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There Will Never Be Another Singapore | Economics Explained

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Singapore, once a poor nation, rose to the 33rd largest economy in 50 years, inspiring
other countries globally. Yet, its unique journey, often misunderstood to be solely based
on glamorous industries, is not easy to replicate, and many economists forget the
draconian measures it took to build Singapore into the wealthy country it is today.

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#EconomicsExplained #SingaporeEconomy

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HOW SINGAPORE GOT CRAZY RICH

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1) This is Singapore, an island country off the tip of Malaysia slightly smaller than New York
City and home to 5.6 million people.

2) Despite its tiny size and modest manpower the country has an economic output of
almost half a trillion USD making it the 33rd largest economy in the world, beating out
much larger countries like the UAE, Vietnam, and Even Malaysia the country directly to
it’s north that has more manpower, more landmass, and more natural resources.

3) But it wasn’t always like this, Singapore just 5 short decades ago was a desperately poor
country still suffering from a long history of occupation.

4) The concentrated success that this small island has been able to achieve in such a short
amount of time is why so many economists and commentators are excited about the
idea of other countries replicating that success and becoming the Singapore of their
respective regions.

5) The Singapore of South America, The Singapore of Africa and even The Singapore of
Asia are all titles that several countries around the world have been given for trying to
replicate the success of this city state, although they maybe didn’t think that last one
through.

6) Anyway, if a poor island devoid of resources and global political capital could go on to
become one of the wealthiest economies in the world then it stands to reason that just
about any economy could achieve the same thing.
 7) Unfortunately the success of Singapore is going to be extremely hard to replicate and
the exact combination of factors that the country had going for it basically just don’t exist
anywhere else in the world.

8) What this means is that there is never going to be another Singapore of some other
region.

9) Another common misunderstanding is that Singapore's success has hinged of

glamorous industries taking place in glass skyscrapers, it’s easy to see why with pictures
of Marina Bay, stories about billionaires from around the world making it their home and
even depictions in modern movies but the reality is far from that and even most
economists ignore what truly made Singapore a success to begin with.

10) So

11) What can regular economies learn from the rapid development of Singapore that could
be applied to their own countries?

12) What was it that made Singapore so successful?

13) And finally

14) Why is it almost impossible to replicate this success in other countries around the world.

15) Once we have done all of that we can put Singapore on the Economics Explained
National Leaderboard.

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16) The start of Singapore's history as an independent nation was quiet unusual, while a lot
of countries around the world had to fight bitterly to claim independence, or in the best
case scenario were able to negotiate it with the country they were claiming it from,
independence was kind of forced on Singapore.

17) The tiny island was once a state of Malaysia and throughout its history was used as a
trade port by colonial empires.

18) This led to the region becoming very diverse but also very tense between all of the
groups that called it their home.

19) In the aftermath of the second world war following a bitter occupation by Japanese
forces, Singapore had to be rebuilt practically from scratch, for the decades following it
was basically just a city sized slum with most residents living in complete poverty.
20) Sensing the tensions that could arise from such a diverse group of people living in such
an unforgiving environment, Singapore was cast out from Malaysia in 1965.

21) The first thing that the new country had going for it was a unique brand of benign
authoritarianism.

22) The new government knew that for the country to have any hope of fixing its issues it
would need a strong decisive hand and that’s exactly what they got.

23) One of the first things that the government did after coming to power was to reclaim vast
tracts of land from private ownership at below market rates to build affordable public
housing.

24) When people argue that their economy should be run like Singapore they normally
overlook this detail, any policy at this scale in any advanced economy around the world
today would basically be political suicide.

25) Housing is still highly controlled in the country to this day, with a unique blend of central
planning and hard core free market mechanics.

26) Income taxes in Singapore are famously very low, as of this year income tax rates top
out at 24% but that’s only for people earning more than $1 million Singaporean dollars
per year, or roughly $750,000 USD.

