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The Singaporean Economy: Lessons for Post War Sri Lanka

Chathurika Hettiarachichi's picture

“There was no secret, we had no choice but to take chance and sail into rough waters”- Lee Kuan Yew

Singapore is an inspiration to Sri Lanka and other developing countries in terms of economic development, political stability, and good governance. Since 1967, it has increased its per-capita purchasing power (PPP) 10-fold to $44,600 in 2007, surpassing countries such as Switzerland’s PPP ($37,300) in 2007. Singapore also has high demographic development compared to Sri Lanka even though both countries were about even in 1960s. The President, Lee Kuan Yew, navigated the Singaporean economy after gaining independence in 1965. With a population of over 5 million, Singapore maintains a market driven guided economy with diversity in cabinet and government.

What was their secret to success?

At independence in 1965, the economy was met with unemployment problems, an unskilled workforce, few entrepreneurs, no domestic savings, wretched housing conditions, militant labour unions and racial riots. They devised a strategic economic plan; developing entrepot (commercial) trading, export driven manufacturing, and then creating a service based knowledge economy.

They targeted education in three phases; the early industrialization phase, the post-1979 industrial restructuring phase and the post 1997 Asian financial crisis era. They were also strategic in developing their infrastructure, creating efficient and innovative structures that were continually upgraded. In essence, they had a planned structural transformation from entrepot trading to manufacturing and then finally to service. As a result Singapore is now ranked as the 3rd in terms of overall competitiveness among 125 counties.

In terms of fiscal and monetary policy, government expenditure to GDP ratio is about 10% with a budget surplus. The Central Bank of Sri Lanka’s equivalent is the ‘Monetary Authority of Singapore’ which is considered among the 10 most sophisticated financial markets. The money supply is endogenous (from within) and exchange rate policy curtails imported inflation.

Singapore also has political stability and quality of governance is needed for the economy to grow. Singapore is managing a plural society, rule of law to maintain good governance. As a country with new born peace, Sri Lanka has key lessons to learn from Singapore.

One country cannot be a model of another country. But any country can be inspired by another. Singapore is a good example for Sri Lanka to open doors toward the success to overcome economic war since every problem provides an opportunity for the growth. I am truly inspired by Dr. Abesinge of National University of Singapore’s lecture at our University and Singapore’s journey towards development. The time and opportunity has come for Sri Lankans to emerge among developing economies and learn from the experiences of others.

Comments

Submitted by Joe Qian on
As Chathurika said, one country cannot be a model of another country but there are a few characteristics that I think are unique to Singapore in the region that has propelled it to where it is today. -Relatively low incidences of corruption with pragmatic rather than ideological governance with social and political stability -High Investment in human capital and infrastructure -Progressive taxation laws... See more -Low barriers of entry to starting businesses and encouragement of foreign and domestic investment in industries -Marketing of Singapore as a trading, logistics, and foreign investment hub -Tolerance for different ethnic groups, religions, tradition, etc.

Submitted by Belinda Higgenbotham, Sr. on
Well stated. However Shelter Kuan Yew was Pm although, not really Leader. You might possess some individuals baffled presently there. Anyhow, well said and I totally agree using the reality which even though all of us can't totally design ourselves according to Singapore due to various variations such as the actual dimension difference; we're 92 times the size associated with Singapore, we have a much bigger populace, a really varied and vibrant tradition, etc, and so on. But around the financial, political as well as government aspect associated with it could considerably be based on Singapore. Paint Sprayer

Submitted by isura on
With all due respect for strategies and work plans, as citizens of this country, they should be more pro-active. In one term - Entrepreneurial. This is taught in Schools and universities, yet where is the application? . It can be applied at any given moment in any citizen's life. Entrepreneur is a person who search for solutions, not just money. When one performs well, it infects others. I am not the best at this moment to talk on macro economic indicators, to assess whether Sri Lanka is feasible for economic growth. I mean...everybody knows there won't be any better time than this. It's time to perform - all citizens in their areas: at workplace, at home, at community.

Submitted by Chathurika on
Yes.This is a wonderful opportunity for Sri Lanka to develop.Now we live in an Asian Era and We have comparative advances specially on many economic sectors.For a example:tourism.The major thing is we have to think "we can" and start from small things.Entrepreneurial development is one thing among them.

Submitted by Sundar on
Great blog posting. The only additional point that I would make is in the early sixties, Lee Kuan Yew is reported to have stated that Singapore was looking up to Sri Lanka as an aspirational model! And, now it is the other way around!

