The city-state is rethinking its strategy to ensure long-term viability

In the last week of September, Singapore's government announced that the city-state's population now stood at 5.4 million and emphasised that the rate of immigration had slowed to the lowest level in a decade. While this is a routine announcement at one level, it comes at a time when demographics are at the centre of national debate.

Singapore has exhibited extraordinary flexibility as it evolved, in a little more than a generation, from a British colonial outpost into one of the most successful cities in the world. At each stage, a visionary political leadership was able to add a new layer to the economy as it moved up the value chain - from a trading port to a manufacturing cluster, then a financial centre and, more recently, a hub for education, research and entertainment. However, the city-state now has to face a very different problem: how to maintain socio-cultural continuity in the face of very rapid demographic change? The way Singapore manages this challenge will have a significant impact on its political and economic future.

Singapore's population is currently estimated at 5.4 million, of which 3.3 million are citizens and 0.5 million are permanent residents (together they are called the resident population). In addition, there are 1.5 million foreigners. The problem is that the resident population has a very low fertility rate. Total fertility rate (TFR) is defined as the average number of live births per woman over her lifetime. The city-state requires a TFR of 2.1 in order to keep its resident population stable but the registered rate is 1.3, a little more than half the "replacement rate".

The government has long recognised the problem of low birth rates but, despite many efforts, nothing has so far succeeded in pushing up fertility. This is not a unique problem and is common to many countries in Europe and East Asia. The obvious implication is that Singapore will need to rely heavily on immigration. Note that the abysmally low TFR implies that the incumbent resident population would have to be steadily replaced by newcomers, including new citizens, merely to maintain the current population cluster. Indeed, immigration was largely responsible for the jump in population from four million in 2000 to 5.4 million today. This is not a problem in itself since Singaporeans are generally open to immigration (after all, everyone is an immigrant within a few of generations). However, the pace of this shift has been steadily accelerating, and suddenly it has triggered a big debate on Singapore's future trajectory.

In early 2013, the government published a white paper that mentioned a population projection of 6.5-6.9 million in 2030. Although the government clarified that the projection was a guideline for infrastructure planning rather than a target, the number came under severe criticism. A part of the reaction may be due to the usual insecurities about economic competition from newcomers, but there is a deep-rooted fear about the erosion of the "Singaporean way of life".

Despite its bubbling ethnic mix, Singapore's economic miracle was made possible by an exceptional degree of social cohesion. At its root, many locals fear that the current pace of change may be too fast to acculturise the newcomers and maintain socio-cultural continuity. In other words, the debate over immigration in Singapore should not be trivialised as xenophobia but must be seen as a fundamental one about the city-state's long-term viability.

One option for the city-state is to accept demographic decline and allow the population to shrink (some other Asian countries seem to be opting for this). Singapore's problem is that it is a "global city" that requires a minimum cluster of activity. As it is, Singapore has the smallest population of any major global hub and there is a non-trivial risk that a steady decline in population would trigger a process of de-clustering. Urban history shows that once de-clustering takes place, it can gather an unstoppable momentum that is difficult to arrest (ask Detroit).

Singapore's leaders are aware of these risks and are trying hard to manage contradictory pressures. On the one hand, the pace of immigration has been slowed to what is deemed socially acceptable. On the other hand, the government has recognised that Singapore's urban mass can be increased by leveraging the hinterland. Thus, we are seeing support for urban developments in the Iskandar Development Region in Malaysia. Similarly, a high-speed rail link is being built between Singapore and Kuala Lumpur. The idea is that Singapore the city could be bigger than Singapore the country.

Such strategies may keep Singapore's economy running for a decade or two, but the country's abysmal birth rates make it inevitable that the resident population will shrink and, to some extent, be replaced by newcomers. This is why it is important that Singapore begins to think of other ways of maintaining socio-cultural continuity.

In some ways, Singapore's problem is common to all global cities where the population keeps churning. The reason that cities such as London and New York are able to maintain socio-cultural continuity despite changing demographics is that they have anchor institutions that keep the collective memory alive. Institutions that help maintain continuity in London include its universities, museums, theatres, old buildings and traditions, and even the monarchy. Cultural factors like literature too play an important role: no matter who buys/sells real estate on Baker Street, Sherlock Holmes will continue to live there. New York is similarly served by Columbia University, New York University, Central Park, Broadway, and so on.

In short, Singapore needs to make the transition from an ingenious whizz-kid to a mature city with a distinct personality. This would be a big shift in the way the city-state thinks of long-term economic strategy. The good news is that the ingredients already exist for creating a distinct and lasting personality for Singapore. As a Chinese-majority city with an Indian name that started out as a European outpost in Southeast Asia, it is the meeting point of some of the world's great civilisations. In the past, this cultural mix was seen as being peripheral to Singapore's economic model, but in the long run it may prove to be its single biggest strength.