27) That’s the free market side with minimal government intervention, but at the same time
20% of workers salaries are still mandatorily taken by the government but instead of
going to fund government spending it’s put into a large communal investment fund that
people can then use to put a deposit on a subsidised house.

28) In addition to this 20% an additional 16% is provided by the worker's employer as
contributions towards the same fund which is also used to fund retirement and
healthcare.

29) This means that at minimum people in Singapore are saving at least 36% of their
income, which is double the average savings rate of the USA.

30) Singapore also has diligent savers even outside of these forced savings measures with
the average resident keeping 54.6% of their earnings.

31) Now a high savings rate means very little if the people of the country are not earning
much, so the next thing the government had to do was attract industries that made
sense in the tiny island nation.
32) Early on the country had very few advantages over its larger regional peers, they had
more people, more resources and more land to set up operations, but Singapore still had
a few tricks up its sleeve.

33) Perhaps the country's greatest global advantage is its amazing geographic position at
the tip of the Malacca Strait, which is the single busiest shipping lane in the world.

34) The reason the country existed as a trading port back in the colonial days were for
exactly the same reasons but now the people of the country had an opportunity to
benefit from that position for themselves.

35) One of Singapore's biggest industries today is a far cry from the glamour of global
finance, it’s basically a gas station for the world's cargo ships.

36) As asia developed as a centre of low cost manufacturing and countries around the world
started trading more intensely with one another singapore set up major oil facilities to
bring in oil from countries in the south pacific and the persian gulf and sell it to all of the
ships passing through the natural bottleneck of the Malacca Strait.
37) Given its location and because crude oil freighters are passing through the area anyway
it is home to the world's largest bunkering port offering prices even lower than than the
gulf states themselves.

38) Singapore does produce some oil itself but it’s only around 20,000 barrels per day which
is a tiny tiny fraction of the total oil volume moved through the country.

39) To make itself even more of a one stop shop for shipping needs it has developed the
region's largest commodities exchange where companies and speculators can secure
prices for resources that get traded all over asia.

40) The government's unique blend of authority and free wheeling capitalism was again
instrumental in getting this industry off the ground.

41) The oil industry requires major capital investments to be globally competitive but the
impoverished country of Singapore in the 1970’s would not have been able to make that
investment itself. It needed to attract multinational oil companies to set up the industry
for it in exchange for sharing in the profits into the future.

42) When investing in a foreign country, especially one as new and potentially unstable as
Singapore, international companies are going to want a compelling reason to be there.
Since Singapore had few oil reserves of its own that wasn’t going to be enough by itself.

43) The potential for its geographic position was understood but economists have argued
that what really made it a logical choice was the freedoms foreign oil companies were
given to operate in the country, and the security they were given from an effectively one
 party state that could guarantee consistency of policy.

44) Another benefit that Singapore had was that it adopted an English common law legal
system from its previous colonisers which is a well recognised and widely understood
system for settling commercial disputes that was much more attractive to international
companies than alternative systems in the region.

45) Being in the right place at the right time and having the right authority to make the right
deals was the foundation of Singapore's economic success.

46) It’s unfair to call it all luck because it did capitalise on this early success by reinvesting
into its people and its industries but had it been located anywhere else in the world apart
from at the corner of what would go on to be the epicentre of global trade it probably
wouldn’t be anything nearly as remarkable as it is today.

47) Another problem with assuming that with the right policies other countries can follow in
the footsteps of singapore is that most of the time people are learning

The Wrong Lessons.

48) Singapore is often used as a poster child for what can happen when taxes and business
restrictions are low, the idea is that companies set up operations there and contribute
back to the economy in other ways.

49) The reality is that singapore does have taxes, and they’re not even particularly great on
corporations either, 17% is on the low end of average for countries around the world and
individuals can find a lot of places to live with zero income taxes.

50) That’s not to mention the other taxes that Singapore has as well including some of the
highest property taxes in the world and the insane costs associated with registering and
driving a car.

