Rebuilding Singapore

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Singapore’s Disadvantages Singapore’s Advantage
Small population Location at the heart of the trade route that connected Asia and Europe
Small land area  
No natural resources like coal or oil  

Despite these disadvantages, in just 35 years, Singapore went from being a slum to one of the richest countries in the world.

The Fall of Singapore

In the 1930’s, Singapore had been a British colony for 100 years and was prosperous. However, during the 2nd world war, Japan captured Singapore and in 3 years, it committed mass killings, destroyed all infrastructure including the harbors, electricity, water and telephone lines and left the island in complete ruin, leading to a massive shortage in food.

Britain won back Singapore in 1945, but Singaporeans had lost faith in the British. At the same time, the British started decolonizing Asia as business was no longer viable in Asia.

Instead of leaving Singapore straight away, Britain held the first general election in 1959.

Enter Lee Kuan Yew (LKY)

The then 31 year old Lee Kuan Yew created the People’s Action Party and contested and won the election.

LKY saw a new ray of hope in the form of Malaysia, which had much more resources than Singapore.

Malaysia accepted Singapore’s request for help and admitted it into Malaysia’s federation.

This was done with the hope that | Singapore will | Malaysia will | |:———————————————|:————————————————-| | Be able to create more jobs | Have access to the Singapore port | | Have access to the free market in Malaysia | Be able to collect taxes from Singapore |

1965 - When it rains, it pours

As things started falling in place for Singapore, Malaysia started

  • exploiting Singapore by charging them 39.8% taxes even though it had just 17% of the total population
  • discriminating against non-Malay population (Indians, Chinese and other minorities), which led to a series of communal riots and massacres.

Eventually, in 1965, Malaysia kicked Singapore out of their country, which led to an economic disaster again because

  • for more than 100 years, the Singapore economy was intertwined with Malaysia such that commodities were produced in Malaysia and sold from Singapore
  • but within a fortnight, all of Singapore’s warehouses were left empty

At the same time, the British Army, which was Singapore’s largest employer was suddenly preparing to leave the country.

Now, Singapore was facing multiple (10) problems including

  • No protection from the British Army
  • Peak unemployment
  • 20% of Singapore’s GDP vanishing
  • Economic Crisis
  • No vast lands
  • Very few factories
  • Communal violence
  • Small population
  • No natural resources
  • No industries

The Rise of Singapore - 1965 to 1975 (actually, 1971)

LKY convinced the British authorities (and their Army) to remain in Singapore until 1975, for the sake of protection and preventing job loss.

LKY identified high risk elements and designed strategies for these elements to enable Singapore’s progress.

These can be summarized into 3 important pillars

  1. Build an army from scratch
    • To prevent
    • Invasion
    • Insider threat
  2. Create > 30,000 jobs so that people employed by the British can still remain employed after the British leave
  3. Build infrastructure needed for business
    • This would help in
    • Locals could build businesses of their own
    • Invite foreign investment into Singapore

1. Building an army fron scratch

Israel helped Singapore build an army.

  1. National Service Act, 1967 - Made national service mandatory for all men above the age of 18.
  2. Taught everyone in school that the greatest threat to a country is not the invasion by an outsider, but the conflict within the insiders.
  3. Ingrained the value of unity.

2. Creating enough jobs for everyone

LKY’s perspective about learning from other countries came in very handy.

Just like how software companies are creating jobs all across the world today, the textile industry used to create jobs in the 1940’s and 1950’s. Back then, Hong Kong and South Korea were undergoing a similar situation to Singapore. i.e. Poor economy and not enough jobs. So, they opened up their countries and invited textile companies from all across the world to create jobs by providing them the cheapest labor rates in the world.

Singapore, in the 1960’s saw that the Electronics Industry was prospering and creating jobs the same way that Textile did in the 1940’s and 1950’s. So, the Singapore government enacted new laws which would

  • lower labor costs
  • give foreign companies incentives by lowering the
    • import duties on machines and equipments
    • export duties
    • land rates Hereby, the goverment would make create a recurring income through taxes on
  • Profit of the companies
  • Salaries of the employees

China and India opened up to the world for similar reasons in 1978 and 1991 respectively.

The British suddenly announced that they were leaving 4 years earlier than planned, but due to opening up of Singapore in the 1960’s, Singapore had created so many jobs that

  • Not a single person was left unemployed
  • No land was left unoccupied
  • Not a single building was left unutilized
  • Every single resource was turned into an economic asset

3. Strategic Infrastructural Investment

1963 to 1975 - Singapore Government took 14 loans from the World Bank, out of which 10 were exclusively invested in infrastructural projects.

2 of them were

  • Jurong Port (built at a cost of $14 million in 1966 and generated > $150 million per year in 2021)
  • Jurong Town Corporation (JTC) (generated a revenue of $2.43 billion in 2020)

JTC was responsible for major infrastructural projects like

  • cleaning up the Singapore River and transforming it from filth to one of the most beautiful tourist spots in Singapore
  • reclamation of land
  • and many more construction projects

Both were used to leverage the only valuable asset Singapore had - the strategic location for trade between Asia and Europe.

This is what happens when the government knows how to do business.

Fixing the housing crisis - the most incredible project

Singapore used to be a slum and this brought 3 potential threats to the country

  1. Occupied a large area that could have been used for more productive ventures like industries and hotels
  2. Hygiene problems which could result in disease outbreaks in no time
  3. Communal segregation, which leads to communal violence
    • Every communal riot in the world is either directly or indirectly associated with communal segregation

LKY made it a priority to not just build houses, but to make sure that people of every community lived together without being segregated. The Housing Development Board executed this using 3 strategies

  1. To make houses affordable, they made it mandatory for people below the age of 55 to save 20% of income into a social savings fund called the Central Provident Fund Board. Employers were asked to contribute 17% to this fund.
    • This money could only be spent on specific essentials or on housing.
    • Subsidized rent for those who couldn’t afford to buy a house so that once these people had enough money in their savings account, they could take a low interest loan and eventually buy the house.
  2. High quality maintenance and made hygiene a priority. Therefore, public housing in Singapore look like elite townships.
  3. Ethnic Integration Policy, 1989 - Every building has a specific quota for every ethnic group, depending on their population ratio. Thereby, all ethnicities lived in the same neighborhood and had equal access to housing and government facilities. This eliminated communal violence.

LKY set high standards for Singapore’s people.

In 35 years of LKY’s governance, Singapore’s GDP grew by 2800%. (500 USD in 1965 to 14,500 USD in 1991)

Lessons from Singapore’s growth

  1. Mandatory Military Service teaches the value of unity and the thin line between
    • pseudo-liberalism
    • nationalism
    • radicalism
  2. Understand the difference between
    • Mindless Socialism - when goverment gives subsidies only for the sake of the votebank, rather than for the progress of the people
    • Evil Capitalism - government and companies try to make money even if that means charging for Cancer medicines and making money out of disease caused to citizens
    • Conscious Capitalism - government puts restrictions on citizens and spends every penny of the public fund to generate a ROI. Government runs the country like an organization which needs to channelize the profits towards the welfare of its citizens.
  3. Learn from the success and failures of other countries so that we become constructive critics and frame policies based on our learning.