Since 2004, the World Bank has produced the annual ‘Doing Business’ report, which ranks countries on 10 factors reflecting the ease with which entrepreneurs and businesses may conduct economic activity in a given country.
Singapore gained its independence in 1965, when it was, in effect, thrown out of Malaysia. At that time, Singapore was backward and poor — a barren speck on the map in a dangerous part of the world. Indeed, Singapore’s per-capita income in 1965, would be roughly equivalent to that of a country like Kosovo or Angola today, adjusted for inflation. However, Singapore had a leader, Lee Kuan Yew, who had clear ideas about how to modernize the country — a strategy known as the “Singapore Strategy”. This strategy contained the following elements:
Number one was stable money. Singapore started with a currency board system — a simple, transparent, rule-driven monetary regime. Currency boards operate on autopilot, with automatic adjustments keeping the system in balance. Accordingly, currency boards deliver discipline to the spheres of money, banking, and fiscal affairs. For Singapore, a currency board provided stable prices and free convertibility at a fixed exchange rate, which attracted foreign investment.
The second point was that Lee Kuan Yew ruled out passing the begging bowl. Singapore refused to accept foreign aid of any kind. This is a far cry from many developing countries, where, when you pick up the paper, all you see are politicians and bureaucrats trying to secure foreign aid from someone, be it an NGO, a foreign government, or an international financial institution like the World Bank. By contrast, “no foreign aid” signs hung, and still hang, figuratively outside every government office in Singapore.
The third point was that Singapore strived to have first-world, competitive private enterprises. This was accomplished via light taxation and light regulation, coupled with completely open and free trade — in short, policies that enabled Singapore’s private businesses to become Asian tigers.
The fourth point in the Singapore strategy was an emphasis on personal security, public order, and the protection of private property.
These were the four goals of Lee Kuan Yew’s Singapore Strategy: stable money, no foreign aid, first-world competition, and law and order. Now, to accomplish these goals, the key to the strategy was a “small,” transparent government — a minimalist government that avoided complexity and “red tape” — hence top ranking in the Doing Business report.