Singapore's Economic History and Destiny(Rhoda Mae Z. Realda)

A Case Study of Singapore’s Economy: Yesterday, Today, and Tomorrow A comprehensive research on Singapore’s Economic History and Destiny

By: Rhoda Mae Zapico – Realda

In Partial Fulfillment for Managerial Economics Class (Masters in Business Administration)

Date Submitted: April 30,2018

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INTRODUCTION: Today being considered as a densely populated area, Singapore made its way from being a small island to an economic superpower not only in Asia but in the world. It is one of the wealthiest nations in the world today with a population of almost 6 million. Singapore is a small open economy, a city state with no natural resources and one the constraint of being a small city state with no natural resources is that there is a small domestic market. However that doesn’t stop them from improving. The first impression you will have in entering Singapore is order, prosperity and modernity. Changi airport is voted as the best airport in the world and you will hope for a long lay-over if you are on a connecting flight. Most of the population live in high-rise apartment blocks, and commute to their places of work on a public transport system which puts that of most western cities to shame. It is clean and wellmaintained, you can enjoy duty-free shopping and excellent museums and theme parks and other modern entertainment facilities.

BRIEF HISTORY/BACKGROUND: However Singapore wasn’t always the developed nation in the past, to understand its economic growth, we need to go back to 1819.

Back in the 19th century, the British was developing a trading empire and had an eye on an island around Malacca Strait. Jan 1819, a small expedition arrived in the island working for the British east India Company, the leader is a Sir Thomas Stamford Raffles, a leader of the expedition. The British setup a trading post in the island; they found a settlement where wild animals roaming its jungle and marshes. It was made a free port, trade, flourish, and since independent in the late 50’s, this multicultural community of Singaporeans has

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carefully nurtured and developed its legacy of being an international focal point of business and trade. In 1819, Singapore was part of England as a colony. Singapore was a porter city in which goods are brought for import and export, it doesn’t have a vast land but it has a strategic location because it is located in the centre of South-East Asia, bordering Malaysia as well as the rest of Indochina, and it is also near the Philippines. Singapore was founded by Sir Thomas Stamford Raffles. It was through his effort to set up a trading post that Singapore became a strategic point of trade and export. 200 years later, a statue of Raffles stood on the place where they came ashore.

Eventually during the World War II, it became a Japanese colony. After independence from Malaysia on 1959, one man rose to the top, he was Lee Kwan Yew, who was perhaps the most famous man in Singapore; he seized power and became the prime minister.

Singapore was very poor on the post independence, two-thirds of the populations had been living in slums and lack of basic sanitation, Lee Kwan Yu pleaded for an international assistance but was unanswered. Seeing this, Lee Kwan Yew and the PAP (People’s Action Party) government made a lot of sacrifices; he realized that to strive on its own, Singapore needs a corruption-free environment to attract investors thus criminal punishment was established, there were death penalties for narcotics and drugs pushers. His party controlled all the labor unions. While the rest of Southeast Asia languishes in poverty, Singapore became an Oasis. Investors could trust the stable nation for its economy. It quickly rises to became one of the powerful nations in Asia, it became an Asian Tiger which is a term referring to quickly developing East Asian nations. In 1967, Singapore co-founded ASEAN (Association of Southeast Asian Nation), it rose from a third world country to a first world country in a single generation. By 1990’s Lee Kwan Yew was succeeded by Goh Chok Tong.

Tong’s government was democratically open-minded as Lee Kwan Yew’s as urban growth became less an issue. Tong lead this country to several crises like the 1997 Asian Financial 3

crisis, the 2002-2003 economic recessions, and 2003 SARS outbreak. Singapore started engaging in biotech research, aerospace engineering, logistics, and pharmaceuticals research.

The 1997 Asian Financial Crisis hit Singapore and that took a short recession, however, the impact was only for a short time.

