Asian Tiger 4: Singapore

The last of the tigers that emerged in the era of a recovering Japan was Singapore. It is also the smallest, most southern and most multiethnic, with perhaps the most colorful modern history of the four: a British trading post since 1819; capital of the so-called Straits Settlements under the jurisdiction of British India after 1836; a thriving port trading rubber from the 1870s; the largest British naval base east of the Suez Canal before the Second World War; occupied by Japan from 1942 to 1945; and afterwards granted self-rule by Britain within the Empire. The fourth tiger declared itself a fully independent republic in August 1965 after a brief union with Malaysia. Its history is prologue to Singapore’s current story of economic growth, and is as grand as its past.

Singapore is ethnically Chinese and it was ethnic friction that led to its independence. The Chinese tigers of Taiwan and Hong Kong began their growth stories isolated from the Chinese mainland. Chinese Singapore began growth after the Malaysian parliament expelled it by unanimous vote from the Malaysian Federation. Even Great Britain abandoned Singapore as, in the case of Hong Kong, it retreated from empire to heal itself in the difficulties of the postwar years.

Singapore’s success is all the more remarkable because of its bleak prospects at independence. The British withdraw of personnel spiked unemployment in the middle 1960s; urban slums proliferated, crime rates increased, and only half of the population could read or write. There was a budding communist insurgency on the island, Indonesia’s Sukarno threatened intervention to defend Muslims in Singapore, and Singapore itself lost access to its Malayan hinterland – once a rich resource on which to draw.   It became what it is today – a collection of 63 islands one-fifth the size of the American state of Rhode Island barely so small that the name “city state” seemed of the name “country” that it called itself a city-state of 300 square miles.

As South Korea had the strong guidance of Park Chung-hee in its formative years, Singapore found extraordinary leadership in the person of Lee Kuan Yew who served as prime minister from independence to 1990. Under Lee, Singapore opened itself to the world by necessity. (comment by PM 50 years later as a matter of survival) It sought recognition by joining the United Nations and the British Commonwealth immediately, and in 1967 sought regional allies by forming the Association of Southeast Asian Nations (ASEAN). Multilingual, Singapore made English the language of educational instruction for national unity. Lee declared a policy of neutrality and non-alignment in the Cold War, following Switzerland’s model, while he nevertheless built the Singapore Armed Forces with advice from such countries as Israel. Finally, and perhaps most strikingly, Singapore looked outward to make connections economically – with spectacular success.

In the 1960s, Singapore took its first steps to becoming a so-called “knowledge economy;” from a low-cost producer of mosquito-netting and pajamas to a maker of smartphone chips and aircraft engines. Initially, it took advantage of its geographical position astride the sea lanes of Southeast Asia to continue its British legacy of the classic entrepôt trade. Duty-free, Singapore imported manufactured parts, assembled them to specifications, then re-exported finished goods at a small profit. Since profits were small, great volumes of business were important, and the tax-free hub encouraged this. But Singapore combined this with initiatives to create a first-rate infrastructure as well as financial incentives to attract foreign investment to the island, and foreign relocation of physical facilities for manufacturing. To this end, Singapore formed the Economic Development Board in this early period, which built roads, water utilities, telecommunication networks, new city lighting – even hotels.

The Jurong Industrial Town and Port and other manufacturing estates dramatically symbolized Singapore’s commitment to industry and foreign direct investment as a development strategy. Off the southwest coast of Singapore island, seven islets were merged, a large area of swamp wasteland was infilled to create a remarkable eighteen square-mile space for “ready-to-move-in” low-cost factories with tax benefits for five-year commitments. There were 158 fully-functioning factories on Jurong Island with 46 under construction in 1968 (Prague paper). The United States and others flocked to invest in Jurong, and still do. Based on the developments in the 1960s, American investors provided 42% of new foreign capital by 1972, and were joined by Australian, Japanese, Taiwanese, Malaysian, and Western European business interests to enter joint ventures with each other, with the Americans, or with Singapore nationals. Cargo traffic in the Jurong Island Port passed the million ton mark for the first time in 1970.

While experiencing success at Jurong, Singapore converted several former British military facilities to commercial and industrial uses, and started its national shipping line in 1968 called Neptune Orient. Thereafter, Singapore built facilities for the accommodation of containers, and the country became the central transshipment center of Southeast Asia. The Port of Singapore, with Sentosa Island in the south and Sembawang in the north, is the short name for the collective facilities and terminals that conduct maritime trade. Just ten years after its independence, Singapore was the world’s third busiest port behind Rotterdam and New York. Today it is number one by gross tons handled. Thousands of ships drop anchor in Singapore’s main harbor and connect the port to over 600 other ports in 123 countries, spread over six continents.

Not only a manufacturing and trading giant oriented to the sea, Singapore (“The Lion City”) is the financial center of Southeast Asia. Its stock exchange began in 1973, grew steadily, and is now the third of three linked trading centers – with New York and Zurich – enabling round-the-clock exchange transactions around the world. Since independence, it has reached out by sea, by trade, and around the world financially, Singapore again extended itself by founding an airline – Singapore Air – which started flying in 1972, which seemed to consummate the achievements of the previous decade, and indicate the confidence of an island nation arrived.

Today, Singapore actively attracts cutting edge chemical, biotech and computer firms to its trading and industrial platform constructed five decades ago with continued tax-advantaged accommodations, no minimum wages, strict labor laws, and unrestricted repatriation of profits. Unique among the Four Tigers, it is also the leading oil trading hub in Asia today – a position it began to build in the 1960s, and which by the early 1970s had garnered Singapore the title of the world’s largest oil-refining center.

Since the early 1960s, Singapore’s prosperity has come at the cost of political freedom. The People’s Action Party under Lee Kuan Yew held power until 1990, and Singapore is still not a representative democracy. In this, Singapore followed South Korea and Taiwan which chose economic growth over broad political participation. It preferred what has come to be called the “Singapore Way” which in its economic aspect was summed up by Prime Minister Lee Loong looking back on the important 1960s: “competition, not protectionism; free markets, not central planning; self-reliance, not welfare; focus on long-term benefits, prepare to take short-term pain; committed to continuous education and upgrading because present successes do not assure future ones.” Democratic or not, Singapore remains unquestionably an economic success with 2% unemployment, a welcoming corruption-free business environment, and a decades-long average growth rate of 8%, which in 2010 accelerated to a staggering 15%. Gross domestic product per capita, which stood at $512 in 1965, grew to more than $56,000 in recent years, surpassing that of Japan and Germany, and making Singapore the richest Asian Tiger of all.

After the Second World War, the opportunity seemed ripe for a miracle – not just for Taiwan but for all the Tigers. The generally prosperous world economy of the 1960s favored their growth and development, as did the America’s involvement in Indochina. Specifically, the advanced markets of the United States and recovering Europe beckoned with a combined 800 million people in 1960 while the Tigers had a total of 50 million. Here seemed enormous potential to match enormous demand. In that sea of promise, the Tigers positioned themselves astutely, and entered their golden age. The result was relatively cheap goods in the West, large foreign reserves, and oftentimes the first taste of cash for the average Korean or Chinese citizen. With the shining exception of Hong Kong, all the Tigers chose “state capitalism” – that is, economic growth to democracy, and poverty elimination over political freedom. Regardless, each achieved formidable and broad increases in living standards.

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