Singapore, also called the "Monaco of the East" after breaking away from Malaysia and gaining independence in 1965, has been on a continuous path of economic progress and prosperity since the 1970s. Much of the city's prosperity may be traced to the vision of one man, Singapore's first prime minister, Lee Kuan Yew, who served from 1959 to 1990. During his term, he became the world's longest-serving prime minister.

Lee Kuan Yew's focus on economic growth and his commitment to attracting a world-class workforce, creating cutting-edge infrastructure and top-notch sea and air networks, an affordable and transparent tax system, a corruption-free and efficient bureaucracy, a robust regulatory and legal framework, a bipartisan diplomatic policy, and developing a sustainable economy have ensured Singapore is a partner of both the US and China.

In a nutshell, Singapore's per capita income was $400 when Lee Kwan Yew took office as the country's first prime minister. It is currently more than $50,000. This is the fastest economic transformation of any country in history.

Lessons that Lion City can teach the Land of Tigers

Ever since India gained independence, Indian political leaders, with their love for socialism in their hearts, have looked down on Lee as a puppet of neo-colonialism doomed to poverty and shame. The number of poor Indians increased between 1947 and 1977, while Singapore's population and economy flourished.

The political elite in India was afraid that globalization and foreign investment would lead to India's economic colonization. To cut costs and move toward independence, they looked into import substitution. Socialist academics, amazingly, didn't see any inconsistency in repeatedly asking for greater foreign help while praising self-sufficiency.

During the Nehruvian era, most Indian political leaders looked forward to the Soviet Union, which was led by visionary thinkers who implemented five-year plans. They aimed to have the public sector take the reins of the economy. But in Singapore, it was not the case.

Capitalism thrives always.

Lee was more open to the private sector than his Indian counterparts, who focused more on the public sector. He didn't see globalization and foreign investment as tools of neocolonial dominance but rather as means to unparalleled wealth. He understood one of globalization's greatest strengths: it can turn a country's poverty into an asset if that country improves its organizations and investment climate. In order to increase exports and attract investors, low wages are essential, and a poor country like Singapore can easily offer that.

Naturally, increased productivity will lead to a rise in wages. But if productivity grows at the same pace as wages, competitiveness won't go down. Lee saw that a consistent rise in productivity was the key. Good governance and business-friendly policies were required. This sparked outrage among Nehruvian-era Indian politicians, but that age old resistance is crumbling today.

In response to the socialist fear that globalization is neocolonialism in disguise, Lee stated that what mattered was the quality of in-house governance. A poorly governed country, on the other hand, will easily invite invaders. Contrary to most Indians, Lee perceived communist imperialism as the greatest threat to wealth and freedom. Hence, he built close ties with the United States. The collapse of the Soviet Union in 1990 justified him.

Singapore, along with other Asian countries such as Hong Kong, Taiwan, and South Korea, built miracle economies with more than 10% annual growth in the 1960s. India's growth rate was fixed at below 4%. However, most Indians dismissed these Asian countries, claiming that they were heading towards misery and neo-feudalism. In reality, Singapore quickly surpassed its colonizer in terms of per capita income. Of course, India remained impoverished.

No laissez faire

Laissez-faire was not Lee's cup of tea. He believed successful government entailed world-class public, social, economic, and logistical infrastructure that facilitated private industry and productivity. As an initial effort, he set up the largest Singapore corporations as government-owned enterprises that built power plants, ports, roadways, and water supplies. Socialist India neglected logistical and social infrastructure in favor of huge yet horribly ineffective public sector manufacturing, particularly in heavy industries like steel and iron.

Lee's social safety net included free public schools and hospitals, extensive publicly funded housing, and retirement benefits. Both Nehru and Lee recognized the significance of social infrastructure, yet the capitalist Lee accomplished an outstanding job while the socialist Indians fell far short. He instituted a speedy and effective law and order system, complete with an anti-corruption bureau. India's performance in these domains was dismally bad. Lee consistently increased the pay of bureaucrats and ministers until they were on par with those in the private sector. But it never happened in India.

Embracing ethnic and religious harmony

One of the most intriguing aspects of Singapore is not only its phenomenal economic development but also the way it has handled its diverse ethnic and religious groups, allowing each to live and grow according to their abilities while never losing sight of the fact that above anything else, they are all Singaporeans. Singapore has seen its fair share of immigrants throughout the years, with 74% of the population being of Chinese descent, 13% Malay, 9% Indian, and a variety of other Southeast Asian backgrounds. The religious community consists of 30% Buddhists, and the rest are Christians, Muslims, Taoists, and Hindus. They rarely have disputes since they are too busy working and making money.

India still has a long way to go.

The development of Singapore is analogous to the independence of Mumbai. It is not fair to compare homogeneous 'city states' to countries like India, which span an entire subcontinent. There are vast cultural, linguistic, and religious differences between the two. However, India started heading in Lee's direction, becoming more open to the outside world and the free market after the reforms of 1991.

The present Indian government has adopted Lee's idea as its motto: "less government, more governance." Narendra Modi agrees with Lee that investment in infrastructure projects is crucial to attracting foreign and private capital. This is why he wants to build large power plants, inland waterways, a sea port network called Sagar Mala, and a high-speed railway network.

Contrary to the social infrastructure Lee offered in a tiny island nation like Singapore, Modi is constrained in his ability to do so in India because such services fall within the purview of individual state governments.

Notably, the current Indian government is not making any efforts to establish a well-functioning law and order system. There is an element of protectionism in the Make in India project. It seems to be in no rush to bring powerful, corrupt individuals to justice. Surprisingly, it has not made it easier to conduct business in the country. India still has a long way to go.

Justin Raj

Alpha Research Team