In 2004, the oldest son of Lee Kwan Yew, Lee Hsien Loong came to power. Loong had some difficulties as Singapore was hit by the 2008 global financial crisis, though Singapore was the first Asian country to slip through the recession, it experienced recession for 12 months. Loong and People Action’s Party were not very popular, and the PAP only won 60% of the vote on 2011. However when Lee Kwan Yew died on March 2015, it puts a increasing vote on the PAP to 70%.

This island of over 640 sq.km of land area has standard of living comfortable to any developed nation. If you want to be reminded of the history and scale of Singapore’s growth, you can also visit other parts of the country like Chinatown and the Mustafa-where Indian culture is present. It is a melting pot of cultures and civilization, but these people and culture are parts of the growth of Singapore, behind its economic boom. Over 75 percent of the population is Chinese, 15 percent Malay, 7 percent Indians, but there are also 60 thousand ethnic Arabs, Japanese, as well as Europeans and other Asians.

ANALYSIS: Let’s take a look at the economic history of Singapore; this is being presented in different books and documentaries. I chose to discuss this topic because I can relate to the physical and economic feature of the country since I came to work in this progressive island for more than 4 years.

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According to Prof. Lee Tsao Yuan, Department director of the Institute of Policy Studies in a documentary entitled Singapore Economic Success; there are three factors that make Singapore as what it is now economically.

First, because it is a small country and no natural resources, government think that there is a need to export the goods, make use what the world can offer in terms of market, technology, capital and so on, even to professional workers to come and work with them.

The second aspect is that, because they are so small, they only have one resource – which is their people, they strive to improve the educational level of the people by creating good institutions for learning and development. Proving that infrastructure is one way of optimizing resources, another is education. Because human resources is very important to Singapore, a lot of emphasis are put on education. In 1960’s and early 1970’s, the emphasis was on primary education, and that was really to educate a large mass of people especially the young people. In 1970’s and early 1980’s, it switch to secondary and then technical education. Now in the late 1980’s and early 1990’s, the emphasis is on tertiary education and so on…

The third aspect is that with regards to government policy and government spending – and that is that one cannot get the fact the way of borrowing and borrowing and hence the need of prudent government spending.

According to Finn Bergstrand, a Swedish Ambassador in Singapore in one of his interviews, he said that Singapore has been strategically placed and skillfully managed by Lee Kuan Yew in the very first place, and he succeeded in taking advantage of the strategic location of the country. Singapore is always being outward looking, it is considered as most ardent spokesman of free trade in the world.

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This liberal approach is complemented by a disciplined society, it isn’t by chance also that Singapore is one of the cleanest city in the world, throwing so much as a cigarette can lead to a hefty fine. Other laws restrict smoking, gambling, chewing gum, and the right to strike. This country is also very strict to the rampant narcotics problem, using and selling of heroine that can lead to death sentence. If you come to think of the policy of Singapore, we can say that it is a State –Over- Individuals policy.

The political leadership in the past 25 years is given emphasis on those by supporting on those who are able, in other words, if you have the ability, more will be given to you, more resources will be spend on you.

Millionaires, tycoons, big foreign firms are drawn to Singapore because of low taxes and stable government, and protected banking laws that keep their account secret. There is no corruption in Singapore; the leaders successfully established a clean government which was very attracted to investors.

Another great source of the company’s economy is the Tourism – this is the primary engine of growth in Singapore’s economy. Singapore is a country of with a mixed of East and West and that is why they have a great tourism appeal.1 of every 12 people in the country worked in tourism related industries. As we all know, tourism has a variety of economic impacts. It contributes to sales, profits, jobs, taxes, revenues, and income in the area. The boom of tourism industry is linked to different aspects of the economy. Pesonally, I think the reason Singapore is very successful in their tourism is because they have good infrastructure, the transport system is excellent, the hotels and restaurants are extraordinary compared to other countries. Another factor is the tax-free law for tourist. If you come to Singapore for shopping, you just have to present your receipt at the airport going home and you will be refunded for the tax that was being charged on your purchases. It is a very friendly country to 6

tourist. Compared to other countries like the Philippines, establishments considered tourists as a source of income, there are even items that tourists have different prices compared to the locals.

