“We are just a small island”

How Singapore became one of the world’s financial centers in 50 years

Singapore's economy grew 300 times in 50 years. Key factors helping the country to achieve such growth were favorable geographic position, openness to western economies and the government’s modernisation policy.

Until the middle of the 20th century, only London and New York could boast the status of the world financial centers. In the 60s, they came under pressure from Asian cities with Singapore being one of the first and most dynamically developing new business hubs. “Our neighbours are rich in natural resources – oil, gas, forests; they have rivers and hydroelectric power stations. How were we supposed to survive?” says Lee Kuan Yew, the first Prime Minister of the Republic of Singapore, creator of the “Singapore economic miracle”, in his Forbes magazine interview.

Singapore's rise was initially stimulated by its geographic position at the crossroads of the sea routes. The British crown established a colony in Singapore and was the first to benefit from its favourable location. Singapore became an important navy base which provided support to British ships on their way to China. The role of the island grew significantly as Suez Canal was built in 1869 contributing to the global trade boom. Resource-poor Singapore, which even had to import water, became one of the biggest rubber exporters and consolidated its economy around port activities. Singapore soon became known as Eastern Gibraltar and is nowadays one of the busiest ports in the world.

Singapore declared independence in 1965 and has since become a connecting point between South-Eastern Asia, the Far East and other regions. While most of its neighbours used protectionist policies, Singapore did everything to attract foreign investors. Lee Kuan Yew was thinking globally even before the phrase itself came into use. In his interview to Forbes, he explains that the country was striving to become attractive to western businesses, “All major companies are present in Singapore. Why? Because of stability, secure investment climate, effectiveness and reliability”. Such favourable conditions helped to set up in Singapore large-scale electronics manufacturing. Law liberalisation and fight against corruption also played a crucial role in the economic development of the island. A large number of police officers were dismissed, and successful private lawyers were invited to take court positions. An education reform was initiated too.

Today Singapore occupies the first places in the Doing Business rankings. It is a major regional financial center specialising on trade in the South East and East Asia. Singapore is currently fourth in the Oxford Economic Forecasting ranking of world financial centers. It is the largest currency exchange in Asia and this year, it has become the third largest exchange in the world, taking Tokyo's place. Singapore accounts for 5.7% of all currency exchange operations (compare to 41% in London and 19% in New York).

Singapore’s authorities have managed to rapidly set the country’s economy up to the world standards but today they are facing a new challenge. The country's growing middle class is demanding institutional political reforms, a process that many Asian nations have been going through in the last decades.