-
down hierarchy of layers of indicators from explicit policy objectives to
the operational level. After the establishment of the HKSAR government
in 1997, there have been numerous incidents of policy and administrative
failure leading to widespread public discontent with the government
(Lee 2000). In the face of increasing demand for democratization and
accountability, the government has resorted to management reform as an
attempt to improve its performance and to rescue its plunging approval
rating. One example is the Management Forum conducted in 2002
involving the participation of 14,000 civil service managers focusing on
how to improve the performance and productivity of the government.
One important theme permeating the forum was the need for change in
the mind-set of public officials in order to meet the community’s expand-
ing needs.9
Compared with Singapore, the reform in Hong Kong is more com-
pelled by fiscal and governance crises. At the same time, the state is much
616 ELIZA W. Y. LEE AND M. SHAMSUL HAQUE

less able to push for extensive reform. Administrative personnel in Hong

Kong are much less subservient to their political superiors than their
Singaporean counterpart. Hong Kong’s civil service has a much stronger
history of labor unionism and resistance against policies that are deemed
against their sectoral interests (Levin and Chiu 2000). The governance
tradition of Hong Kong, rooted in the colonial bureaucracy, is more rule
following. As a result, there is tremendous unease among the civil ser-
vants with a system that gives management the discretion to assess their
subordinates and decide on their salaries on the basis of performance. The
lack of integration among the politicians themselves also means that
administrative decentralization can further weaken the unity of political
leadership.
As a whole, both Hong Kong and Singapore wish to utilize NPM
reform to restructure their administrative institutions as a way to contain
the size of the public sector, so as to preserve their inherent policy of
financial conservatism. Confronted with a rising popular demand for
political responsiveness, both also wish to utilize NPM reform to institute
a performance-based governance structure. The difference in the ease
with which the state can implement the reform of its civil service shows
the difference in the relative strength of the state. Singapore has been
better able to adopt sweeping reforms largely because its administrative
elites are more integrated with the governing party and subordinated to
its leadership. In Hong Kong, the disunity within the newly formed
political leadership and their relative inability to control the civil service
make the imposition of NPM reform difficult. The “trustee model” of
governance also makes Singapore more receptive to the results-oriented
management approach that is implicit in NPM measures. The more rule-
based governance tradition in Hong Kong makes it difficult for civil
servants to accommodate NPM reform measures that emphasize perfor-
mance. In sum, Singapore has attained a larger scale of NPM reform and
higher effectiveness in attaining reform objective in administrative gov-
ernance when compared with Hong Kong.

Reform in Social Governance

NPM reform is frequently associated with the withdrawal of the welfare
state10 in the western context. Indeed, many reform measures, such as
decentralization of financial and personnel management, flexible budget-
ary arrangements through the one-line vote, user charges, and so on, have
been used as devices for “recommodification” and “cost containment”
(Pierson 2001, 421) in welfare provision. The relationship between NPM
reform and the restructuring of the welfare system in Asia, however,
requires further investigation. Both Singapore and Hong Kong share
some of the common characteristics of the Asian welfare system (Good-
man, White, and Kwon 1998). Both states reject a high level of social
 NPM REFORM IN HONG KONG AND SINGAPORE 617