51) The average person and the average company operating in Singapore is going to end
up handing just about as much over to the government as they would in most other
advanced economies, they are just not going to do it in the same way.

52) Government revenue in Singapore is roughly 18% of GDP which is almost exactly in line
with the USA.

53) Singapore also has the advantage of being physically tiny so things like infrastructure
and services are much cheaper and easier to administer since they only have to service
what is effectively just one mid-sized city instead of the 3rd largest country on the planet,
so if anything the Singaporean government probably takes more than its fair share.
 54) It also kind of cheats a little bit. around 10% of its workforce commutes from Malaysia
every single day considering its extremely close proximity to the much larger country.
These workers produce value in the economy contributing to economic output but they
are not counted in the country's population.

55) This means when economists put together GDP per capita figures they are including the
output of the workers up here in the numerator but not adding them to the denominator
giving this figure an unfair advantage when comparing it to regular economies that don’t
have this daily cross border workforce.

56) This is similar to another economic outlier Luxembourg that is a very wealthy country in
its own right but is also helped by this unique glitch of economic arithmetic. We explored
this issue in depth in our video on that country so I don’t want to repeat too much else
here.

57) Either way Slashing taxes was not the key to Singapore's success, it was instead a
combination of the factors explored in this video.

58) If a country also found itself gaining independence in a region that would quickly develop
into the centre of global trade, and it gave power to a government that that could make
practically unchallenged decisions that impinged on the freedoms of their people, and
that government didn’t abuse their power to enrich themselves, and there were no better
alternatives available until world leading industries were established then yeah, sure that
country could be the next singapore of it’s region.

59) But that’s a lot of ifs, and as tempting as it may be to try and become an economy as
prosperous as singapore is, there are better examples to follow which will likely yield
much better results for the dozens of countries around the world now going through their
own periods of rapid development.

Ranking

60) Ok now it’s time to put Singapore on the Economics Explained National Leaderboard.

61) Starting as always with size,Singapore has a GDP of $466 billion dollars making it the
33rd largest economy in the world beating out regional rivals like Bangladesh, Vietnam,
The Philippines and Malaysia. Singapore gets an 8/10.

62) That impressive GDP is spread out over a population of just less than 5.5 million people
meaning the country has a GDP per capita of $73,000 putting it in line with the most
productive countries on the planet but behind the usual micronation outliers, even still it
gets a 9/10.
63) Stability and confidence is interesting. The country is in theory a multi party democracy
but in practice it has been ruled by a single party since its independence, for the most
part that’s just because the party is very popular and it has allowed the country to offer
degree of economic consistency that is hard to match, all while mostly avoiding the
pitfalls that comes from unchallenged political power.

64) Given it’s reputation as a safe haven in the region for trade and business it gets a 9/10
but missed out on a perfect score because of the complication that could eventually
arise from this system of leadership.

65) Growth has been incredibly strong, obviously it had to be to get from where it was 50
years ago to where it is today, but even in the last two decades the economy has
quadrupled in size and has only ever really been slowed by the asian financial crisis, the
GFC and covid, and even then it didn’t slow it down for long. The country gets a 10/10.

66) Finally industry, the country is today home to a number of extremely valuable industries,
it’s one of the largest oil traders in the world despite not having much oil of its own, it has
a surprisingly robust and technical manufacturing industry and of course there is still it’s
role as a global financial hub. It’s not a world leader in any of these industries by itself
and it hasn’t really developed any domestic companies that compete on the world stage,
but it still gets an 8/10.

67) All together that gives Singapore an average score of 8.8/10, which is incredibly
impressive and puts it all the way up here on the leaderboard.

68) If you liked this video you will also like one that we produced recently on another major
country in this region, Indonesia which could soon be one of the world's most powerful
economies. You should be able to click to that video on your screen now.

69) Thanks for watching mate, bye.