Singapore Economy

1. INTRODUCTION

1.1 Background

Singapore came into being on 1819 as a British trading colony. In 1963 it became a part of Malaysian Federation but this coalition could not last for long and after two years it became independent. Singapore eventually became one of the world's most prosperous countries with strong international trading and per capita GDP that lies in the league of leading nations. But this transition has not been easy for Singapore because of the harsh conditions that prevailed in Singapore at the time of its independence from Malaysia and the most formidable of them was political turmoil that had entire peninsula in its clutches. The fact that the Chinese in Singapore outnumbered Malays was of great concern to Malay politicians as they perceived it as a threat to Malay heritage and it led to the forcing of independence on Singapore in order to preserve Malay majority within Malaysia.

Lee Kuan Yew, the first Prime Minister of Singapore and leader of the ruling People’s Action Party (PAP) used to say: “Singapore was a tiny Chinese island in a large Malay sea”

Singapore’s exit from Malaysia was a unique and unprecedented historical event. Singapore’s problems at independence however were not unique. High levels of unemployment, lack of sanitation, little supply of drinkable water, and ethnic conflicts were conditions that plagued Singapore then. The situation was further aggravated by the policies both Indonesia and Malaysia adopted towards Singapore. While Indonesia began a policy of “Confrontsi” or confrontation by sending Indonesian marines to bomb the building of a prominent English run bank in Singapore, the Malaysian government flexed its muscles over its tiny neighbor by refusing to move its military out of Singapore. The Malaysian leaders while not interested in having Singapore as part of their sovereign territory, nevertheless wanted to establish a relationship of “agong, adi” which means “big brother, small brother”. In such an adverse situation the leaders of Singapore soon realized that in order to set out on the path of economic development they had to strengthen the sovereignty of their country. While Singapore was completely abandoned by international community, its leaders remained persistent. They knew Singapore had to survive on its own by prioritizing the use of limited resources Singapore had. A new national identity was first on the agenda, for that convincing Singaporeans to view themselves as an independent nation was necessary

Another challenge was that till 1960s economists were of the view that nations, especially a small one, needed to make use of their surroundings to succeed. Foe Singapore it was easier said than done because of hostility that prevailed in its relationship with the surrounding countries. The report of this situation in the American media attracted the attention