In 1964, there was a palpable air of misery that surrounded Singapore. Just a year back, the city-state sought a merger with other former British colonies in Southeast Asia to form the Federation of Malaysia, which had, as one of its goals, the creation of a common market. One year later, not only were the economic promises of a common market between Malaysia and Singapore not coming to fruition, the ideological differences between them were also proving to be too great of a chasm to bridge.
This economic and political divide resulted in bitter exchanges between the leaders of the two countries, particularly on issues concerning taxation in Singapore, its loans to the states of Sabah and Sarawak, and its revenue contributions to the federal government. Moreover, the already-existing communal tensions in the city-state were further played up by political leaders and pro-Malay right wing activists, which eventually led to the violent race riots of July and September of 1964. Finally, on 9 August 1965, after weeks of negotiations between the leaders of the two states, Singaporean Prime Minister Lee Kwan Yew and Malaysian Prime Minister Tunku Abdul Rahman simultaneously announced the secession of Singapore from the Malaysian Federation.
During the press conference, Prime Minister Lee encouraged his fellow Singaporeans to remain firm and calm, all while being overcome with emotions himself. Indeed, the end of Singapore’s union with Malaysia was an occasion of deep perturbation among many Singaporeans, who felt that the economic prospects of the country were suddenly cast into dire straits.
56 years on, however, Singapore stands not only as the wealthiest country in Southeast Asia, but also one of the most economically successful nations in the entire world. In this short review, we’ll take a look at some of the things this country has done right since that fateful day in 1965. These are experiences from which today’s many developing countries can draw lessons and inspiration.
Creating a Society Undivided by Culture, Ethnicities, and Religions
On the same day Singapore seceded from Malaysia, Prime Minister Lee made a promise that would echo through the country’s history. He said, “We are going to have a multiracial nation in Singapore. We will set the example. This is not a Malay nation. This is not a Chinese nation. This is not an Indian nation. Everybody will have his place.” Today, Singapore continues to be a place where people from different religious, ethnic, and cultural backgrounds coexist in harmony. This coexistence is the foundation not only of the country’s unique and vibrant culture, but also of the peace that its citizens enjoy.
Establishing a Social System of Meritocracy
Despite recent criticisms that argue that it perpetuates elitism and inequality, meritocracy remains as one of the most sacred tenets of Singaporean national identity. Meritocracy is based on the idea that a person’s success and status in life should be based on merit—that is, on the person’s individual skills, talent, and effort. It permeates all areas of life in Singapore, from education and corporate life to public governance. While meritocracy does have its limitations, very few people will contest that it is a much better system than the nepotistic favouritism, cronyism, and ethnoracial discrimination and that is so rampant in many other societies.
Designing a Free-Market Economy
Economic freedom is one of the quintessential advantages that Singaporeans and Singapore residents enjoy, and this is largely due to the export-oriented free-market economy that the country has established over the decades. Singapore is a free-market success story where people enjoy very free trade, very low taxes and tariffs, and a very liberal approach to immigration that has attracted the highest-quality talents from all over the world. Indeed, Singapore is not only the most open economy in the world today, it is also the most pro-business country, consistently ranking at the top of ease of doing business indices.
Nurturing Local Industries and Adopting an Open-Minded Approach to Industrialisation
Being a small city-state with a land area of just over 700 square kilometers, Singapore does not have significant natural resources. However, this did not stop it from becoming a major economic center in Asia, creating thriving industries that today include shipbuilding, electronics manufacturing, biomedical sciences, chemical production, petroleum refining, banking and financial services, and many others. It’s not so surprising, considering that early on, the Singaporean government poured substantial amounts of state funds into its local industries as a way to address poverty and unemployment. Moreover, at a time when many countries were adopting a hands-off approach toward multinational corporations, Singaporeans defied convention by instead attracting MNCs and other foreign investors into their country, affording them incentives that they couldn’t find elsewhere in Southeast Asia.
Investing in Education
Right from the get go, the Singapore government has also realised that the country’s true natural resource is its citizens, which is why it invested heavily in education to make up for the city-state’s lack of natural resources. Singapore was a poor country in the 1960s, but by improving the skills and talent of the location population, it was able to attract the crème de la crème of Singaporeans, who were then asked to join the ranks of the government. More than that, investing in education created exponential positive gains for the Singaporean economy, not only because better education led to higher marginal productivity per capita, but also because it opened up numerous positive economic externalities for Singapore society as a whole.
Adopting a Pragmatic Approach to Social Services
In its nascent years as an independent country, Singapore learned from the mistakes made by other nations in the area of social service. The Singaporean government rejected the adoption of very lavish social welfare systems adopted by many western countries, knowing full well that indiscriminate welfare state expenditures can lead to financial ruin. Instead, Singapore chose to establish the country’s social policy around healthcare, housing, and pensions based on defined contributions rather than benefits. The city-state’s housing policy, in particular, has resulted in one of the highest rates of homeownership in Asia, with more than 80 per cent of the population being served by the programmes administered by the Housing Development Board (HDB) today. Some of the best home loans Singapore citizens can take out come from HDB itself, which offers loan-to-value limits of up to 90 per cent for new flats.
Corruption was rampant in Singapore during the British colonial period and the post-war era, which is why when the ruling People’s Action Party (PAP) first took reins of the government, it made eliminating corruption one of its priorities. Today, Singapore consistently ranks as one of the least corrupt countries in the world, frequently appearing in the top 10 cleanest governments in Transparency International’s Corruption Perceptions Index.
More than five decades after Singapore left the Malaysian Federation, it stands as one of the wealthiest nations in the world. Naturally, this didn’t occur just by happenstance. By creating an environment that is conducive to peace, free trade, stability, and rule of law, Singaporeans were able to turn a resource-deprived island into one of the most prosperous places on earth.