Singapore’s ruling party has long relied on its reputation for clean governance to win elections and attract capital from around the world. A series of scandals is now putting that image to the test just as Prime Minister Lee Hsien Loong prepares to pass the baton to new leaders.

Last week Transport Minister S. Iswaran got arrested in the first graft probe involving a member of cabinet in nearly 40 years. On Monday, the parliament speaker and a lawmaker resigned over an affair.

The revelations are sending shockwaves through the People’s Action Party at a time when Lee is seeking to step aside after almost two decades leading the city state. Multiple former party officials and lawmakers interviewed by Bloomberg say the PAP’s credibility has taken a hit at a time when a presidential election is less than three months away and a national vote by late 2025. None of them suggest the party will lose in the general election.

The scandals could irk the city-state’s voters grappling with higher living costs and concerns of growing inequality. While a significant majority of them have consistently voted for PAP on the party’s carefully woven narrative of transparency and zero-tolerance for corruption, there may be a backlash this time.

A spokesman for the PAP didn’t respond to an emailed request for comment.

After Lee first disclosed the probe involving Iswaran, his heir-apparent Lawrence Wong also stepped into the spotlight pledging transparency. A week later Lee issued a statement and held a briefing on the speaker’s resignation, which Wong also weighed on.

“We will continue to uphold stringent standards of honesty, integrity and probity that Singaporeans expect of their political leaders,” Wong, who is also finance minister, said in a Facebook post. “We will investigate all cases that come up and, whichever way the facts eventually fall, they will be taken to their logical conclusion.”

However Lee’s succession plan could well get delayed at a time when the PAP is facing a major internal crisis following an unprecedented spat of controversies. There’s a precedent — Lee already postponed plans to step aside once during the pandemic, saying he’d only do so with the country “in good shape.”

“While Wong has taken a front-facing role with Iswaran, the various incidents that have transpired have perhaps made it even more difficult for PM to let go,” said Nydia Ngiow, managing director at strategic business consultancy firm BowerGroupAsia in Singapore.

“His performance will heavily contribute to how the public views his upcoming leadership and the party as a whole. While he has promised to be open and transparent, it is still too early to say whether this will actually happen,” she said.

Political and market watchers will look to the Aug. 9 National Day celebrations and the prime minister’s National Day rally to track shifts in policy and in the timeline of the elections that must be held by November 2025. Lee has said the succession will coincide with the national vote.

“These political scandals could tarnish foreign investor sentiment,” said Charu Chanana, a market strategist at Saxo Global Markets in Singapore. “Growing public discontent could also raise risks of political instability and policy paralysis.”

Investors appear to be shrugging off the political drama for now. The benchmark Straits Times Index rose 2.9% since the graft probe was announced July 12. The S&P 500 is up 1.9% and the Singapore dollar gained 1.5% against the greenback in the same period.

Economic concerns are likely to weigh on voters as well. Singapore staved off a technical recession in the second quarter and the central bank has warned that the fight against inflation is not over. The city’s buoyant property market is also set to be a key issue with around a third of adults in Singapore seeing high rents affecting their voting choice, a recent survey showed.

This is not the first time the conduct of PAP officials has been called to account this year. In February, a lawmaker hired as director of public affairs and policy for Grab Holdings Ltd. was moved to a different role after a public backlash over a perceived conflict of interest.

A government review into luxury bungalows rented by Home Minister K. Shanmugam and Foreign Minister Vivian Balakrishnan was carried out after the opposition questioned whether the officials were paying less than market rates for the properties. While it yielded no evidence of corruption or criminal wrongdoing, the matter brought renewed attention to Singapore’s policy to pay top dollar for its ministers to prevent graft.

The situation could trigger some policy changes in the future, said Gillian Koh, senior research fellow at the National University of Singapore’s Institute of Policy Studies. “This will be a test of the PAP leaders’ political acumen,” she said.

--With assistance from Tassia Sipahutar.

Author: Philip J. Heijmans and Faris Mokhtar