Submitted by Naeem Akram on
"One country cannot be a model of another country. But any country can be inspired by another" These words are very crucial for the policy maker and researcher. Most of the emperical studies are replicated to other countries or they are conducted on the panel of countries. On the basis of these results policies are laid down. But as each and every country differ in various asepect so it is very imporatnt that country specific studies may be conducted. Instead of replecating the emperical models to other countries, new model may be developed by considering the country specific socio-economic environment.

Submitted by Anonymous on
Sri Lanka can hope to emulate Singapore only if it were to meet two preconditions Singapore instituted. One was a transparent, clean, accountable and predictable business environment, one that was tied in to a robust civil service and good administration even if it did not meet the Westminster credentials of competitive party politics. The other was a level playing field for different ethnic and religious groups where the politics of ethnicity, religion and history were not incentivized unlike Sri Lanka. The ethnic Chinese were 74% of Singapore, much as the Sinhalese were 74% of Sri Lanka. But Singaporean identity was defined in a manner that was not determined by the legacy and history of one ethnic group alone. All ethnic groups helped define the inclusive national identity. That is a crucial difference that Sri Lankans, including the author, need to appreciate.

Submitted by Ram Bansal on
Firstly, 'High Investment in human capital and infrastructure' is the principal reason for progress which every nation must learn, particularly India and Sri Lanka having pluralistic societies and where economic and social disparities are impediments to progress. Secondly, Singapore is a city state and its model can not be copied by other types of countries. For Sri Lanka, the best course would be to develop its villages by creating employment potential at local levels through making 'High Investment in human capital and infrastructure'.

Submitted by anonymous on
Interesting post. But the initial conditions in Singapore were far different from what is described here. = Let's not forget the work ethic of the majority of the Singapore population - which is probably the single most important determinant of success. Emulating Singapore without such work ethic will be impossible. = Let's not forget that independnece for Singapore was simply the split from Malaysia. The will to succeed as a result of thsi dissolution was tremendous. = Let's not forget how open markets and openness to foreign direct investment contributed to prospority. Acheiving such level of openness is never easy. = And let us not forget the determined ambitious government. Thus, while looking at Singapore as an example, we need not forget the unique features that made it a success. And Sri Lanka has plenty of examples to look at. Today, there is no lack of lessons how to grow fast. The trick is to muster the political courage to do it.

Submitted by Priyanga Dunusinghe on
As Ms. Chathurika says Singaporean economy provides a sort of inspiration to a country like Sri Lanka that is craving for the economic development. Sri Lanka leaders inspired from the success of NICs a few decades ago. But we have so far miserably failed. Why? Is it because that we had a civil war? Partly true, but that is not the whole truth. Development literature has shown that economic growth is determined by several arrays of factors ranging from physical capital to institution and cultural factors. Sri Lankan society lacks most growth friendly institutional and cultural factors. Hence, the need of the hour is to, in addition to addressing the bottlenecks emanating from physical and human capital sides, launch a determined effort to make attitudinal change that is pro-growth. Singapore and most NICs had it or their leaders were able to inject it to the society.

Submitted by Dulanii Liyanahetti on
Thank you Chathurika for posting this interesting piece of writing. Actually I was once doing a mini case study on Singapore in order to see as to how Singapore became one of the most successful knowledge driven economies. I found out that one reason behind their rapid growth was the investments on research and development. Innovations and putting those into practice is a major initiative undertaken not only in Singapore but also Taiwan, Malaysia, Japan etc... Human capital development also acquires a pivotal role backed by the Government's clear vision and policy measurements which doesn't change due to change of power. The problem we see in Sri Lanka is that macro level policies affecting education, health and economic development tend to fluctuate at the event of a change of power or Government. In countries like India whoever comes into power abide by these national policies as it affects the whole nation. So we need to adopt consistent national policies and not be driven by political motives. It's not that Sri Lanka cannot change but the correct initiatives and commitment is lacking. Actions are limited to words and policy documents/commission reports and marching ahead with the head held up is vital.

Submitted by Luxman Siriwardena on
I n summary what I asked was whether the good governanance meaning tollerance dissent, treatment of all ethnic or religious groups equally freedom of expression are necessary conditions for achieving economic development and poverty allevation? Do the experieces of Korea in 60s and 70s, that of Malaysia or currently China or even now Singapore are evidence for good governance and democracy as preconditions for development?