spending and do not wish to recognize welfare as a set of social rights,

and both are proponents of the ideology of self-reliance. Priority is given
to creating a favorable environment for economic development, including
minimal labor protection and favorable tax rates for private corporations.
In recent years, both states have experienced pressure for change in their
social policy. Notably, economic globalization and socioeconomic change
make it more important for states to assume an active role in social
provision. On the other hand, the globalized economy has compelled
these states to maintain a favorable business environment through low
public spending and low tax rates. In the face of these challenges, two
different approaches are detected. Singapore’s NPM reform in social pol-
icy is more policy driven, the aim being to reinforce a state-regulated
welfare society, whereas Hong Kong’s reform is more budget driven, the
aim being to retrench the “residual welfare state” (Lee 2006).
The difference between the two cases in NPM reform is highly related
to their historical approaches to social policy financing and provision.
Hong Kong’s social policy approach is distinguished by a higher level of
state financing through taxation, with little attempt at institutionalization
through insurance systems. The state is the major financer of education,
public health, rental public housing, social service, and social assistance.
Its antiwelfarism stems largely from its free-market economic ideology
and conservative financial policy. In comparison, the state in Singapore
plays a weaker role as a financier in most social programs (except for
education), but acts as a major provider and a strong regulator (Ramesh
2004). Singapore’s antiwelfare ideology is closely related to its develop-
mental objective. It instills in its population the values of self-reliance and
work ethics with the aim of maximizing the people’s productivity so that
they contribute fully to the state’s developmental goals. The state actively
promotes the ideology of familialism and anti-individualism through its
official campaign. In what follows, the NPM reforms in the areas of
education, social service, public health, and public housing are discussed
to illustrate how these two different states have responded to recent
global and local changes.
In Singapore, in terms of education, the state recognizes the need to
transform its economy toward a knowledge-based one in response to the
challenge of economic globalization. To improve the quality of education,
competition was introduced among schools through the School Excel-
lence Model, entailing the use of performance measurement, quality
assurance, and a rating system. The control exercised by the state in the
financing, provision, and regulation of education has been slightly
relaxed through allowing the setting up of independent and autonomous
schools with a higher degree of autonomy in setting fees, selecting stu-
dents and teachers, and determining the curriculum within the parame-
ters set by the government (Mok 2003; Tan and Gopinathan 2000). NPM
reform measures are being extended to universities, where quality assur-
618 ELIZA W. Y. LEE AND M. SHAMSUL HAQUE

ance and strategic planning are interwoven in the governance philosophy

(Mok 2000).
More drastic reforms have been instituted in public health. The state
began to reform its public health-care system in the early 1980s through
the introduction of Medisave, a system of compulsory individual savings
accounts, and Medishield, an insurance program involving large co-
payments. All the general hospitals and specialist hospitals are now
corporatized, restructured to run as fundholders using commercial
accounting methods, and given more management autonomy and flexi-
bility (World Health Organization 2004). A means-tested public assistance
scheme is provided for the low-income citizens through an endowment
fund. Ramesh (2004) remarks that following all these reforms, Singapore
is now “one of the smallest spenders on health in the world” (100).
In social service, Singapore has largely resorted to state-funded non-
profit organizations (NPOs) as the provider of service. New guidelines
have been developed for the conduct of their NPOs (termed voluntary
welfare organizations [VWOs]) (National Council of Social Service 2003,
1), requiring them to adopt businesslike financial and management tech-
niques such as benchmarking, performance measurement, self-evalua-
tion, financial accounting standards, and strategic planning. These
practices aim to enable greater efficiency, accountability, and transpar-
ency. Singapore’s VWOs are not only the state’s agents for social service
delivery, but also the “informal” channel through which the state distrib-
utes many social welfare benefits to the poor and the needy. The state
prefers such informal arrangement of social welfare provision through
the family and community so as to maintain its ideological position that
welfare is a matter of “charity” rather than of “right,” and that their
citizens should strive for self-reliance rather than dependency on the
state. In recent years, following the economic downturn and the growth
of the elderly population, the state has actually increased its funding to
VWOs (Ramesh 2000). In this context, the NPM reform measures are
used more as ways to increase service output, to improve service quality,
and to better discipline the state-funded NPOs through standardized
managerial performance measurements and pressures to produce good
results.
In public housing, the program provides owner-occupied apartments
to over 80% of the population and serves important political purposes of
instituting political stakeholdership, maintaining traditional family val-
ues, and social control (Chua 1997). On the other hand, the PAP govern-
ment also deems it necessary to continuously satisfy the expectation of
the population for continuous asset price maintenance if not appreciation
(Ramesh 2004, 146). The high economic and political stakes make it
unthinkable for the state to withdraw from the provision, financing, and
regulation of housing. In fact, over the years, the state involvement in
housing has increased. In the 1980s, luxurious condominiums were intro-
duced to satisfy the needs of the higher-income group. In 1991, a public
 NPM REFORM IN HONG KONG AND SINGAPORE 619

