Quick Story of Singapore's Rags to Riches Journey

Rags to riches always inspires anyone, and put a country in the situation, Singapore fits the bill. A tiny island nation with small land, no natural resource, not even enough water, transformed itself through sheer vision of its leader, Lee Kuan Yew, into one of the most prosperous country in world. Through praticality and resourcefulness, they joined a bandwagon of industrializing Asian nations but twisted the rule book to fit its realities.

Poor Singapore

1965 saw a weeping Prime Minister Lee Kuan Yew devastated with the expulsion of Singapore from the Malaysian Federation, which he championed for the island state’s survival. Kicked out, the 41-year old Cambridge-educated Lawyer must then work with meager resources. A dauting task for any leader.

Living Conditions of Singaporeans - Like a child abandoned in the middle of a mall, Singaporeans felt this in 1965. They hoped that union with Malaysia would elevate the squalor conditions of the island. Forget the skyscraers and the Marina Bay Sands of today and imagine a whole island of small shanty houses called kamongs made of wood and topped by huge dried leaves dominating the landscape. Whatever proper building that stood may have been occupied by 10 or more families who divided the whole place into small cubicles. No privacy, hello diesease. 

Singaporean Kampongs
Credit: Ministry of National Development of Singapore

Health and Fire Hazards - places like this became hot bed of health and fire problems. Singaporeans relieved themselves outdoor, mostly without proper sewage, hence the job of a night soil man, who carries human waste to far away places, became a thing. Dengue, tuberculosis, and other sanitary-related disesases plagued the country. Electricity also hard to come by, hence most families used kerosene to give light in the night and cooking fueled by wood and charcoal. One wrong spark, a wooden kampong could burn bringing with it a whole neighborhood.

Poverty in Numbers - the lives of the Singaporeans reflected in numbers. 70% of the population lived in slums. In 1965, GDP per Capita of Singapore stood at USD 516, not the lowest, but not the highest either, being far behind Kuwait, Japan, and Israel. Unemployement rate stood at a whooping 14% out of the total population of a million. Literacy stood at only 52%. 1965 Singapore lived with mediocre income per individual, high unemployment and meager education. 

Socio-Policital Tensions - As Singaporeans lived roughly, add more the racial and political tensions between different communities. Chinese dominated the population but with sizable Indian and Malay minorities. The ethnic divide turned worst with the communists agitating and ambitioning to take power. The 1964 Riots highligthed this social divide that threated to burn the whole of Singapore. 

Deplorable living conditions with a divided population along ethnic and political lines, already amazing, how Lee Kuan Yew could have envisioned a prosperous country? What he did became a master class in nation-building that every world leader hoped to emmulate. 

Former Prime Minister Lee Kuan Yew surveying the swamp
that was to become Jurong Industrial Estate.
(27 October 1962. Image from the National Archives Singapore)

The Starting Point

Money solves everything, apparently this also applies to countries. Prosperity provides the capital for basic needs and later wants. At this point, Lee Kuan Yew and his equally talented cadres looked towards industrialization as a means to their goal of a prosperous Singapore. But the question, how?

Industrialization as Solution to Everything - Industrialization brings prosperity as already seen in cases of America, Europe, and Japan. It brings money to finance social welfare with the likes of housing, healthcare, sanitation, etc.  Moreover, factories allowed people regardless of background to come and work together, thereby improving social cohesion. Politically, rising standards of living gives Lee Kuan Yew’s party, the People’s Action Party, the credibility and gravitas to resist communism. Hence, industrilaization became the main path towards Singapore’s success.

Invisible Industrialization - before the rising factories and  exports laid the plans and the regulations that allowed this development. Regulation, education, and planning became the first steps in industrialization of Singapore. Lee Kuan Yew did not start from scratch. Fortunately, recommendations and some institutions already began 5 years before the expulsion.

UN Recommendation - in 1961, a UN mission led by Albert Winsemius, made a recommendation regarding Singapore’s development. “A Plan for Rapid Industrialisation” that came out from the mission proposed Singapore’s economic transformation from entrepot and retail as well as commodity trading economy to a manufacturing economy. They placed a goal of creating 200,000 jobs by 1970. The report also recommended the establishment of a government agency with the responsibility of overseing this manufacturing push. This became the Economic Development Board (EDB).

Business Friendly Climate - the key hallmark of Singapore’s development story laid with its friendliness towards foreign direct investment. In a region dominated by economic nationalism, Singapore looked towards foreign capital and multinational to fill up the money that local Singaporeans lacked. The Economic Development Board (EDB) spearheaded the push to attract foreign direct investments. They basically, as pointed “knocking on doors and explain Singapore.” They declared Singapore as a free port, hence no customs duty, they simplified regulations and tax regime, they lowered taxes such as corporate taxes with the Economic Expansion Incentive Act of 1967. The government rather than directly commanding the economy used incentives, carrots if you will, to direct investments in the priority sectors.

Clean and Stable Government - in addition to incentives, Lee Kuan Yew reformed towards a reliable government to attract business confidence. Corrption snuffed out by the new and independent Corrupt Practices Investigation Bureau. The Singaporean government attracted the best minds and administrators in the country with competitive salaries. Even today, the Singaporean Prime Minister received way higher salaries than the President of the United States. All of which aimed in preventing bribery and deterence against corruption alongside promoting professionalism and competency. 