Thanx Prasanna I think we do not need to follow singapore but we can reggrd it as an exmple.Acknowlegemnt will do more

Submitted by Eng Tissa De Silva on
Its unfortunate most economist think that sri lanka should follow or be inspired by Singapore. Singapore is a city state. Sri Lanka is a village nation with the power been in the hands of our village men and women. This has been our strength for 2000 or more years. We cannot go blindly in the road of economic development, and thus shifting our population to the slums of cities. The vision under Mahinda chintane accepted by the majority is to develop our villages and hence draw back the people from the cities. What is more essential is a Social index of happiness and not a slave index as the GDP. Where the rich are getting richer at the expense of the poor who has to depend on the trickling effects of the market economy. Singapore imports most of its food and even water. May be they now have a desalination plant at tremendous cost to the people as well as the environment. I am sure Chatrunika and many others who are inspired by Singapore will not want to live and work in Singapore. It is better to be self sufficient in our food and use our environment and water resources with care so that future generations will also be able to use these basic facilities. Note: When we build the Port and infrastructure in the ancient Port city of Hambantota, Sri Lanka will become more prosperous.

Submitted by Priyanga Dunusinghe on
Your posting is really remarkable. This kind of thinking is lacking with most our policy makers. I would like to read more from you

Sri Lanka is unique.It cannot be the model of Singapore.We do not need to change our own identity.But I think we can learn from other nations and develop our selves while preserving our own identity

Submitted by Nethmini Perera on
One impediment to Sri Lanka's pace of development is the high level of corruption in civil service visible at every level from top officials to bottom layers. If this is fought against properly, the addition to the economy even at the current rate of functioning would be immense. PM Lee's initiatives in this regard are worth highlighting. While taking legal measures to probe into and take action against corruptions on one hand, he made attempts to bring the Government officials to a state where they would not tend to engage in corruption. He proposed to raise the salaries of ministers, judges and top civil servants on par with that of top private sector officials in order to attract and retain the talented in the public sector and thereby to ensure a clean and honest government.

Submitted by Nony on
I agree. The most important factor was how the Singapore Government cleaned up its act not only by raising allowances, the carrot, but also the stick. Countries can plough in money into infrastructure etc but what happens when the money gets siphoned away or simply runs out? Another would be the level of coordination within the government, a natural advantage due to its size. Still, this is something all countries can work on. Last, invest in education. High quality education begets a high quality workforce.

Submitted by Joe Qian on
When measuring development, it has to be done objectively. You have to use numbers, facts, statistics, balance of payments, diaspora, and remittances to measure development in country. Having spent some time in Sri Lanka, I can tell many people are quite happy and laid back although social issues and developmental challenges are very much apparent. There are optimistic and pessimistic people in every place and you can't paint them with broad strokes. Your arguments about wealth distribution is completely invalid as Sri Lanka has more income inequality than most countries including Singapore. Take a look at the Gini Index. http://en.wikipedia.org/wiki/List_of_countries_by_income_equality How would you measure development subjectively? Send out a survey and ask people if they're happy? I'm not sure if you've been to Singapore but I can assure you that very few people live in so called slums, which are much more prevalent in South Asia, Sri Lanka included. It is clean, organized, with no noticeable pollution. I can also guarantee more Sri Lankans live and work in Singapore than the other way around. Your argument about self reliance and the Hambantota port is completely invalid as it is mostly being financed and constructed by China, which has had its fair share of problems with balanced and even development.

Singapore , a tiny island which once afraid to be an independent state , was under the kuala lampur governance. After a period of friction between Singapore and the central government in Kuala Lumpur, in 1965 Singapore separated from Malaysia , and became an independent republic. Secret behind the success in singapore was the perfect backing & guidance from the government. The singapore economy which was solely depend on trading later switched to produce some perfectly choosen limited no. of products. for an example at the early stages of IT Singapore was one of the leading manufacture For Hard Disks , almost 80% of HDDs were manufactured in singapore. Than producing Everything we've to make a proper study about our capabilities & should choose which to produce & which to import. Pls follow the link to Join the discussion through our Facebook Group "Lets share Your ideas to develop Sri Lanka" http://www.facebook.com/group.php?gid=127112367305844

Submitted by Anonymous on
It is extremely disappointing that views which provide different perspectives are considered 'attacks'. To me it does feel that the comment by Joe Qian seems more like an attack on views by other people. I understood that the intent of this blog to provide a platform for opinions/views.. Chathurika Hettiarachichi's has no doubt provided an excellent analysis and viewpoint and alternate views can in no way diminish her arguments.

