How Singapore INCENTIVISED itself into a First World Country

Singapore went from a Third World country to a first world country in 50 years. This is already impressive but what makes this transformation phenomenal is that this country was just a British Colony, without any natural resources, less than 700q km and no army. They achieved independence from the British and Malaysia, but their independence was extremely fragile. Their economy was simply running on servicing the remaining British battalions that were on their way out.  People talk about Dubai being a miracle, but hey Dubai had OIL, all Singapore had was 2 million people lead by a man with INEXHAUSTIBLE ENERGY, Integrity and one who knew the power of Incentives.

It is easier to afford character when you are wealthy and well recognised, but displays of discipline, fairness and integrity when you have close to nothing but a dream is hard to come by. Lee Kuan Yew has systematically changed the future of his people, giving most of them a share of prosperity of Singapore. From surviving Britain and Malaysias pulling out, to building an Army from scratch, to creating a Financial Centre in the East, creating a Fair and not a Welfare state, to changing the attitude of the unions, killing corruption, greening singapore to nurturing talent his methods are unprecedented.

While Lee’s governance standards as well as his implementation was fantastic, what really seems to have worked was the way he Incentivised his countrymen into achieving the countries goals.

1.  BRAWN AND BRAIN – Singapore knew that it could not support and army with such a fragile economy and more so because it had a population of just 2 million.If the young and able were to join the army, who would grow the economy ? They needed a system that was not regular. Finally their defence system was borrowed from the Israelis, wherein every male ( israel has females also ) was supposed to be trained in the army of combat and serve the army for 24 months, and had to report back periodically all throughout their lives. Today they have 71,600 personnel and 13,86,000 reservists.  All ranks here depended on skill and not pedigree. This was particularly difficult because the people were basically a trading community and this Spartan approach to life did not come about naturally to them. This methods had multiple benefits, it was efficient, around limitless amounts of patriotism and made everyone think that protection was their problem. They proved that the war making ability of a small, vigorous, well-educated and highly motivated people should not be underestimated.And here is the best part, their defence budget is just 3.5% of their GDP !!!                                                
2.       SHARE OF THE PIE – 
   • Lee wanted a home owning economy. He realised that people took much better care of their homes and surroundings when they were owned. He made sure their PPF was high and that it could be used as downpayment for a house. Another thing that he did was he subsidised asset purchases. He wanted people to own a home there, and that would even convince them of being the army to defend it.
   • Lee made sure most of the public utilities such as transport and energy were listed and he massively encouraged people to subscribe to those issues. “When you own a slice of the public infrastructure that you use everyday, you are very unlikely to misuse it.”
   • All wealth redistribution was to be made thorough Asset Enhancement and not Subsidies.
3.                      SELF RELIANCE –
   • Despite all of its troubles Singapore never asked for aid. Lee believed in NURTURING SELF-RELIANCE AND PENALISING DEPENDANCY.
   • The pension system was designed in such a manner that one paid for his own pension. The government or the future generation was not responsible for the pension or the healthcare of the senior citizens. This has encouraged  self-reliance, self-worth and thriftiness.
   • Singapore BANNED ALL CONSUMPTION SUBSIDIES.
   • It could have easily asked for other countries to provide it with battalions to defend its fragile economy, but it decided to hire other countries professionals to train their people instead. It took a little longer but this was the equivalent of “teaching a man how to fish, instead of handing him one.”
4.  TALENT MANAGEMENT
   • Lee encouraged graduate men to only marry graduate women. He noticed that if both parents were graduates, the kids were almost certain to be the same.
   • Special admission privileges were given to graduate parents if they had more than two kids. He wanted graduate parents to have more than 2 kids. Admission into institutes like Nan yang were almost guaranteed for them. He realised that non-gradautes were growing 2 fold and graduates were not even replacing themselves and wanted to reverse the process.
   • He believed that talent is Singapore’s greatest asset and the government spent heavily on SKILLING the people as well as making sure every smart kid from poor parents was given a scholarship.
   • The prime minister, during his tenure, took a sabbatical at Harvard, during his tenure !!!!
5. KEEPING THE GOVERNMENT CLEAN OF CORRUPTION
   • This is where you can see Lee’s masterstroke of using incentives in full play. Following are his quotes.
   • “Petty power invested in men who cannot live on their salaries is an invitation to major misuse of that power.”
   • All my ministers except one were university graduates.
   • Most of us had working wives who could support the family if we were imprisoned or not around.
   • The bane of most countries is the high cost of elections.
   • If ministers were underpaid, one could not expect them to stay in office for long, earning a fraction of what they could earn outside.
   • Adequate renumeration is absolutely vital for high standards of probity in political leaders and high officials.
   • No allowances were given. A lump sum was decided and the ministers were allowed to choose what they wanted to spend it on.
   • Singapore was a FIRST WORLD OASIS IN A THIRD WORLD REGION.
6.  DEALING WITH THE UNIONS Singapore had a union problem, a problem that they had inherited from the British and one that was continuously effected by the neighbouring regions in the area. They not only tackled it but also became one of the most efficient labor in the world.
   • “Pay for performance, not pay for time.”
   • Lee made a promise that the Singapore dollar would never be de-valued.
   • It was made illegal for a trade union to take strike or industrial action without a SECRET BALLOT. This stopped the voting from open show of hands where the dissenters were intimidated into acquiescence.
   • Wage increases were not to increase beyond productivity increases.
7. GREENING SINGAPORE
   • Buildings were to be judged not by their size but their maintenance and greenery.
   • Greening became a competition amongst the neighbouring countries.
   • Singapore’s small size forced their people to work, play, and reside in the same small space, and this made it necessary to preserve a clean and gracious environment for rich and poor alike.
8. MANAGING MEDIA
   • Chinese and Malay have a cultural practice for constructive support of policies they agree with, and criticism in measured terms when they do not.
   • It was a declared policy that newspapers shouldn’t be owned by foreigners.
   • The media was forced to re-inforce and not undermine, the cultural values and social attitudes being inculcated in universities and schools.
9. CREATING A FINANCIAL CENTRE
   • Nothing happened after San Francisco closes and before Zurich opens. Singapore proposed that they open up in between so that the world could have a 24-hour round-the-world service in money and banking.
   • Lee’s cardinal objective was not to maximise returns on the funds of Singapore, but to protect the value of savings and get a fair return on capital.
   • In Hong Kong what is not expressly forbidden is permitted; in Singapore what is not expressly permitted is forbidden.
   • In the financial system, when you follow conservatism, you do not need to chase success. Someone will falter and you can consolidate. 
   • Today Singapore has 200 banks with an asset size over 2.5 trillion, is the 3rd largest FX volume in the world and over 40% of the listed companies in the SGX are foreign.
   • Avoiding Stupidity, is easier than seeking brilliance – Munger.

There have been many admirable stories of countries in reclaiming their independence. All impressive in their own way, but very few who have achieved excellence after achieving their independence. Singapore is a shining example of this.

Lee and his people did not have any experience in running a country, especially one that resembled a city. They demonstrated that with intellect, energy, integrity and drive, one can easily trump experience. They have been learners and implementors. Lee’s system of rewarding self reliance, and penalising dependancy has worked out extremely well for him.

Above all, Singapore is an example of what Inexhaustible Energy can do !

Lee Kuan Yew – From Third World to the First

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