Our Singapore managing director has seen a lot happen in the tiny city-state; here he shares his thoughts on the direction of the country in a world without its founding father, Lee Kuan Yew.
Half a century ago, Singapore was still a colony of the British Crown. It had a busy port and a naval base for the Royal Navy, but otherwise it was an island without any natural resources, not very different from similar or larger cities in the region. The population was rather poor, nearly as poor as in neighbouring, recently-independent countries.
Today, 50 busy years onwards, the central business district of Singapore is crowded with skyscrapers that rival neighbouring Hong Kong and Shanghai. Singapore is a highly developed, trade-oriented market economy that has been ranked as the most open in the world, among the least corrupt, most pro-business, with low tax rates, and the third highest per-capita GDP in the world in terms of Purchasing Power Parity (PPP).
Much of the city-state's success can be attributed to the vision of its first prime minister Lee Kuan Yew, who passed away last month aged 91. Mr Lee was in office from 1959 to 1990, a tenure that made him the world's longest-serving prime minister.
After Singapore broke away from neighbouring Malaysia and gained independence in 1965, Mr Lee developed a highly technocratic government which applied competitive, meritocratic and results-based economic policies. Key decisions included the development of Changi Airport as a regional transport hub and the promotion of Singapore as a shipping hub, as well as the foundations of stability, transparency and good governance, all of which contributed to Singapore's position as a natural regional headquarters for multinational businesses in Asia. Other key positive economic policies included the Central Provident Fund, Housing Development Board flat ownership, and integrated education, which all helped Singapore transform over several decades into the sophisticated cosmopolitan global city that we have today.
In the days that followed the announcement of Mr. Lee’s passing away, there wasmuch praise for the outstanding achievements of his rule, together with some criticisms for his style of government. But of most immediate relevance are the doubts expressed by some about the endurance of Mr. Lee’s legacy. How will Singapore fare in its second half-century without its creator and mentor to guide its steps?
Nobody can deny that the city-state faces challenges: considerable income inequality, rising population density, massive and controversial immigration. In truth, the country is much better prepared for the future now than it happened to be when independence was forced upon it 50 years ago.
Though his critics point to his authoritarian style and ruthless pursuit of what he considered right for his country, it must be remembered that Mr. Lee stepped down as Prime Minister in 1990, and gradually withdrew from politics thereafter, having carefully planned his succession. Since then, Singapore’s political environment has opened significantly; the country’s politics are no longer comparable to the intense nation-building era of the 60s and 70s. In the most recent national elections, the opposition won nearly 40% of the popular vote, its best result in four decades.
The rise in internet access has fostered a much more vibrant political debate, and vastly reduced the influence of state-controlled media outlets.
On the economic and social score, Singapore remains one of the most competitive economies in the world. In order to maintain rising wages and improving living standards, it will continue to transform its economy towards higher-value-added activities with strong productivity growth. Key growth drivers for Singapore over the next decade will focus on its role as one of the world's leading financial centres; its competitiveness as a logistics, shipping and aviation hub; and its role as a regional HQ for global multinationals.
The government will have to strike a fine balance between remaining fiscally prudent in order to retain high sovereign ratings, and expanding welfare schemes to meet the expectations of entitlement of the new generations of Singaporeans who only know Singapore as a double-digit growth economic powerhouse.
The rule of law that Mr. Lee helped create in Singapore will continue to give it a built-in advantage in attracting foreign direct investment, even in an era in which many other countries in Asia have emerged as potential investment destinations. While certainly very attractive on their own, most countries in Asia remain places where regulation is excessive, bureaucracy stifling, corruption rampant and local talent scarce. Some neighbouring countries even look like they are heading backwards in terms of the rule of law, a major reason why many investors are reassessing their decisions and rebalancing their risk portfolio across the continent.
Meanwhile, Singapore is becoming more innovative as the country moves up the value-added chain, the social and political environment relaxes, and some of Singapore’s best talent stays home. Bloomberg’s annual index of the world’s most innovative countries ranks Singapore in the top five in the world in terms of manufacturing innovation and research personnel, and as the eighth most innovative country in the world overall. Globally, Singapore comes ahead of other rich economies including the United Kingdom, France, and Canada, and only two spots behind the United States.
The keenest observers agree that the long-term outlook for Singapore remains very bright indeed, which is the finest tribute to the long-lasting legacy of its founding father.
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