Singapore’s Economic Transformation


In the 1960s, Singapore was an underdeveloped country with scarce resources after being a British colony for more than 100 years. Today, Singapore is one of the fastest-growing economies in the world and has transformed into a modern city with the second-highest population density in the world and a skyline full of skyscrapers. How was this possible?

Singapore immediately after gaining independence

After gaining independence in 1965, Yusof bin Ishak served as Singapore’s first president and Lee Kuan Yew was Singapore’s first prime minister. At the time Singapore was facing many problems. Most of Singapore’s 3 million inhabitants were unemployed and more than two-thirds of Singaporeans were living in slums or so-called squatter settlements in the fringe part of the city. Singapore’s immediate neighbors, Malaysia and Indonesia, were initially not friendly towards Singapore. Additionally, Singapore lacked access to natural resources, a clean water supply, proper sanitation, and infrastructure. Originally, the prime minister at the time, Lee Kuan Yew, hoped to modernize Singapore through foreign aid, but no country showed interest in helping Singapore.

Singapore and globalization

While a member of the British colonies, Singapore’s economy was focussed mainly on the entrepôt trade. However, there was very little perspective for the future of this industry. Therefore, politicians decided to focus on industrialization, specifically developing labor-intensive industries. This was a big step as Singapore had undergone very little industrialization before. Once production started, Singapore was forced to adapt once again as its neighbors (Malaysia and Indonesia) did not want to trade with it. Therefore, Singapore started looking into globalization as an opportunity to trade with the “developed” world. To attract foreign investment, Lee Kuan Yew worked to create a Singapore that was safe, corruption-free and had low taxes, putting in place harsh penalties — even including the death sentence — for people who disobeyed the law. Furthermore, all independent labor unions were also meshed to form the National Trade Union Congress (NTUC). These new measures helped Singapore become attractive for multinational corporations, especially because Singapore’s political system was very stable.

Singapore and foreign direct investment

Singapore was hugely successful in attracting multinational corporations. In fact, by the end of 1972, “one-quarter of Singapore’s manufacturing firms were either foreign-owned or joint-venture companies” (according to ThoughtCo.). Among the foreign investors, Japan and the U.S. were especially influential. All of the cash flowing into Singapore meant that between 1965 and 1972, Singapore was able to achieve annual double-digit GDP growth every single year. In order to maintain their growth, the government decided to start heavily investing in education. Technical schools were set up and the multinational corporations investing in Singapore were encouraged to train their unskilled workers. People who couldn’t find jobs were given jobs in sectors such as the tourism and transportation industry by the government.

Singapore today

Today, Singapore’s port has become the second-busiest in the world, only behind Shanghai. Before the outbreak of COVID-19, more than 10 million visitors came to Singapore annually. Aside from the shipping and tourism industries, Singapore’s medical industry has also grown significantly, alongside the banking industry. Despite its small size and comparatively recent economic transformation, Singapore is now the 15th largest trading partner of the United States. In 2019 there were over 3,000 multinational corporations that operated in Singapore. If you don’t mind abiding by some comparatively strict laws, Singapore is one of the best places to live these days, offering its citizens the third-highest life expectancy in the world. Singapore really has become a “powerful and financial center” (according to the BBC) of the world.

More recently, Singapore has had to grapple with an increasing number of unemployed due to the outbreak of COVID-19. Aid packages and policies have been put in place by the government to protect jobs and create opportunities for people. However, Leila Lai states that in order to survive, “Singapore will need to accelerator economic transformation and establish itself as a key player in the Asian and global realms of technology, innovation, and enterprise.” Although there is hope, only time will tell to what extent Singapore will be able to recover from the effects of the pandemic.