The Singapore Story
On Singapore's Economic Miracle: "Singapore was thrown out of the Malaysian Federation in 1965. Within a very short period of time, largely because of the use of English common law and other regulatory advantages over the surrounding area, Singapore became a powerful economic engine. In fact, right now Singapore is one of the top six cities in the world....These cities are governed by regulatory systems that deliver open trade, property rights protection, the rule of law and merit-based competition that creates an environment where insurgent companies can actually be successful. There is nothing in the way of an entrepreneur’s vision and dreams. "
The case of Singapore’s Economic Miracle highlights the impact of building a nation on the basis of the Three Pillars.
Singapore today has one of the highest per capita incomes in the world, currently outdoing the US, and well beyond the UK. And the rate at which they developed their powerhouse economy is outstanding.
Starting with their 1965 separation from the Malaysian Federation, Singapore faced on their own, the daunting task of replacing their role as the transshipment point and major naval base for the British Empire in Southeast Asia. They chose to establish themselves as an independent economic force, and in an entirely new national direction.
Singapore’s Stages of Economic Development
Between the 1960’s and the 2000’s, Singapore went through the following phases: Labor intensive, skill intensive, capital intensive, technology intensive, and, finally, innovation intensive. (See the IMF study Breaking the Oil Spell: The Gulf Falcons’ Path to Diversification, Chapter 3, entitled “Going Beyond Comparative Advantage: How Singapore Did It” by Phillip Yeo.)
Income per capita went from $428 per year to $54,000 per year (US dollars). In 2022, Singapore’s per capita income was $83,000.
By the 1970’s, manufacturing had become a significant percentage of Singapore’s GDP, which was an initial crucial step away from their previous existence as a British outpost.
The Singapore government’s role in this development was, of course, significant in these early stages.
The land was developed to establish areas suitable for industry and manufacturing, and this included the improvement of internal waterways.
Housing and health care were provided for the population. Singapore’s government also played a major role in the education system, which was crucial for the nation to move forward towards greater skill sets and innovation.
Looking to the outside world, Singapore’s leaders realized they needed to attract foreign investment, which they accomplished with great success.
Electronics and computer parts, including software and chips, were amongst some of the types of companies which established facilities in Singapore. In 1969, Texas Instruments opened a plant in Singapore, beginning a flood of foreign investment.
Singapore, with the collaboration of foreign nations and multi-national corporations, established training centers in order to upgrade the skill level of its citizens. But, as is typical in Singapore’s free market thinking, the nation also adopted a liberal policy towards immigration of highly skilled foreign nationals in order to fill the gap of needed expertise.
Contrary to various prejudices against “cheap foreign labor”, in the 1980’s Singapore embarked upon its “Second Industrial Revolution” – the push towards capital-intensive industries.
By the 90’s, Singapore set its sights on becoming a “first world” nation in every respect. This included a shift towards knowledge and innovation. This was fully accomplished in the 2000’s.
Today, Singapore is a fully diversified and forward-driven nation. (See chart summarizing GNP by sector.) Watch the video below for a quick summary of Singapore’s resiliency, including how they survived the economic blow of the Covid-19 pandemic.
Today, Singapore is a fully diversified and forward-driven nation. (See chart summarizing GNP by sector.) Watch the video below for a quick summary of Singapore’s resiliency, including how they survived the economic blow of the Covid-19 pandemic.
Throughout this period, Singapore did not impose restrictions on foreign companies’ investments into their nation, imposed virtually no tariffs, and very little regulation preventing foreign entities from setting up shop in their city-state. Their pro-competitive and common law based regulatory environment also enabled foreign investors to be successful.
In the first stage, Singapore focused upon more labor-intensive industry. This included various consumer items for export, such as textiles, toys, wood products, and many more. (All data from Singapore Department of Statistics unless otherwise indicated).
In Summary
Singapore in 2023 again achieved first place in the Heritage Foundation’s “Index of Economic Freedom”.
