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The Singapore Model: How it works

25/07/2011 03:38 (997 Day 23:16 minutes ago)


After some 51 years as Prime Minister and later as Senior Minister in Cabinet, Lee Kwan Yew, the indomitable nation-builder of Singapore, stepped down from politics and government a few months ago.




His son, educated at Harvard in public administration with a  military background as Brigadier  is in power.  Lee Kwan legacy is that he created a highly robust, resilient, intelligent and highly effective society of some 4 million people with almost zero resources. When he broke away from the Malaysian Federation to form the tiny Singapore republic of hardly 800 with total dependence on Malaysia for water, he had to call upon the very best resource to produce the economic miracle which is Singapore today. His best bet was on human capital development and total discipline, from the top Minister to the man who opened the gate to his prime ministerial compound. There was no exception.

I lived and worked in Singapore for some 7 years, half way through Singapore’s growth. This was a nation that was driven by sharp economic planning, futuristic modelling, robust education and development policies with a social conscience and a law and order system which was a pride of Asia. With hardly any opposition in Government and a one-party rule, he eradicated corruption and put the public service on the forward drive. The nation celebrated various campaigns, year after year, which extolled the virtues of hard work, meritocracy, keeping the city clean and “boy-or-girl, two is enough”. Lee was often accused by the West of being a dictator, for resenting political dissent, whipping graffiti artists, banning long-haired hippies from entering Singapore, banning chewing gums because the residues could not be properly disposed, and massive  cash fines and jail sentences for the smallest crimes. Soon, he had created a nation whose GDP rose to some 300 billion a year, had total infrastructure and facilities and a per capital income equal to that of developed nations in the West.

Dubbed Singapore Inc, the Singapore Model was unique, totally and unashamedly Lee Kwan Yew.  It is a new brand of free market capitalism with a communist-socialist twist,  where most Singaporeans were an integral and obedient part of the state apparatus and how it wished to function. From the schools to the factories, from the shipyards to the public service,  individual and collective contribution to the nation was driven home as a sacred mantra. And, in the grand wisdom of the sage, the nation’s own free thinking guru, Lee decided that it is the state that must lead wealth creation, harness limited resources, preserve it for its own people and feed them when the nation runs dry of cash.

And so the Singapore Model of economic development aggressively let the State apparatus take control of critical components of economic development. It created Temasek, sovereign wealth management fund which invested across many corporations, giving them massive strength in their technology and operations. It owned  and operated the main arteries of the economy: Singapore Airlines, Singapore Port, Airport , Housing Development Board which supplied 90% of Singapore’s housing,  Singapore Telecom, Singapore Government Investment Corporation which invested in and outside the country, trading arm Intraco, Development Bank of Singapore, the Singapore Transport Board with all it buses, the Undergorund trains, the national universities and schools and through Temasek, plugged its investments into bio technology, consumer electronics and a number of profitable ventures.

Today, over 60% of the $300 billion GDP is from state owned and state-linked enterprises that gives Singapore a certain stability, even in times of financial and other crisis. The Singapore model was based on the assumption that the State could own and operate any business better than any private venture could do. The miracle is that Lee proved his theory right. A state minister is on an average wage of $1m per year and senior executives and staff are often paid higher wages, inducing top private sector executives to drift toward public sector jobs.

Singapore’s strength has been its capacity to run the public services with the highest level of efficiency, manned by top specialists in each area of activity. It also had the savvy to harness limited resources and increase individual savings through the Employment Provident Fund which requires compulsory savings from workers and mandatory contributions from employers totalling 40 per cent gross wages.

What is even more exciting about the Singapore model is that it is dynamic, that it is futuristic and it has through the years, developed highly rated core competencies among its people.

Despite the government’s lead role in business and economic development, Singapore enjoys the freest market in the world and is ranked first in the world for Ease of Doing Business. The Singapore model is not about competition between state and private sector, but about the state showing the private sector how businesses can be conducted, how limited resources can be harnessed and applied, how a strategic location, however small, can be planned to offer significant comparative advantages.


Guy de Fontgalland is President of Eurasia Management House in Georgia. He is a Harvard educated investment banker who has worked internationally for over 25 years in senior positions in commercial banks, World Bank group and with UNDP. 

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