Life is getting tougher for Singapore, long the pin-up country for politicians and business spruikers. The economy has slowed, population growth has stopped, and voters are angry. Foreign businesses, too, are unimpressed with government moves to crack down and restrict foreign workers.

On top of this, its international reputation has been battered by claims it is the global heart of a match-fixing racket in soccer. Singapore’s squeaky clean, highly moral image is being tarnished. The claims about corruption and match-fixing in soccer make the stories about drug-taking in Australian football look small beer by comparison.

Singapore is well known for its economic and financial successes, and for its tough line on crime. It’s a country where spitting on the pavement or littering can get you into trouble, fined, or perhaps even jailed. But its legalisation of betting on local soccer matches back in 1999 and international games in 2002 has set up the country to become the centre of a worrying global problem for professional sports.

On top of this, Singapore has stringent bank secrecy laws, which tightened in recent years to attract more wealthy residents from China, Malaysia, Japan and Australia. They are similar to those in Switzerland where it remains a criminal offence to disclose details of accounts.

This combined to present an image of Singapore as the centre of a gambling cartel taking advantage of tough bank secrecy laws, while the government is actively discriminating against foreign workers, especially high-earning white collar professionals.

This is not the image Singapore’s leaders — from former PM Lee Kuan Yew and his family downwards (his son is the current PM) — want to present to its people and the rest of the world, but times are changing. The old certainties and moral standards are slipping.

There’s a rising tide of xenophobia among native Singaporeans, especially against foreigners from mainland China. The ruling People’s Action Party (PAP), established by Lee Kuan Yew, is fraying as a small, noisy opposition makes inroads into its support. Native Singaporeans fear for their jobs (even though they won’t do the jobs the foreigners are doing, such as driving buses and taxis, cleaning buildings and working in building and construction).

The government has responded to these pressures, and an embarrassing by-election loss last month, by tightening controls on foreigners entering and working. And, confronted by a falling birth rate (which is driving the demand for foreign labour) that is accelerating, the government is trying to bribe native Singaporeans into having more children. It’s an echo of what is happening in mainland China (and happened in Australia a decade ago, come to think of it).

Foreign businesses are reacting to the growing level of foreigner bashing. A survey last month by the American Chamber of Commerce revealed foreign investors have started leaving the country in reaction to a crackdown on overseas workers. They are heading across the Straits of Johor to a more welcoming Malaysia and a couple of huge economic and residential developments 30 minutes or so away. Some are also going to Thailand or The Philippines.

In November, the government raised by more than 400% the minimum salary threshold for foreigners with professional qualifications looking for work, requiring them to have an annual salary of at least S$144,000 ($US116,000), up from a previous threshold of S$34,000. This impacts white collar foreign employees, not the blue-collar workers from mainland China, Malaysia and Indonesia and The Philippines who arrive to fill menial jobs. AmCham said its survey showed around 15% more of the respondents were thinking of moving operations from Singapore. Besides the salary restrictions, the government last year tightened the length of time foreign employees can work in Singapore to three years from five, and tightened the rules on foreigners buying housing.

The by-election in late January ended up being fought on the issues of foreign workers and the falling birth rate, and it’s clear that the result (a Workers Party Candidate won with 54% of the vote) in a seat vacated by the Peoples Action Party’s speaker of the country’s Parliament (who was sprung having an extra-marital affair), stunned the government. Voters didn’t listen to their message and a blatant election promise just before the poll of S$2 billion to native Singaporeans to have more babies by handing out payments and making child care more affordable. The loss was the PAP’s worst ever and its vote is now the lowest in history. But it still dominates Singaporean politics with 80 of the 87 seats in Parliament.

What is being said in Singapore isn’t unique: xenophobia is what we are also hearing from Hong Kong, Italy, France, Germany, parts of the US, the UK and Spain. And countries don’t have to be doing poorly economically, as Spain, Italy and the UK are, for these concerns to move to centre stage. It’s also something we have seen from time to time emerge in Australia, especially in parts of western Sydney, Melbourne’s outer suburbs, those in the margins of Brisbane / Gold Coast, and from Australian unions.And, worrying for the image conscious government, Singapore’s problems are starting to be noticed, as CNBC reported overnight.

“Singapore, one of Asia’s largest financial centers, has seen a big inflow of expatriates in recent years. Now, as a sharp rise in the cost of living threatens high living standards, the city-state may well be at risk of becoming a victim of its own success.” That is not the sort of publicity the Lee family and the rest of the PAP and business establishment are used to.

A strike among mainland Chinese-sourced bus drivers late last year scandalised the government as it was the first labour strike in decades. The dispute was settled and the rebels deported back to China. But the PAP can’t use that as a solution to every problem, especially the falling birth rate. As Italy, Japan and Russia are finding out, a falling birth rate is bad news for a country and growth.

As the Financial Times reported in late January: “The government has warned that growth will slow to a range of 2-3% in coming years from the previous level of around 5% because of the static or declining population and the maturing of the Singapore economy.” In terms of past performance, Singapore is definitely ex-growth. Soon it will start running into ageing concerns.

GDP figures for neighbouring Indonesia and Malaysia show they have grown faster in the past five years than Singapore, where economic growth has slowed sharply, despite the generally solid demand across south east Asia and the rest of the region.

Singapore is also one of the biggest foreign investors in the non-mining side of the Australian economy, with more than $50 billion invested, much of it through companies controlled by Singapore Inc, the country’s sovereign wealth funds (especially Temasek). Singapore has interests in telcos (Optus), sugar and grains (CSR), lots of property (Australand among others), casinos (Echo) and power and gas generation distribution and retailing (Sp Ausnet). An attempt was made several years ago by the Stock Exchange of Singapore to takeover the ASX, a move that was denied by the federal government. Singapore is close politically to Australia regardless of whom is in power.

Singapore finds itself in such a situation with the current birthrate of 1.2 well below the natural replacement rate of 2.1. Years of being told to limit the size of their families to two, or better, one child (following China, but without the draconian penalties meted out there, such as forced abortions), has left Singaporean couples unwilling to do the “right” thing and have more children, or in a growing number of cases, start a family. Lee Kwan Yew was behind the policy to limit the size of the countries families. It’s an unhappy legacy for his son and prime minister Lee Hsien Loong.

The PAP need the country’s population to resume growing because without that the future is very much uncertain. But without foreign workers, especially white collar professionals, the country will not be able to grow with certainty into a bigger financial and services group for the region.

And, without lifting the birth rate sharply in the next five to seven years, the government’s objective will fail and Singapore will be condemned to ever stagnating economic growth. Being nasty or discriminating against foreigners could damage Singapore’s standing because an estimated 38% of the country’s 5.3 million people are classed as foreigners (up from 25% in 2000).

Some 7,000 foreign companies use the country as a base for the region. Make life tougher for their employees and those companies will prove to be counter productive. The country could need its mega billion sovereign wealth funds sooner than they think.