Singapore's prosperity: From colonial port to global financial hub

Singapore is Asia's wealthiest country; we explore its success and future challenges as leadership changes.

Singapore, a tiny island nation, has achieved remarkable economic success, transforming from a colonial trading port into one of the world’s wealthiest countries. With a GDP per capita surpassing that of the UK, the US, France, and other developed nations, Singapore is a model for developing robust, high-tech economies. This success results from decades of strategic planning by the People's Action Party (PAP), which has been in power since Singapore gained independence in 1965. As the nation undergoes a leadership change for the first time in 20 years, questions arise about whether it can maintain its prosperity.

Singapore’s journey to economic power began in 1965 under the leadership of its first prime minister, Lee Kuan Yew. Recognizing the country's lack of natural resources, Lee and other founding leaders focused on building an export-led economy and attracting foreign capital. Singapore's strategic location, with access to the Strait of Malacca, the Indian Ocean, and the South China Sea, positioned it as a pivotal shipping hub. The initial focus was on developing a manufacturing base to address high unemployment, but Lee always intended this to be a stepping stone toward a more advanced economy.

Lee Kuan Yew laid the foundations for Singapore's future success by establishing a solid financial and legal system, a stable and largely corruption-free government, efficient public transportation, and world-class healthcare infrastructure. In the 1980s, he shifted the focus to finance, liberalizing the financial services industry with lighter regulation, following the lead of the US and UK. This strategy has paid off, with 4,200 multinational companies now having regional headquarters in Singapore. Low corporate taxes, ranging from 13.5% to 17%, have been a significant draw for these businesses.

Lee's successor, Goh Chok Tong, continued to attract big businesses by emphasizing a knowledge-based economy, fostering creativity and entrepreneurship. In 2004, Lee Hsien Loong, Lee Kuan Yew's eldest son, became prime minister. He recognized the need to make Singapore an even more attractive place to live, not just to do business. This led to ambitious land reclamation projects and the development of entertainment hubs, including introducing the F1 night race and integrated resorts or casinos. These initiatives coincided with the economic boom in China and India, attracting the region's ultra-wealthy to Singapore.

The results of these efforts are evident in the total value of assets under management in Singapore, which jumped from $420 billion at the start of Lee Hsien Loong’s tenure to $3.6 trillion in 2022. However, while Singapore has been an economic success, its leadership has faced criticism for restrictions on civil liberties and media freedom. Under Lee Kuan Yew, there was a climate of fear, with people afraid to criticize the government. Subsequent governments have maintained a tight grip, with protests still largely illegal.

As Singapore's new prime minister, Lawrence Wong inherits a nation facing several challenges. Wong, who earned praise for his leadership during the COVID-19 response, is seen as having a common man's touch. He emphasized the need to build on Singapore's strengths and address the nation's issues. The PAP remains in power, but its popularity is declining, and political competition is expected to intensify.

Singapore's rapid economic growth has brought its own set of problems. Housing prices have increased, and the cost of living has gone up. The country’s growth model, which relies heavily on attracting foreign labor, has raised citizen concerns about job competition. Although inequality has been reduced statistically, many residents still feel the effects of economic disparity. Additionally, Singapore's rapidly aging population will pressure workforce growth and government spending.

Wong’s task is to manage these challenges while ensuring Singapore thrives as a high-tech economy. Balancing economic growth with social equity, addressing the needs of an aging population, and maintaining competitiveness in a global market are critical issues. As Singapore navigates this transition, its strategies will determine whether it can sustain its hard-earned success and continue to serve as a model for other nations.