housing estate upgrading program was initiated, with one billion dollars
to be spent annually to finance the scheme over a 15-year period (Chua
2000).
In the case of Hong Kong, the reform is more budget driven and deeply
related to its philosophy of financial management, which ties the level of
social spending to the financial situation of the government. As dis-
cussed, the budget deficit was snowballed to a record high after the
Asian financial crisis, prompting the financial secretary to impose cut-
back on virtually all major social policy areas. In education, the govern-
ment has encouraged the setting up of more private schools and direct
subsidy schools, for which less funding is granted in exchange for more
autonomy in setting staff salaries and school fees, and in curriculum
design. This liberalization in the use of private schools and DSS offers a
way to support better quality education through allowing middle-class
parents to pay higher fees, where they can afford to do so. NPM-type
reform measures are being introduced to schools, setting standards for
measuring performance through the use of quality assurance, perfor-
mance measurement and rating systems, and creating internal competi-
tion as a method of allocating resources. New managerial reform
measures have been extensively used in the management of public uni-
versities. Systematic measurement and auditing of research outputs,
teaching performance, and quality of management were carried out. The
indicators generated are used as the basis for the allocation of funding.
Recently, substantial budget cuts have been imposed on universities,
while the salaries of university staff have been delinked from the civil
service pay scale, essentially giving universities the free hands to lower
staff salaries.
For public health, the service was corporatized in the early 1990s with
the setting up of the Hospital Authority (HA), which was given more
flexibility in the deployment of resources and in introducing new man-
agement concepts into hospitals. Ideas such as user charges, performance
pay, and the Patients’ Charter were introduced. Under the HA’s manage-
ment, however, health expenditure continued to rise. In 1999, the govern-
ment commissioned the Harvard Team to study health-care financing.
Their report recommended the setting up of individual savings accounts
and compulsory insurance schemes. Subsequently, the government rec-
ommended a mandatory contributory scheme, and rejected the idea of an
insurance scheme with redistributory effect. It has yet to convince the
public to accept reforms that will have individuals shoulder more of the
burden of medical costs. Meanwhile, budget cuts have been imposed on
the HA, forcing it to adopt measures such as salary cuts, hiring freezes,
and more user charges.
In social service, in the 1990s, NPM reform measures were introduced
by the government in the funding and monitoring of NPOs. The Service
Performance Monitoring System11 was introduced, together with a flexi-
ble funding model called the Lump Sum Grant System (LSGS) that gives
620 ELIZA W. Y. LEE AND M. SHAMSUL HAQUE

