THOUGHTS ON SINGAPORE

June 28, 2015

 

In its early history—as early as 1819—Singapore was a port city under British control with the East India Company put in place to turn such a sparsely inhabited island into a “Southeast Asian trading perch”. Like other colonies, Singapore gained its independence after World War II (1939-1945), a tumultuous period in which it was invaded by Japan. In 1963, it briefly and unsuccessfully joined the Malaysian Federation until it became a sovereign state in 1965 with the People’s Action Party’s (PAP) Lee Kuan Yew as its Prime Minister. Ever since, Lee has become the undisputed leader and founding father of Singapore.

 

The late Lee Kuan Yew (1923-2015) has admirably set the benchmark of economic prosperity in East Asia. While neighboring countries and regions have flourished, most notably Japan, Hong Kong, South Korea and Taiwan, Singapore did so to the world’s surprise. No one expected the small city-state to flourish in such fashion and pace. At the time, Singapore struggled economically; it had one of the lowest GDPs per-capita. With a history of entrepôt trade due to British management of its affairs, its economy was anything but diversified, and a reliance onentrepôt trade was not sustainable as was demonstrated in the State of Singapore Development Plan (1961-1964). In addition, Singapore lacked territory, experience, human capital and natural resources. Unemployment was high. The international community was unresponsive towards Lee’s plight for aid.

 

Decades later, Singapore has posed a dilemma to avid proponents of neoliberal economics like Milton Friedman of the Chicago School, who opposed interventionist policies. That is what Singapore implemented: considerable state influence was instrumental in achieving Lee’s vision. Singapore embraced capitalism and trade responsibly. In fact, Lee was once quoted stating: “if Singapore is a nanny state, then I’m proud to have fostered one.” Under Lee, the country’s raison d’être was centered on fast economic growth, which demanded autocracy. Citizens gave up a degree of their freedom to realize Lee’s vision; the government would impose draconian punishments against corruption and other unsolicited practices. Corruption levels would become extremely low, and government ministers would be amongst the highest paid in the world. That in turn would positively impact the quality of government services. Moreover, with a strong grip on the country, foreign enterprises would be more interested in investing in Singapore.

 

Even though there was a degree of government control, Lee has championed private enterprise, particularly in the technological sector. Even Small Medium Enterprises (SMEs) were accounted for since they played an instrumental role in supporting larger corporations. Doing business in Singapore has become extremely efficient with the elimination of red tape, low taxation and a depoliticized labor movement. Employees’ real wages doubled between 1978 and 1990. Additionally, the Port of Singapore has thrived to become the busiest of its kind in the world.

 

Lee has allowed foreign capital, which at first was not an alluring option as skeptics reasoned it would negatively impact domestic businesses in wake of increased competition. Nonetheless, with Lee’s progressiveness foreign goods were allowed in—but with tax concessions and temporary import tariffs, of course. Unlike portfolio investment, the bringing in of foreign corporations has had a ripple effect on the development of human capital. Valuable knowledge and expertise have become available to Singaporeans, which in turn helped them develop their own industries to compete in the global market. This was the result of patience and being forward-looking. Today Singapore ranks amongst the highest in GDP per-capita and life expectancy. It enjoys one of the best education systems; in fact, it is one of the top-performing countries in the PISA survey. Its students are in the top five in the mathematics, science and reading portions of the latest survey. This is partly because schools in Singapore are given more autonomy and they apply the concept of “Teach Less, Learn More”.

 

To become one of the most buoyant and resilient Asian Tigers, Singapore has adopted successful short-term and long-term strategies. It embraced change when necessary and it did not succumb to the dominant line of thinking. It essentially applied what worked for its situation. Its case study shows us that government control is not necessarily harmful and that a healthy degree of it is necessary. There is no single formula for a successful economy. Instead, the single biggest enabler of economic progress is a government’s pragmatism rather than an ideological commitment to a particular school of economic policy. With the recent passing of Lee Kuan Yew, Singapore continues to grow. Lee has left an important legacy for his successors, which is to be result-oriented.

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