At a time when Singapore’s resources were extremely low and future uncertain, Lee began Singapore’s garden city campaign with the simple act of planting a single tree in 1963, an act that launched a country-wide green-city campaign. His view was Singapore must present an image to the world of an attractive, efficient and disciplined city if it was to convince international companies to locate here.
The rest, as they say, is history. There are few economic transformations as defining, rapid, enduring and successful as that of Singapore over the past 50 years. Born of immediate necessity after Singapore was expelled from Malaysia in August 1965, the policy choices and pragmatism of Lee Kuan Yew are simply inseparable from Singapore’s remarkable success.
The Ongoing Transformation of Singapore
A consistent internal restructuring of the economy is testament to Lee’s vision and tireless reluctance to rely on the status quo. Through the 1970s, Singapore upgraded its industrial capacity from textiles to higher technological goods such as electronics. The early plans for developing Singapore as a financial centre, as well as an international centre for air traffic and sea transport also fell into place over this time.
Lee also implemented a range of measures focussing on excellence in the public sector and further encouraged the best and the brightest to participate in the Singaporean economic miracle. He believed ministers should be well paid in order to maintain a clean and honest government.
In 1994, he proposed to link the salaries of ministers, judges, and top civil servants to the salaries of top professionals in the private sector, arguing this would help recruit and retain talent to serve in the public sector.
As Singapore celebrates its 50th Birthday on the 9th August this year, the influence of Lee Kuan Yew in Singapore’s first half-century is everywhere to be seen. But what of the next 50 years? What will be required, and what will define Singapore as a 100 year old come 2065?
A sense of the answer to those questions comes from the past.
The economic miracle
Singapore was a former British colony from 1819 to 1959, when it obtained internal self-rule, and briefly a member of the Malaysia Federation from 1963 to65. At the time of independence, Singapore was a tiny third-world country with one of the lowest income levels in Asia beset by severe unemployment and an acute shortage of housing.
Infrastructure was virtually non-existent and two-thirds of the population lived in slums and squatter settlements on the fringe of the city. The economy was entirely dependent on entrepot trade – imports, storage and re-export – with no value-added or production occurring within Singapore.
Today, Singapore is one of the richest economies in the world, characterised by sophisticated high-value added manufacturing and is a true global financial capital with deep and liquid financial markets.
That journey from third-world to first-world is widely recognised as one of the most rapid state guided economic shifts of modern economic history and is largely attributable to the vision and judgement of Lee who was Prime Minister from 1959 to 1990.
The breadth of policies and reforms introduced by Lee are remarkable, as would be expected to have achieved such a rapid economic transformation.
The policies and reforms ranged from simple programs like greening the city-state, dovetailed with a sophisticated industrialisation plan and a rapid period of global engagement.
Indeed, Lee’s earliest policy measures were characterised by simplicity that gave little inkling of their long-term success and effectiveness. After the devastating expulsion of Singapore was approved by the Malaysian parliament on the 9th of August 1965, Lee’s earliest measures were to seek international recognition of and global engagement for Singapore.
Singapore joined the United Nations on 21st September 1965 – just 43 days after expulsion. Just two years later, Singapore was one of the founding members of the ASEAN on the 8th August 1967.
By then, the economy was already well on track to rapid industrialisation. The UN had sent a special envoy led by the Dutch post-war industrialisation economist, Dr Albert Winsemius, to Singapore in 1960 to conduct a three-month feasibility study of the island’s potential for industrialisation.
The outcome of that visit was a ten-year development plan that aimed to turn Singapore from a port dependent on entrepot trade into a manufacturing and industrial hub. Under Lee’s stewardship at the time, those recommendations were rapidly enacted. The first statutory board to promote industrialisation and economic development was passed by a parliamentary act a matter of months after the UN envoy had completed its visit.
Given the extent of Singapore’s unemployment problem, labour-intensive industries were the key target in the first years of development. To attract foreign investment, ’pioneer status‘ was given to many industries with attendant tax holidays and tariff protection.
By the end of the 1960s, manufacturing had become the lead sector of Singapore’s economic growth and accounted for nearly 20 per cent of GDP.
By the early 1970’s, Singapore had reached full employment, less than a decade after separation. Over the period from 1965-1975 Singapore experienced an annual economic growth rate of 12.7 per cent, a decade of growth that makes even the China high-growth period pale by comparison.
By the 1980s, Singapore was considered one of the Newly Industrialised Economies of Asia alongside Hong Kong, South Korea and Taiwan, but even amongst this grouping, Singapore was moving well ahead of its peers. By 1980, Singapore’s per-capita income had risen to be the second-highest in Asia after Japan, just 15 years after being one of Asia’s poorest third-world economies.
The next 50 years
Though Singapore’s transformation over the past 50 years has been a formidable accomplishment, the challenges going forward are no less challenging. Perhaps more so today. The template for successful re-engineering of an economy while consistently and boldly moving up the value-added chain has now been established by Singapore.
Imitation is the sincerest form of flattery for the Singapore development model. But the failure of Singapore to continue moving forward will likely see its leading advantage in manufacturing and services heavily eroded by lower cost, rapidly converging economies.
In reality, there are few templates Singapore can now copy as it looks forward to its next 50 years. The rapid industrialisation of the 1970s followed a path Japan and western nations had forged earlier.
The requirement to move into those types of production at the very edge of the technological frontier and continuing to build out financial and professional services will see the need for the Singapore economy to move into uncharted territory.
The Singapore of the future will need to be designed and implemented by the Singaporeans of today. This will require visionary governance, entrepreneurial spirit, creativity and imagination married with hard science and radical new innovative paths to be forged in the highly competitive services and manufacturing sectors.
Like other advanced economies, Singapore will have to navigate the challenges of disruptive technologies, increasing competition from other metropolis as well as an ageing population. Hence, the need to be nimble and delve into new niche areas to maintain economic competitiveness.
For instance, Singapore aims to develop as a hub for advanced manufacturing via the A*Star Additive Manufacturing Program, which will ensure Singapore remains ahead of the pack as the rest of ASEAN climbs up the value chain.
The recent Skills Future initiative is also a concerted national effort to ensure the future workforce is endowed with the relevant work skills, thereby enabling future Singaporeans garner good jobs and opportunities in the years ahead
The economic transformation that occurred under the 31 years Lee was Prime Ministerwill perhaps never be repeated. It truly was exceptional, even in a region characterised by rapid industrialisation and development.
But perhaps Lee’s greatest success is creating the ecosystem, via education and skills transfer that ultimately created an environment where Singaporeans themselves could excel and succeed.
Ultimately, Singapore has succeeded because of the hard-work and tenacity of Singaporeans. They were, however, truly enabled by the great Singaporean who led them on that way. Let’s not forget it was Lee himself and his son, the current Prime Minister, who clearly articulated the need for Singapore to continue to change and evolve.
Glenn Maguire is ANZ’s Chief Economist, South Asia, ASEAN & Pacific
Photo: Getty Images