SINGAPORE is a tiny island-city state in south-east Asia with a total area of 718km2 (543 times smaller than Zimbabwe) and part of the four Asian Tigers (others are Hong Kong, Taiwan and South Korea).
The country is a high-income economy with a gross national income of US$64 582 per capita, as of 2018. Despite its small size and lack of natural resources, Singapore’s 5,7 million people enjoy the highest average incomes in the world, better than the United States, Japan, Germany, France and the United Kingdom.
The country ranks among the world’s strongest economies with a gross domestic product of US$362 billion and collects various medals on the economic front from ease of doing business, least corruption, best property rights, innovation to bet investment destination. In 1960, Singapore was an undeveloped country with a Gross Domestic Product (GDP) of less than US$705 million (poorer than Zimbabwe at US$1,053 billion).
In 1819, Stamford Raffles founded colonial Singapore as a trading post for a British company, just as Cecil John Rhodes did in the 1890s. For over 100 years, Singapore was under British control, but was annexed by the Japanese during World War II. Singapore separated from the British crown in 1963 and merged with Malaysia to form the Federation of Malaysia. The merger saw Singapore becoming a sovereign state in 1965.
After independence, Singapore continued to experience socio-economic problems. The majority of three million people were unemployed and poor. More than 70% of its population was living in slums and squatter settlements and the territory was sandwiched between two unfriendly states in Malaysia and Indonesia. Singapore lacked natural resources, electricity, sanitation, proper infrastructure and economic systems.
In order to stimulate socio-economic development, Lee Kuan Yew (Singapore’s founding father) sought international financial assistance, but his pleas went unanswered, leaving Singapore to fend for itself through local resources. Lee went on a drive to improve and expand the country’s transport, communications, industrial, education and housing infrastructure with a vision to position Singapore as a global business hub. The government embraced the vision and focussed on the following broad policies:
Singapore’s foremost advantage is its location on the key trade route between Asia and Europe. The most feasible solution to the country’s economic and unemployment woes was to embark on a comprehensive programme of industrialisation, with a focus on establishing labour-intensive industries to create employment and take advantage of globalisation through trade.
In order to entice foreign investors to set up manufacturing plants in the country, Singapore had to create a stable economic environment that respected property rights, that was corruption-free and low in taxation. The targets for such policies were multinational corporations from the United States, European Union (EU) and Japan because they had the capital, technology, innovation expertise and established markets.
Today the manufacturing sector provides 22% to Singapore’s GDP and the country is the leading exporter of computer chips, computer hardware, engineering spares, electronics and various merchandise. The government continues to invest in state highways, ports and technology to open access to markets for manufacturing exporters across the country.
Singapore is now the world’s busiest trans-shipment port, surpassing Hong Kong and Rotterdam in the Netherlands. In terms of total cargo tonnage handled, it has become the world’s second-busiest, behind only the port of Shanghai. Singapore’s tourism industry is also thriving, attracting over 10 million visitors annually.
Free market capitalism
A free market is one where the laws of supply and demand provide the sole basis for the economic system, with minimal government intervention. Key features of free markets are the absence of forced transactions or conditions such as price controls, property seizures, government threats and dictatorial economic policies.
In order to promote private sector investment, Singapore established the Economic Development Board (EDB) with a constitutional mandate to plan and execute strategies to enhance Singapore’s position as a global business centre and grow the economy without political interference.
The board is responsible for engaging investors, designing and delivering solutions that create value for potential investors and companies in Singapore. EDB has 18 international offices in 12 countries that are predominantly Singapore’s trade partners and investment sources. Under Lee, the country adopted a two-pronged strategy with regards to its financial sector.
Apart from making Singapore an international financial hub, it wanted the financial sector to play a key supporting role to the growing industries located in Singapore such as manufacturing and shipping. Foreign direct investment (FDI) to Singapore continues to grow despite a slowdown in the global economy, eclipsing US$78 billion in 2018.
Perhaps the key standout policy by Lee Kuan Yew was to create a governance system based on delivering public services efficiently through a competent and lean workforce, meritocracy, inclusive governance and pragmatism in policy diffusion.
The state used its revenues from taxation, investments and trade to modernise its education system. Singapore spends 10% of its revenues on civil service consumption, 25% on investment in infrastructure development and 30% on social services among others.
Singapore has a strong governance ecosystem, one that integrates private infrastructure players along the whole value chain from multilateral banks, private financiers, lawyers, accountants, engineers and other professional services despite their background or affiliation, nationality and age. In the 2017 World Bank Human Capital Index, Singapore ranks the best country in the world in human capital development. A child born in Singapore today has an 88% chance of being productive when he/she grows up because of access to quality education, health, sanitation and employment opportunities.
A key factor in the development of any country is the level of corruption. This is an important factor used to explain the so-called Resource Curse widely prevalent in Africa where developing countries do not develop economically because natural resource wealth and public funds are diverted into the pockets of politicians, the elite and the connected few at the expense of the impoverished and tax-burdened public.
Today, Singapore enjoys a well-earned reputation for a high level of incorruptibility. The success of Singapore in fighting corruption is the result of an effective corruption control framework with its four key pillars of effective laws, independent judiciary, effective enforcement and a responsive public service, underpinned by strong political will and leadership. Singapore is the third-least corrupt nation out of 175 countries, according to the 2018 Corruption Perceptions Index reported by Transparency International.
Singapore’s transformation from a poor Third World country dependent on fishing to a First World prosperous business hub in the 1970s is an incredible rags-to-riches story. For a country that lacks territory and natural resources, Singapore’s economic ascension is nothing short of remarkable.
The country has achieved this remarkable growth through embracing globalisation, respecting property rights, free market capitalism, investment in technology and education and pragmatic government policies.
To keep locals happy in a flurry of foreign investment and relaxed immigration policies, the government provided housing and employment opportunities that would bring the nation political stability.
Zimbabwe is naturally richer than Singapore and is facing similar constraints faced by the Asian state in early 1960s from high unemployment (over 93%), poor sanitation, poverty, and poor infrastructure such as electricity, housing, roads and border posts. Singapore’s development boils down to visionary economic management decisions taken back then to turn around the country’s fortunes.
The government of Singapore could have given any excuse possible like other developed countries; From their limited geographical size or population, recurrent natural disasters, colonisation, lack of access to credit lines, unfriendly neighbours, lack of natural resources, global financial disasters and poor infrastructure, but the leadership rose to the challenge of solving national problems, implementing economic reforms and lifting citizens out of poverty in one of modern-day economic miracles.
Victor Bhoroma is business and economic analyst. He is a marketer by profession and holds an MBA from the University of Zimbabwe. — firstname.lastname@example.org or Twitter: @VictorBhoroma1.