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Ildikó Nagy - Zsófia Gulyás
27/11/2023 08:00
Singapore’s economic success and development model has long been a priority area of research in relevant literature. The city-state gained independence from Malaysia in 1965 and since then the administration has undertaken a series of important economic, political and social reforms that have transformed the entity from “third world to first”. Following independence, a social contract of sorts was established between the Lee Kuan Yew-led cabinet and the people, whereby society accepted the curtailment of individual freedoms and tight government control in the interests of economic prosperity and better quality of life. This special political system, in which the triple intertwining of politics, meritocratic bureaucracy and business elite made state dominance spectacular but economically effective, resulted in a near sevenfold increase in Singapore’s capital flows between 1968 and 1972, and the country is now the third most competitive financial centre in the world (Global Financial Centres Index 32).
There is a consensus among experts in the academic world that the successful development model is not the result of a ‘tried and tested recipe’, but a combination of factors. Singapore already had several conditions in its favour in the mid-20th century, acting as a logistics hub given its geographic location and British colonial past, and the infrastructure was already in place by the mid-1960s. In addition, a combination of interventionist state policies such as industrial and fiscal policy, political stability and a political culture open to international ideas, effective fiscal and monetary policy and various social policies have made Singapore a model state.
The full application of the Singapore model in the 21st century is limited, but there are many elements in its economic strategy that other countries can successfully apply. These include: a high degree of internationalisation; transposing international best practices into the domestic system; promoting a labour-based economy, the promotion of free trade and investment facilitation practices; tax incentives for start-ups; continuous improvement of the business environment; increasing investment in infrastructure; and ensuring an environmentally-sustainable and digital transition.
The Monetary Authority of Singapore (MAS) plays a key role in Singapore’s development as an international financial hub. The MAS has also been prominent internationally in supporting green transition, with one of its many green initiatives being the Green Finance Action Plan, which aims to, among other things, improve the resilience of the financial sector to climate risks; support the development of green finance and technology solutions and markets; enhance green finance knowledge and capacity; and strengthen Singapore’s role as a centre of green finance.
Singapore’s economic success has given it an outstanding role in regional and even global politics. It is an almost unparalleled achievement that a country can be a key partner to both the United States and China.
Ildikó Nagy – The author is an international adviser at Magyar Nemzeti Bank (MNB), the central bank of Hungary
Zsófia Gulyás – The author is a junior international adviser at MNB