NPOs the autonomy to decide on their staffing structures, salary levels,

and other items of expenditure (Social Welfare Department 2000). The
government has also opened up service contracts to business enterprises
for competitive bidding alongside the NPOs. The official justification for
the reform of the social welfare funding system is that it makes service
provision more efficient, customer oriented, and output driven, and that
it gives funded NPOs more flexibility and autonomy in managing them-
selves. In actuality, the reform entails extensive marketization and is pri-
marily aimed at cost containment. The LSGS allows the government to
put a ceiling on social service spending by giving NPO managers the
“autonomy” to work out the method of cutback.
In public housing, the program supplies subsidized rental housing
and owner-occupied apartments (through the Home Ownership Scheme
[HOS]) to 47% of the population. Since the 1990s, there have been
attempts by the state to limit its commitment to the provision of public
housing, although souring real estate price have continuously pressurized
it to supply adequate housing to the middle and working class. In recent
years, ceiling has been imposed on its consumption, such as capping the
supply of public housing at a three-year waiting period and imposing a
more stringent residency requirement to limit the eligibility of new
migrants for public housing. In 2002, the government announced the
permanent cessation of the HOS, thus forcing lower middle-class families
to buy apartments from the private market. In 2005, amidst strong oppo-
sition from social activists, the Housing Authority proceeded to set up the
Link Real Estate Investment Trust, which is an attempt to raise HK$2.8
billion by privatizing 151 shopping centers and 79,000 parking lots of
public housing estates.
To summarize, both Hong Kong and Singapore have a low level of
public spending on welfare. As a whole, the antiwelfare tradition in both
states, coupled with the lack of the pressures usually associated with
electoral politics, allow cutbacks in social spending to be made with
relative ease. Comparatively speaking, Hong Kong has a larger scale of
NPM reform in the areas of education, social service, and public housing,
whereas Singapore has a larger scale of reform in public health. As pre-
viously mentioned, the overall welfare restructuring in Singapore is more
policy driven in the sense that the extent and nature of reform in each
social program has been constructed in accordance with the regime’s core
values and developmental objectives, but in Hong Kong, it is largely
budget driven, and used as an administrative tool for the retrenchment
of the residual welfare state.
The difference is attributed to the degree of linkage between social
policy and political and developmental objectives, the level of state
financing in social programs, and the severity of the budget deficit. Hong
Kong, having a weak linkage between social policy and developmental
objectives, a higher level of state financing of social programs, and a more
 NPM REFORM IN HONG KONG AND SINGAPORE 621

severe budget deficit, has resorted to the retrenchment of the residual

welfare state as a strategy to cope with the pressure of economic global-
ization and socioeconomic change. Conversely, Singapore, with a lower
level of state financing, a milder budget deficit, and a strong linkage
between social policy and political and developmental objectives, has
resorted to the consolidation of the state-regulated welfare society. Such
difference in strategies accounts for the difference in the levels of NPM
reform in the areas of social governance. Overall, Hong Kong is found to
have a larger scale of NPM reform, although both countries have attained
a similar level of effectiveness in attaining their reform objectives.
Concluding our study of NPM reform in the three areas of governance,
Singapore has attained a greater extent of reform in the areas of economic
and administrative governance, whereas Hong Kong has attained a
greater extent of reform in the areas of social governance. The findings
are summarized in Table 2.

Conclusion and Suggestions for Future Research

Our study confirms that despite the rise of NPM reform as an interna-
tional policy culture, countries are not converging toward a universal
pattern of NPM reform (Cheung and Scott 2003; Hood 1996). Instead, the
context and significance of reform have to be understood in relation to
the characters of the political regime. In our study of Hong Kong and
Singapore, the two Asian NICs that are developed economies and non-
liberal democratic states, we have identified the respective defining fea-
tures of their political regimes that shape their NPM reform. Adopting
the three sets of factors that are identified by other researchers as crucial
in affecting the patterns of NPM reform in western states, namely, mac-
roeconomics, political systems, and state traditions, we identify the spe-
cifics of such factors for Hong Kong and Singapore (Table 1). Our current
findings could be further refined through extending the study to other
Asian NICs in different states of political development (notably South
Korea and Taiwan), while the further identification of patterns of reform
in Asian states could be done through comparative studies of various
types of regimes, such as postcommunist and developing states.
Second, our study shows that reform can have multiple objectives
that are different for different areas of governance. Our comparison of
Hong Kong and Singapore also shows that within each area of gover-
nance, there are specific factors affecting the level of reform as measured
by the scale and the effectiveness of reform in realizing certain policy
objectives (Table 2). Thus, within the same state, the objectives, extent,
and factors affecting the extent of NPM reform are not monolithic for all
spheres of governance. As such, more fruitful and meaningful compara-
tive studies may be generated by further research through exploring the
cause and extent of NPM reform in different areas of governance across
countries.
 622