Some of Singapore’s unique features include:
- Virtually no foreign debt
- Government civil service based upon meritocracy
- Virtually no tariffs
- Few regulations impeding new business creation, including by foreign companies
- Near the top of the Global Competitive Index (World Economic Forum)
- Business friendly low tax rates
- Average growth rate of 9.2% in first 25 years, 7.7% until today
- Highest rank (2020) in the World Bank’s World Capital Index, indicating level of investment in the development of its people. (The chart below shows numbers of Research Scientists and Engineers.)
There is no doubt that Lee Kwon Yue accomplished Singapore’s Economic Miracle with a heavy hand against internal political opposition, corruption, and sometimes, personal political liberty. But as Dr. Henry Kissinger states in his preface to Lee Kuan Yew’s From Third World to First, “… The long-established nations of the West have fallen prey to the temptation of ignoring history and judging each state by the criteria of their own civilizations.”
We of the Competere Foundation, point to Singapore, and other cases, such as Dubai, to prove how adherence to the principles of The Three Pillars provides a model for success.
(Watch the video below for a wonderful overview of Singapore’s historic transformation.)
Singapore and the three pillars
Competition within the Border
- The government of Singapore has been increasing its commitment to an innovation-based economy, which is focused on growing its domestic start- ups based largely upon new technology.
- Singapore provides an excellent environment for establishing such domestic enterprise by its investment in the quality of education and workforce development. Venture funds have been aided by the government, providing support for new ventures and scaling them upwards.
- Singapore’s extraordinary infrastructure includes cutting edge development around green technology, smart-city technology, and water management. By setting benchmark goals in these areas, local innovation based upon competition is fostered.
Open Trade
- Ranks number one in the Heritage Foundation’s 2023 “Index of Economic Freedom.” That report states: “The trade regime is open and competitive, and no tariffs are imposed on imports. The law treats foreign and domestic businesses equally, and nearly all sectors of the economy are open to 100 percent foreign ownership. The financial sector is highly competitive and resilient.”
- More than 25 Free Trade Agreements.
- Hosts ” a diverse group of shipping companies providing a wide spectrum of maritime services such as ship management, ship agency, broking, finance, insurance, legal and arbitration, survey, and research and development” says Lim. (Quote from Kenneth Lim, Maritime and Port Authority of Singapore).
Property Rights Protection
- Singapore ranks first in Asia and second globally on the International Property Rights Index for 2023. This ranking includes very high scores in the following areas:
- Intellectual property rights protection
- Physical property rights protection
- Financing access
- Registration process
- Singapore’s legal system, originating in British Common Law, provides a reliable business-friendly environment. Singapore has received high scores for the independence of its judiciary and rule-of law.
- Famous for anti-corruption laws and a high-level of government integrity.
- Streamlined business regulations with low tax rates.
- Singapore is the leading financial centre in the Asia-Pacific. It ranks third in the Global Financial Centre Index 2022, trailing only New York and London.
- Singapore has risen in ranks to be the second preferred destination for cross-border investment in 2023, behind Tokyo.
- The largest transshipment port in the world, accounting for 20% of the world’s transshipments. Singapore lies along the Straits of Malacca, close to the lowest-distance route between many European and Asian countries.
- The second busiest port in the world, connected to 600 ports and with 130,000 vessels docking every year.
- Singapore ranks 6th out of 154 countries in the Global Knowledge Index 2021. (Knowledge- based economy)
- Singapore is one of the most wired countries and technologically advanced Information and Communications Technology (ICT) markets in the world. Also, one of the leading smart cities in the world.
- Singapore ranks 7th in the World Index of Health Care Innovation. Ranked #1 in Asia for their health care system, and the #2 global destination for medical tourism.
- A leader in formulating a long-term plan for managing climate change and is steadfastly implementing that plan.
- Leader in cutting-edge technology for providing clean water.
- Singapore’s traditional key industries: Electronics, chemicals, financial services, oil drilling equipment, petroleum refining, biomedical products, scientific instruments, telecommunication equipment, processed food and beverages, ship repair, offshore platform construction
Note: The top photo is a picture of Singapore’s mascot, the Merlion. (Wikimedia)