The island nation embraces global best practices, takes a long-term view, and reaps success
An apt example of adversity bringing out the best is the tiny nation of Singapore in Southeast Asia. Turned out of the Federation of Malaysia in 1965 despite its protests, the nation of 6 million, barely 700 square kilometers in size and with no natural resources except a harbour, had by the turn of the last century joined the club of developed nations. Through a highly focused approach to economic and social development, its founding leaders transformed the island nation into a modern commercial and financial hub and raised the quality of life for all. At $93,456 per capita income, it now figures in the uppermost grouping of rich nations. Eschewing allegiance to any established system of governance, economic ideology, or superpower-led alliance, successive governments have worked meticulously in improving the all-round lives of its citizens, taking a long-term view of domestic and international affairs.
HISTORICAL BACKGROUND
Singapore, located south of the Malayan Peninsula, was once a fishermen’s village with just 150 inhabitants. In 1819, Stamford Raffles, then an Assistant Secretary at the British settlement of Penang, recognized its potential as a strategic trade hub on the sea route to China and as an alternative to the bustling port of Malacca then under the Dutch. At that time, Singapore was also under the Dutch who ruled it through the local Sultan of Johore. The British initially leased the island from the Sultan, solidifying their foothold.
The Treaty of London (1824), signed between Britain and Holland based on European considerations, divided their South Asian spheres of influence along a vertical line through the Straits of Malacca: the areas south and west of the line fell under Dutch control, while those north and east, including Singapore, became British. Further consolidating their position, the British secured full sovereignty over Singapore through a pact with local rulers Sultan Hussein and Temenggong, who ceded the island in exchange for a modest sum and a lifetime pension. Thereafter, Britain firmly controlled the three strategic settlements on the trade route to China: Penang, Malacca, and Singapore.
For decades until 1874, the establishment of the Straits Settlements brought no significant immediate change to the Malayan Peninsula, including Singapore, despite being the only European power in contact with the Malay states. The three settlements were under the domain of the East India Company, which prioritized trade over territorial consolidation.
Furthermore, the Straits Settlements were administered by the Governor of Bengal, who operated under the directives of the Governor-General of India. The Resident of Singapore had limited authority, and his policies were subordinate to those dictated from Calcutta. The civil service was dominated by officials whose careers were largely spent in India; during their short tenures in the Settlements, they rarely showed genuine interest in the region’s development
However, the free port of Singapore, with no import or export duties, experienced tremendous buoyancy. By 1860, its trade exceeded that of the entire Dutch East Indies. This extraordinary commercial success spurred massive infrastructure development to support trade, including the creation of banks, insurance houses, and agency houses. Port facilities and shipping capacity also expanded. The city saw an influx of Chinese migrants drawn to flourishing job markets and trade opportunities, as well as Indians who predominantly took up administrative roles. The transfer of the Settlements to the Colonial Office in 1869 and the opening of the Suez Canal in the same year further boosted Singapore’s trade, which had begun to face competition from Hong Kong, which had also become a free port. This ushered in a new era of prosperity.
Migrants into Singapore brought their customs, religions, and languages, living in tight-knit family and clan groups without assimilating with the locals. While this facilitated smoother interactions with the local administration and businesses, it also made them regard their stay in Singapore as transient; a prelude to their retirement back home. Chinese migrants, loyal to their own “secret societies”, were often feared by other groups and sometimes by the colonial administration. By the late 19th century, the British began to exert greater control, recognizing the importance of Malaya’s tin and rubber resources and Singapore’s commercial and strategic location, as well as the revenue potential.
From Singapore, British trading networks extended not just to China but throughout Southeast Asia. The island was also earmarked for a British naval base, though it took several decades for it to be readied. During World War II, however, Japanese forces occupied Singapore, Borneo, Sarawak, and Malaya. Post-war, the British faced major communist movements in Malaya, which also reverberated in Singapore. Autonomy was delayed, and initial self-government was restricted to internal affairs. When Malaya gained full independence in 1957 and Singapore in 1963, they, along with Sabah and Sarawak, formed Malaysia. However, due to fears that Singapore’s large Chinese population could become a majority in the combined electorate, the Malay-led government pushed for its separation. The present-day Singapore thereafter came to be created in 1965.
SINGLE-MINDED FOCUS ON TURNING SINGAPORE INTO A GLOBAL BUSINESS HUB
A notable pillar of Singapore’s post-1965 transformation is its emphasis on responsibility and discipline among citizens, regardless of social standing. Sacrificing personal rights for the community’s benefit is instilled from a young age and has served the nation well. Residents are encouraged to set aside personal beliefs and preferences to embrace the country’s multi-racial character. No endeavour to effect any change in the extant social milieu of tolerance of those with varying faith or ethnicity is encouraged. All sections are deemed equal, and stoking of differences of any kind is decried and invites severe penalties.
Cognizant of its size and limitations, Singapore has pursued an accommodative and pragmatic approach to external relations. It has sought cordial ties with neighbours and other nations, reducing the need for a large defence budget or maintaining a sizeable armed force. Instead, all males over 18 years undergo compulsory military training, remaining on reserve duty with an obligation to serve when called upon. Such flexibility and nimbleness is the hallmark of its efficient public service, where professionals from the private sector are brought in for limited terms to provide specialized expertise. Civil servants are well-compensated and enjoy substantial post-retirement benefits. Corruption, including accepting favours, small or big, is strictly punished, ensuring integrity across public and private sectors.