TABLE 2
Comparison of NPM Reform in Hong Kong and Singapore in Three Areas of Governance
The Extent of NPM Reform
Factors Affecting the Extent of NPM
Scale of Reform Effectiveness of Reform Reform
Areas of Objectives of NPM
Governance Reform Hong Kong Singapore Hong Kong Singapore Hong Kong Singapore

Economic To increase the Smaller Larger Lower Higher Lower state Higher state
governance transformative autonomy vis- autonomy vis-
capacity of the state à-vis the civil à-vis the civil
and maintain society society
competitiveness in the Lack of Collaborative
globalized economy collaborative linkage
linkage between the
between the political,
state and administrative,
business and business
personnel elites
ELIZA W. Y. LEE AND M. SHAMSUL HAQUE

Administrative To maintain the Smaller Larger Lower Higher Disunity among Consensus among
governance conservative financial political elites political elites
policy
NPM, New Public Management.
 The Extent of NPM Reform
Factors Affecting the Extent of NPM
Scale of Reform Effectiveness of Reform Reform
Areas of Objectives of NPM
Governance Reform Hong Kong Singapore Hong Kong Singapore Hong Kong Singapore

To cope with the pressure Inability of the Dominance of the

for political reform political ruling party
through establishing a leadership to over the
performance-based control the administrative
public service culture civil service personnel
State tradition of State tradition of
rule-based the “trustee
governance model” of
governance
Social To cope with the Higher Lower Same Same Higher level of Lower level of
governance increasing demand for state financing state financing
social provision due to of social of social
socioeconomic change programs. programs.
High level of Low level of
budget deficit budget deficit
Weak linkage Social policy is
between social integral to
policy and political and
political and developmental
developmental objectives.
NPM REFORM IN HONG KONG AND SINGAPORE

objectives

NPM, New Public Management.

623
624 ELIZA W. Y. LEE AND M. SHAMSUL HAQUE

Notes
1. The work described in this article was substantially supported by a grant
from the Research Grants Council of the Hong Kong Special Administrative
Region (HKSAR), China (Project No. CHUK4374/00H).
2. For the general characteristics of NPM reform, see Hood (1996). The most
common NPM reform measures are downsizing, contracting out, cor-
poratization, competition, agencification, managerial autonomy, user fees,
performance targets, output controls, purchaser–provider split, and public–
private partnership.
3. For NPM reforms in different regimes, especially nonwestern ones, see
Turner (2002), Batley and Larbi (2004), and Manning (2001).
4. An example of such a merger is the acquisition of the Post Office Savings
Bank by the Development Bank of Singapore (DBS) in 1998.
5. Please refer to http://www.mof.gov.sg/budget/budget_2003/index.html
and http://www.budget.gov.hk/2003/eng/index.htm for the data related
to Singapore and Hong Kong, respectively.
6. For details, please see http://magnet.undp.org/Docs/psreform/
singapore_ten_best.htm.
7. For details of some of these practices, see the Web site of the Efficiency Unit,
http://www.info.gov.hk/eu/index.html.
8. The government’s attempt to cut civil service pay and benefits was met by
major legal and constitutional obstacles. Article 100 of the Basic Law states
that after 1997, civil servants will remain employed and retain their pay and
benefits at a level that is “no less favourable than before” the handover. Very
recently, in a verdict on the mechanism of determining pay, the court also
ruled against the legality of the government reducing civil servants’ pay
through legislation.
9. For details, please see http://www.info.gov.hk/eu/English/history/
history_mf/history_mf2002.html.
10. In this article, the term welfare as used in welfare state, welfare restructur-
ing, and welfare programs broadly includes the social goods and benefits
that contribute to human development and well-being such as education,
health care, social security and social services, and housing.
11. See http://www.info.gov.hk/swd/html_eng/sup_ser/ser_pfm_mon/main.
html for details.

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