CHALLENGES: With the rising cost of living, many Singaporeans are suffering. They have the most expensive public housing in the world. One of the reasons, the Singaporeans are finding it difficult to look for jobs ASEAN Professor Chan Heng Chee said that Singapore is a heterogeneous society, the existence of Chinese, Malay, and Indians. The many religions like Buddhism, Hinduism, Islam could be possible source of tensions and conflicts and minority issues could always surface. By far, the most dominant religions are Buddhism and Taoism.

Singapore was a British colony for more than a hundred years and once they become independent and the government decided to keep English as the language of business, civil service, and government- the language of the modern sector that’s why you can see that Singaporeans are modern and western in orientation. But there is a very large base that at home, people speak according to their race (Chinese, Malays, Indian, etc),and the cultural norms at the home is not very western. The language might be western, but the traditions and norms are not. If you move around Singapore you will find different people with different degrees of westernization. Each ethnic group is encouraged to encourage celebrating on their own. Some concerns are, if you are allowing them to go on their own culturally, there might be a time that there will be no unity/disunity.

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Home Affairs and Law Minister K. Shanmugam answered students on the range of issues from students from Nanyang University on March 28,2016. He cited that four of the key challenges that Singapore might be facing in the next 50 years are: balancing of budget, an ageing population, competition, and terrorism. 

Balancing budget and economy – he said that the “sobering reality” is that Singapore in the recent years spent more than what they collected. This is possible at the moment because the past generations had saved enough from investments but this should not continue what they have at present. He added to always think whose going to pay for it every time a proposal is being put forward so that people will not end up paying more taxes to pay off its debt. One of the challenges is

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raising productivity in an already advanced economy.

Rapidly ageing population which cannot be replaced – I found this very personal because when I was working in Singapore, I encountered my Singaporeans friends who doesn’t want to have children to cope up with the pressures of life. The government in fact is giving incentives to their citizens to have children.

According to the article I read that Singapore is one of the fastest greying populations in the world. Aside from expensive health care cost, the ageing population will leave few young people available for defense force to pay taxes and support economic vibrancy for a country tax-based country. There might be a

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time that adult diapers will outsell baby nappies’ demand.

Competition abroad – Singapore faces regional and global competition. There are many countries in South East Asia also rising to become an economic hub such as Hongkong, Malaysia. Thailand is trying to overtake Singapore as the largest air

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hub.

Terrorism – This is one of the biggest problems every nation is concern of. A single act of terrorism can destroy the economy of a country that took decades to

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make. Mr Shanmugam addressed that there was a limit on how much Singapore can do in working with its neighbors in tackling the problem of radicalised fighters returning from the Middle East. He also stated that protecting the country from terrorism is a responsibility of all Singaporeans. Mr Shanmugam called on Singaporeans to resist Islamophobia even as the Government continues to be tough on extremism.

RECOMMENDATIONS/ SOLUTIONS: To address the issues Singapore is facing in the next 50 years, I would like to quote ideas from the article entitled “Can Singapore Overcome Its Challenges in the next 50 years?”. In the article, it discuss about the speech of Prime Minister Lee Hsien Loong on June 30, 2015.

He said that to address issue on raising productivity on an already advanced economy, Singapore should never stop growing; they don’t want to be stagnant in growth compared to other countries. They are now at par with Japan, the world’s third largest economy.

Maintaining growth, Lee said, can be achieved either through increased productivity or a larger workforce. The past decades, there has been a rising concern about the influx of foreign workers to achieve high productivity. He said that in the coming years, it will be reasonable to strive for 4% growth, with half of that coming from productivity growth and the other half from workforce growth. To help achieve this, Lee said the government had launched SkillsFuture as a national movement to support Singaporeans in developing skills throughout their lives to become more resilient and adaptable.