Jurong Industrial Estate - 1965 witnessed Lee’s push for Singapore’s industrialization through foreign direct investments in labor-intensive and export-oriented industries. A choice made with the hope of solving Singapore’s high unemployment and small market by producing for products for selling to the West. Jurong Industrial Estate, a recommendation of the 1961 UN Industrialization plan and the headed by then Singapore’s finance minister Goh Keng Swee, took center stage. The initial problem laid in the fact that Jurong was a swamp and the project came to be known as “Goh’s Folly.” Dr. Goh and Lee beated the odds and the swamp became a reclaimed land hosting the beforementioned labor intensive light industries, such as textile, garments, toys, and electronic assembly. Foreign investment did came thanks to the incentives and capable administration. Soon the numbers reflected that developments

Initial Success in Numbers - as a result of reforms and investment, Singapore experienced double digit economic growth and increase in employment. From 1965 to 1973, GDP grew in the annual average of 12.7%. GDP per Capita jumped from just USD 516 in 1965 to USD 2,489 in 1975. Unemployment dropped from 14% in 1965 to only 4.5% in 1975. The recent developments also led to rising standards of living. Huge improvements in housing, which became a global sensation for its efficiency. Electricity and water became accessible to all Singaporeans. Education provided for all Singaporeans and geared towards continous improvement to match Singapore’s development needs.

Dr. Goh Keng Swee, 1948

Diversification and Upgrading the Economy

In the 1970s Lee’s Singapore achieved a newly-industrialized country status and even one of Asian Tiger Economies. However, in this point, the economy faced the developmental challenge called the Middle Income Trap. The middle income trap meant a country manufactures but it remained in the lower end of manufacturing and economic as well as income remained stagnant. Singapore and to the credit of Lee and his cadres knew about this and worked to upgrade the economy. If the 1960 and early 70s saw light industrialization, the late 1970 and 80s saw Singapore elevate towards high value manufacturing and services.

Levelling Up the Economy - Singapore began to invest heavily in research and development or at least attracting R&D to be made in Singapore from companies already investing in Jurong. Companies like HP, GE, and Texas Instrument welcomed such push. Singapore upgraded its education and technical training to provide the needed skills for high value manufacturing. In addition, in 1973, after an oil shock, Singapore doubled down its incentives to further petrochecmical and oil refining industries. These industries became another pillar of the economy. FInally, first vestiges of financial services began. Singapore began to attract multinational banks, foreign fund manager, insurance companies, and venture capital with tax incentives and stable regulations. The birth of Singapore as a financial center began in the late 70s and became part of the economy’s diversification to high value services in the 1980s.

Temasaek Holdings - The shift towards higher value industries and other income streams for Singapore also led to the foundation of Singapore government’s business arm - Temasaek Holdings. With local businesses still cautious of investing in capital-incentive and volatile utilities and services industries, the government took the role. Temasaek, founded in 1974, managed a huge portfolio of businesses, from Singtel, Changgi Airport, Keppel Shipyard, Port of Singapore, and finally the world renowed Singapore Airlines. Lee made sure Temasak ran independently without political interferance and run efficiently as a business. Hence, the business thrived and became globally aclaimed for efficiency and source of income and pride for Singapore.

From the Book By Generation For Generation of Temasaek Holdings

End of an Era - by 1990, Singapore completely transformed into a propserous country. From a manufacturer of toys and garments, it had become an investor in other countries. It operated companies and welfare schemes envied by the world. Its governance hailed as one of the least corrupt and most efficient. The slums and poverty that scarred Singapore in the 1960s completely disappeared earased by high value manufacturing, financial services, and later high tech industries. In 1990, the architect of Singapore’s survival and transformation, Prime Minister Lee Kuan Yew, stepped down in his post, handing over the batton to next generation of leaders…somehow, because he remained in government with positions such as Senior Minister until 2004 and Minister Mentor from 2004 until 2011 when he finally decided to retire, passing away in 2015.

Summing Up

An inspiring story, Singapore gives several lessons in development. 

1. It teaches practicality and resourcefullness. With a small poor populations, Lee’s government dropped any nationalistic tendencies and decieded to welcome foreign investors to finance and provide the capital for Singapore’s development.

 

2. The Southeast Asian country also proved that development begins from the inside. Singapore built an ecosystem that attracts business confidence with efficient and clean government, stable regulations, commitment to the rule of law. Without the following reforms, business whether local or foreign would not have come or stayed for long.

 

3. Finally, Singapore did not sit in its laurels. It continued to evolved, resinvesting their profits to industries that provided higher profits. They conitnously developed their regulations, their ecostytems, to attract and maintain such business. 

These fundamental lessons allowed Singapore to prosper and give a world a fascinating rags to riches story that inspires many.

References:

_______________. Our Early Struggles. Ministry of National Development. Accessed April 3, 2026. URL: https://www.mnd.gov.sg/our-city-our-home/our-early-struggles 

_______________. Unemployment, total (% of total labor force) (national estimate) - Singapore. World Bank Group. Accessed on April 4, 2026. URL: https://data.worldbank.org/indicator/SL.UEM.TOTL.NE.ZS?locations=SG&utm_source=copilot.com 

van Elkan, Rachel. Singapore’s Development Strategy. IMF eLibrary. Accessed April 3, 2026. URL: https://www.elibrary.imf.org/display/book/9781557754639/ch003.xml 

Misnhawi, Salman. Singapore’s Transformation from Developing Nation to Global Economic Success. Medium. Accessed April 3, 2026. URL: https://medium.com/@iamminshawi/singapores-transformation-from-developing-nation-to-global-economic-success-c19755ce72d1