Who would have thought that a tiny island-city country with no natural resources (not even water) would become one of the world’s richest and most competitive countries? Well, it happened in Singapore. Singapore became rich in only one generation period. It did not happen overnight or coincidently.
So, how did Singapore become rich? How has this tiny state with limited land and zero resources transformed itself from a developing country to a developed country with one of the highest GDPs in the world?
In gist, various factors contributed positively to Singapore’s prosperity. It all started with its founding member, Lee Kuan Yew’s vision of a de-facto one-party system that maintained political stability in the country. Political stability, a business-friendly environment, an educated workforce, a corruption-free Government, and a strategic geographic location contributed positively towards rising trade and business activities, leading to a better economy.
Let’s elaborate on all these points and learn some possible reasons for your question, how did Singapore become rich?
How Rich Is Singapore?
Before we try to figure out the reasons that made Singapore rich, let’s find out how wealthy Singapore is.
But, before that, let’s go way back in the yesteryears of this tiny state of only 5.45 million people.
Singapore had been a British colony until the 1960s, and most of its population worked at British government offices. This small island was significant for the British government because of its exclusive geographical location as it connected the east with the west. When the British regime ended in Singapore, it caused a little mayhem for the country. It led to unemployment and other issues because the state did not have natural resources. It even had to import food and water supplies.
Long story short, it then merged with Malaysia, which did not work out well due to racial differences.
What is astounding is, despite all the factors against its actual survival, Singapore not only survived but also thrived in achieving what any nation could only imagine.
As you can see on the infographics, Singapore has a GDP per capita of $79.43. This makes Singapore, the fifth richest country in the world. If you look at GDP per capita (as per PPP), Singapore is the second-richest country in the world, with 112,711 GDP per capita based on PPP. What’s mind-boggling is that Singapore has achieved all these despite having no natural resources, not even significant land to its name.
How Did Singapore Become Rich | The Possible Reasons
Singapore is one of the richest countries in the world, let’s find out some reasons that accounted for the prosperity of this one of the most competitive economies in the world.
Geography – Entrepot Trade
Singapore has an exclusive geographical location in the middle of the trade route between east and west. Its port is strategically located, making it a logistics and trading hub.
Its strategic position makes it more competitive to carry entrepot trade than any other country in the region. Singapore purchases raw materials — then refine and re-exports them. The top exports of Singapore are integrated circuits (wafer-fabrication industry) and refined petroleum. With these trade activities, Singapore completely rescinded the belief that only countries rich in natural resources can achieve economic growth.
Singapore transformed from a third-world country to a first-world country in one generation under the leadership of its founding father, Lee Kuan Yew. Lee maintained the de-facto one-party system in the country to achieve sustainable growth under his leadership. This political stability made Singapore a favorable land for many businesses.
Singapore provides the world’s most business-friendly environment, making it the hub for various Multinational corporations. Its favorable strategic location, infrastructure, and educated labor force further make it more attractive for foreign businesses. It is the Asia-Pacific hub of many unicorns (Grab, Sea, Lazada, and Razor), commercial banks, fund managers, and other financial services providers. It is also the hub for wealth management.
Another reason that makes it business-friendly for private and public companies is that it has the lowest tax rates in the world for corporates. It also offers various tax exemptions.
Singapore is corruption free and one of Asia’s most transparent nations. Its public sector is ranked fourth among the least corrupt in the world. Its founding father, Lee always wanted the country to become attractive to foreign businesses, and he knew a corruption-free public sector was the way to do that.
Lee also imposed various laws that made corruption an extremely punishable crime. Eliminating corruption was the first step that this small ambitious nation took to achieve the economic growth and prosperity it enjoys today.
Lee’s administration knew that people were Singapore’s biggest assets, so they invested heavily in their welfare and education. The country has one of the best education systems in the world. Over the years, the government recruited the best global teachers to improve its educational system. Lee strongly believed that it would benefit citizens to have the technical skills and knowledge required by foreign companies.
Today, educated labor is one factor that encourages foreign businesses to prefer Singapore to establish their businesses. Now, the country is the hub for financial and technological development, all due to an educated population.
Singapore Compulsory Saving Scheme
CPF (Central Provident Fund) is the compulsory saving program of Singapore that urges people to save a portion of their income in CPF.
CPF funds are invested in Government bonds which enable the government to spend the fund on infrastructure, technology, and education to foster economic growth. Singapore has one of the highest savings rates in the world, which has helped the country to achieve phenomenal economic growth that inspires everyone.
Singapore A Small Nation With Big Income
In this article, we figured out the answers to the question, how did Singapore become rich? We learned that the founding father’s administration devised a plan that led this natural resources-deprived country to the economic success it enjoys today. From strategic geographical location, skilled labor, and corruption-free government to business-friendly policies, all positively contributed to its mega success.
Let’s end here with this saying of the father of this tiny yet great nation,
A nation is great not only by its size alone. It is the will, the cohesion, the stamina, the discipline of their leaders which ensure it an honorable place in history.~ Lee Kuan Yew