Submitted by Joe Qian on
The blog is an open but regulated forum for people to share their views. There were some obscenities and hyperbole's that had to be edited out from the one I was discussing. Just like Chathurika, Tissa, Priyanga and yourself, I can express my views as well. It's always good to have empirical evidence when conducting intellectual discourse.

Submitted by Wannabe Economist on
Well said. But Lee Kuan Yew was Prime Minister though, not President. You might have some people confused there. Anyways, well said and I fully agree with the fact that although we cannot fully model ourselves according to Singapore due to various differences such as the size difference; we're 92 times the size of Singapore, we have a much larger population, a very diversified and vibrant culture, etc, etc. But on the economic, political and governance side of it can somewhat be based on Singapore.

Submitted by Bytesland on
I think that citizens of this country should be more active. In one term -enterprising. It can be applied at any given moment in any citizen's life. Enterprising person is that who search for solutions, not just money. When one performs well, it infects others. I am not the best at this moment to talk on macro economic indicators, to assess whether Sri Lanka is feasible for economic growth. Everybody knows there won't be any better time than this. It's time to perform - all citizens in their areas: at workplace, at home, at community.

Submitted by Claus on
From my point of view it is just the mentality of people that matters actually. It all starts from there. Hard working nations achieve fantastic results in economic growth despite the harsh political conditions, so to say. Kindest regards and thanks for a nice post.

Submitted by Anonymous on
Singapore treats all its citizens equally. If Sri Lnka had been doing the same after independence, Singapore would have been nowhere by now. Even Lee Quan Yew once mentioned that "Sri Lanka's down fall is Singapore's gain". Even recently (after the end of Sri Lankan civil war)he said "The rulers of Sri Lanka has the same "Sinhala only" mentality. I doubt that Sri Lanka will ever travel in the right direction". If you really want to develop Sri Lanka like Singapore, as a first step, treat all citizens equally. Keeping the rest of the country different from north and east of the country is not going to work. North and east people are forced to live among Sinhala armed forces (ratio between a citizen and army personnal is 1:1). Is this pattern present in Singapore? Please think and act.

Submitted by Jayathilaka on
I know this is an old blog post, bt i would like to say something on the topic. I know after the end of the war, mainly politicians of the gov is talking about how they are going to develop SL's economy looking at Singapore as an inspiration and even following the so called "singapore model" as a strategy. First of all lets see whether that sort of a step is fruitful. I would say the similarities between those countries are very very few, like both had been under british colonialism, being situated close to important sea routes. Though both are small islands, SG is very small compared to SL geographically and it has ony a population of 4.4 million while SL has more than 20 million population. The situation in SL is much more complex than in SG. Out of the 20 million population a considerable amount of them come from villages. From earlier times ppl in SL has been an agricultural race. That is something we can develop to great heights. If u take any developed country except SG all other countries even including India have a much more developed agricultural sector. SG is a new country, just like Australia and Hongkong are. No body claims a historical relationship with SG as a homeland. SG is not a cultural homeland of any of the ethnicities that live here, bt SL is. We have more than 2500 years of history. Such a country cannot be treated the same way as a new country. Sri Lanka going for a singapore model is a stupid idea. As you had previously pointed out every country is unique bt in this case SL is way different than SG. SG does not have to take care of the cultural and historical background that SL is having. Remember that. The other thing is do u really want SL to be a SG? i dont. i want SL to be more than SG. Because SL has every thing to do that. SG had only strategic location and human resources that they developed through good education. We in SL have the former one (and developing a highly skilled HR is not difficult at all if we provide opportunity for the public ), more land for agriculture development and industrial growth, resources like minerals, beautiful locations to make SL a better tourist destination. We just have to have a good managemant. We should develop our manufacturing side as well. What gov should do is trying to attract multinational companies to have manufacturing facilities in SL. Have competent pple in top management positions in gov corporations or privatise them. If SL needs any inspiration from any other country look towards india. It is a better example than SG. And the first thing to do is having political stability in the country. Settle the ethnic conflict in the country, go for power devolution. Finally if u didnt notice Sl has been trying to practice SG model in the past and it went wrong, because it doesnt suit us.

Submitted by Singapore on
The situation in SL is much more complex than in SG. Out of the 20 million population a considerable amount of them come from villages. From earlier times ppl in SL has been an agricultural race. That is something we can develop to great heights. If u take any developed country except SG all other countries even including India have a much more developed agricultural sector.Another would be the level of coordination within the government, a natural advantage due to its size. Still, this is something all countries can work on.

Submitted by savita on

I could tell how great you are in your field of interest. You could relate in each detail very well. Thank you for spending a time on sharing such informative writings to us.

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