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About the dwindling and aging population, Lee is worried that this will intensify in the next decades. On 2014, the population growth was only 1.3%, the slowest in a decade . As I mentioned earlier, in a conversation with my Singaporean colleagues, they are scared to have children because of the responsibility and the pressure to cope up with the fast-paced environment they have. Lee argued these worries would only intensify in the next few decades. He encouraged Singaporeans to get married and have babies. He suggested that the country strive to get its total fertility rate up from 1.2 to 1.5, which are over 200,000 more babies born over 25 years. The government would do its part to facilitate this, including by helping young couples with housing, child-care and flexible work arrangements. But he also admitted that policies alone would not solve the problem because it also required a cultural change to become “a more family-friendly country.(sic) Another minor issue they are facing is the loss of Singapore’s identity. As we know, Singapore is a melting point and different minorities are allowed to practice their own culture.

Concerns are rising that they don’t have a single identity. Apparently, the sense of identity is something the government cannot create. The Prime minister is saying that as much as possible, they would like to forge the spirit of camaraderie among their people that despite of the difference in culture, they would be a people who would celebrate success together and help each other in front of adversity. One example was during the death of Lee Kwan Yew and during the SEA games that they were united. With these experiences that they have in common, may they realized that multiracialism, justice, and equality, and full of equal opportunities for all is what Singapore is all about.

CONCLUSION: 10

Based on the facts gathered, I would say that Singapore has reached a long way to economic sufficiency. These three fundamental factors contributed a lot. First, its strategic location which is in the mouth of Malacca strait, it was an important post since the 14 th century. Second, it welcomed foreign trade and investment. Third, government is kept small, efficient, and honest.

A hard work of iron leadership of Lee Kwan Yew and his successors made Singapore an ultra industrialized city-state. It is a wealthy and affluent nation now but it came without a sacrifice. It has been criticized as money as autocracy as individual freedoms are severely limited they say. Or more so, during Singapore’s economic growth, punishments are draconic and very severe but personally, coming from the Philippines where law is not properly executed, I believe it is one of the factor why we are still a third world country compared to Singapore.

In my own point of view, Singaporeans are proud of their country. Talking to some of my friends and officemates who are Singaporeans, they are happy of their economic growth.

They are amazed of their prosperity, they travelled many countries in the region and they compared those countries that they travelled to their own country and use it for their own advantage. They have reached the stage when they have genuine admiration and gratitude to the government for giving them what they have now. According to some of the older people I talked to that, no question that Singaporeans have the material prosperity but the less tangible things are missing, example if the youth will grow up to be materialistic and no sense of the culture and tradition.

REFERENCES:

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1. Gavin Peebles and Peter Wilson, Economic Growth and Development in Singapore: Past and Future. Cheltenham, UK: Edward Elgar, 2002. xiii + 328 pp. $110 (hardcover), ISBN: 184064-741-8 2. Editor and Producer: Christian Falk, Kricke Falk, Executive producer: Thomas Wredler, Octopus Group. 2016 Feb 29.Singapore Success Story.retrieved from https://www.youtube.com/watch?v=Kstf6FXBpAY&t=1029s

3. AlJazeerahEnglish.2009 May 2. Singapore’s Economy – 101 East. Retrieved from https://www.youtube.com/watch?v=ie9SzMSkq5k

4. Lim, Liang Yan. The Strait Times. 2016 29 Mar. Four key challenges for Singapore in next 50 years. Story retrieved from https://www.straitstimes.com/singapore/four-key-challengesfor-singapore-in-next-50-years

5. Kayla Mehl. 2016 Oct 02. The Role of Leadership in Singapore’s economic success. https://borgenproject.org/singapores-economic-success/

6. Prashanth Parameswaran. The Diplomat. 2015 Jul 02. Can Singapore Overcome Its Future Challenges? https://thediplomat.com/2015/07/can-singapore-overcome-its-future-challenges/

7. https://www.economist.com/blogs/economist-explains/2015/03/economist-explains-23

8. https://blog.oup.com/2017/04/singapore-globalization-economic-rise/

9.http://www.mas.gov.sg/News-and-Publications/Speeches-and-Monetary-PolicyStatements/Speeches/2015/An-Economic-History-of-Singapore.aspx

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