In fact, such rectitude in the conduct of business is expected in both public and private jobs. This has enabled the young nation to attract capital, commerce, and talent from around the globe, despite not being resource-rich or having a comparative workforce advantage. It has effectively leveraged its locational advantage in matters of commerce and finance. A high level of literacy, including digital literacy, gender equality, and significant female participation in the workforce, combined with proficiency in the English language, makes its workers globally competitive. The availability of well-developed infrastructure, residential and commercial spaces, clean air, healthcare facilities, elderly care, and recreational amenities are additional magnets for growth and settlement.
A pro-business attitude, marked by the government’s prompt decision-making, low tax rates, efficient port operations, and constant easing of regulations, keeps Singapore ahead of the curve. The nation has embraced modern technology to produce new services and green products. Its seamless handling of foreign capital flows, both FDI and FPI, has made it a preferred centre for the movement of global capital movement. With excellent connectivity to all major cities in Asia, Australia, and the Indo-Pacific, Singapore remains a preferred destination for Western businesses eager to tap emerging markets. Its rapid adoption of advanced technologies and alignment with global best practices underline its progressive outlook. The positive effects of such preferences and shifts are evident in the island’s rapid embrace of new technologies, especially in the services sector. Aligning its regulations with global best practices has been its constant endeavour.
With Hong Kong experiencing numerous challenges following its reintegration with mainland China, the relocation of global banking and financial institutions to Singapore has further accelerated. To sustain these high standards of service, Singapore is partnering with workforce-surplus neighbours like Malaysia, Thailand, and Vietnam to develop huge data centres and state of the art digital and back-office facilities.
OPPORTUNITIES FOR INDIA TO PARTAKE
India and Singapore enjoy a mature and stable relationship, with no major conflicts in over fifty plus years of mutual diplomatic ties. Frequent high-level visits, including five by Prime Minister Narendra Modi and four by ex PM Lee Hsien Loong, have been helpful. Both nations recognize each other’s close relationships with other powers, such as Singapore’s ties to China and India’s to Russia and the USA. India also reckons with Singapore’s proximity with the ASEAN nations. Despite these dynamics, their bilateral ties have grown deeper and more diversified. In 2024, their relationship was elevated to a Comprehensive Strategic Partnership. Earlier, in 2005, a Comprehensive Economic Cooperation Agreement was signed, boosting bilateral trade from US$6.7 billion to US$37.8 billion. Singapore is now India’s 6th largest trading partner and the most important economic partner in ASEAN, with potential for further growth in the services’ sectors like advanced medical care, luxury hotels, retail, project execution, and urban planning, besides computer software and hardware, telecom, drugs and pharmaceuticals.
Of greater significance is the inflow of FDI from Singapore. Between April 2000 and March 2024, 24% of India’s FDI came from Singapore, totalling $160 billion cumulatively. In 2023-24 alone, Singapore invested $11.75 billion in India. Temasek, Singapore’s state-owned investment arm, regularly invests in sunrise and existing Indian industries. Its national carrier, Singapore Airlines, holds a quarter stake in the privatized Air India, now run by the Tatas. Singaporean investors laud India’s strengths in IT, digitalization, and cost-efficient innovation while benefiting from India’s lower manpower costs and access to its vast market. Such comparative advantages enable Indian companies to raise substantial capital from Singapore-based banks and other institutional investors. Alongside annually, about $5bn of Indian investment goes into Singaporean businesses.
India could more effectively leverage its strengths in hi-tech sectors like semiconductor manufacturing, artificial intelligence, robotics for precision industries, and quantum computing. In each of these, Singapore has made much headway on its own, as well as with its foreign collaborators. A large number of scientists and engineers of Indian origin are associated with these efforts. Singapore acknowledges India’s space capabilities, with ISRO having successfully launched Singaporean satellites like X-SAT and TeLEOS-1. Expanding cooperation in such technology-driven fields could yield mutual benefits. Relevant Indian authorities, as well the recently established Invest India office in Singapore, must constantly work on identifying and fostering such highly valuable opportunities.
To streamline investment processes at the federal and state levels, the Indian government could consider setting up a central clearance and facilitation mechanism in the office of the Prime Minister, akin to the Japan Plus initiative done about a decade ago. The PRAGATI framework set up under the Prime Minister, which has effectively resolved bottlenecks in large projects, could be adapted to attract high-tech collaborations with Singapore and other sources.
In the longer run, Singapore could play a critical role in creating a Customs Union connecting India and all the countries en route to Singapore. Linking the vast Indian subcontinent with the landmass extending to Singapore through a network of highways and railways has long been discussed. Projects like the Kaladan multi-modal transit transport initiative linking India’s northeastern states with Myanmar, the Agartala-Akhaura rail link between India and Bangladesh, and the Mahabahu-Brahmaputra inland waterway program could become part of a larger vision supported by multilateral agencies like the ADB.
* Dr Ajay Dua, a development economist, is a former Union Secretary, Commerce & Industry.