Singapore, a nation smaller than New York City, stands as the wealthiest country in Asia and among the richest globally. Its GDP per capita surpasses that of many developed nations, including the UK, the US, and France. Over six decades, Singapore has transformed from a colonial trading post into a thriving financial center, serving as a model for countries seeking robust, high-tech economic growth.
The Foundations of Singapore's Wealth
Singapore's prosperity stems from decades of strategic planning by the ruling party, in power since its independence. The nation's economic success began with recognizing its key limitation: a lack of natural resources.
Leveraging Location and Manufacturing
Recognizing its strategic location with access to the Strait of Malacca, the Indian Ocean, and the South China Sea, Singapore initially focused on developing a manufacturing base. This labor-intensive industry aimed to reduce high unemployment. However, this was viewed as a temporary phase towards a more advanced economy.
Building a Solid Foundation
First Prime Minister Lee Kuan Yew prioritized building a solid foundation. This included establishing a robust financial and legal system, ensuring a stable and largely transparent government, and developing an efficient public transportation system and world-class healthcare infrastructure.
Transition to a Finance-Driven Economy
In the 1980s, Singapore strategically shifted its focus toward finance, now its largest source of wealth. Taking cues from the US and UK, the government liberalized the financial services industry by implementing less stringent regulations.
Attracting Multinational Corporations
This approach attracted a significant number of multinational corporations. Currently, 4200 multinational companies have regional headquarters in Singapore.
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Low corporate tax rates (17%, and potentially lower for specific activities) are a significant draw for businesses.
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Lee Kuan Yew’s successor, Goh Chok Tong, continued to prioritize attracting large businesses.
Embracing a Knowledge-Based Economy
Singapore shifted its focus towards a knowledge-based economy that relies on creativity and fosters the growth of Singaporean entrepreneurs.
Enhancing Liveability and Attracting Wealth
In 2004, Lee Hsien Loong, Lee Kuan Yew's son, assumed the premiership and focused on enhancing Singapore's appeal as a place to live, aiming to sustain the inflow of businesses and wealth.
Land Reclamation and Entertainment
Singapore embarked on ambitious land reclamation projects, expanding its landmass significantly. This newly created space was filled with:
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Offices
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Apartment buildings
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Entertainment hubs
These projects transformed the city's skyline. The government also introduced initiatives like the F1 night race and welcomed casinos (referred to as integrated resorts).
Capitalizing on Regional Growth
Singapore strategically positioned itself to capitalize on the booming Chinese and Indian economies. This allowed it to attract the region's ultra-wealthy, who could benefit from the casinos, nightlife, and the opportunity to invest their capital.
- The total value of assets under management in Singapore surged from $420 billion at the beginning of Lee Hsien Loong’s leadership to $3.6 trillion in 2022.
Criticisms and Challenges
Despite its economic success, Singapore's leadership faces criticism regarding restrictions on civil liberties and media freedom. The government believes freedom of the press should be subordinate to the integrity of Singapore. During Lee Kuan Yew's governance, a "climate of fear" allegedly existed.
Evolving Challenges and the New Leadership
Singapore faces evolving challenges.
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Maintaining Competitiveness: Other nations are learning from Singapore's growth model.
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Climate Change: Climate change poses a threat to national security.
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Rising Cost of Living and Inequality: Increased housing prices and cost of living, combined with concerns about foreign workers, lead to public discontent.
Lawrence Wong, the new prime minister, inherits these challenges. He is seen as having a more approachable style and aims to build on Singapore's existing strengths.
Declining Popularity and Future Political Landscape
While the People's Action Party remains in power, its popularity is declining. A more intense political landscape is expected in the coming years. Furthermore, an aging population will strain the workforce and government spending. Wong's task is to sustain Singapore's achievements amidst these challenges and guide its evolution as a tech hub.
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