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On his first trip to the United States in 1967, former Singapore Prime Minister Lee Kuan Yew attended a lunch gathering in Chicago hosted by American businessmen. One participant asked Lee how Singapore, once just a small fishing village, became a metropolis that houses two million residents. Lee offered a clear explanation: Singapore manufactured products that were the cheapest in the world, yet were of top quality. He said if Singapore was unable to do that, it would not survive. Word spread throughout corporate America: “Keep your eyes on Singapore.”
When Lee was inaugurated as prime minister in 1959, Singapore’s per-capita Gross National Income (GNI) was just US$400. The landscape was so barren that Singapore had to purchase even tap water from its neighboring countries. Singapore’s economy, which had depended on its colonial ruler England for 80 percent of its support and trade, fell into panic after British troops pulled out in the mid-1960s. Trade with neighboring Indonesia and Malaysia also dropped sharply. Singapore resorted to opening its markets and attempting to boost exports in order to survive.
In just 20 years, Singapore grew to become the largest trading hub in Southeast Asia. Its strategy of nurturing exporters by cooperating with multinational companies paid off. Singapore became a link between Southeast Asia and the world, where multinational businesses dropped off products to be exported to Southeast Asia, while products manufactured in Southeast Asia converged in Singapore to be exported worldwide. Singapore is now an export giant that ships out products worth double its gross domestic product (GDP). Around 5,000 foreign businesses and 220 multinational corporations have their Asia-Pacific headquarters in Singapore, whose total land mass is slightly larger than Seoul.
Singapore’s economy contracted 11.5 percent during the first quarter of this year, compared to a year ago. Exports are also down 20 – 30 percent so far this year. Changi Airport, where 63 carriers provide flights to 139 cities around the world, and the port of Singapore, which handles cargo headed to 600 ports in 123 countries, are quieter. According to some projections, Singapore’s economy could shrink between six to eight percent this year.
Singapore emerged relatively undamaged from the 1997 Asian financial crisis, which impacted more severely in Korea and other countries in the region. At that time, Lee boasted that Singapore was still the leader of Asian values and the Asian manufacturing model. But he probably has little to say this time. The Financial Times reported that the economy of Singapore was sinking as exports drop rapidly. This is the problem with depending wholly on exports without the support of domestic demand. It is also a problem facing Korea.