NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, March 24, 2015

Lee Kuan Yew, the founding father of one of Asia’s smallest but most developed economies, has died. Lee led Singapore after its separation from Malaysia to emerge as one of the world’s most powerful financial centres.

The tiny nation, whose main industry was manufacturing at independence, saw its GDP per capita skyrocket under Lee to one of the highest in the world in 2013, behind just oil-rich Qatar and private banking centre Luxembourg, according to the IMF. Its population has doubled to more than 5m.

Singapore flourished on the inherited advantages and foresightedness of Lee to transform into the ranks of New York, London and Switzerland as a global financial hub. As a key port in the British Empire, Singapore was in a strong position for trading activity. Lee built on this, as the country had no natural resources of its own to exploit.

Even though Lee was criticised by many for leading the country in an authoritarian style that stifled political dissent and press freedoms, his firm grip on power and maintenance of stability gave little scope for corrupt financial practices. The orderliness that Singapore became known for was attractive to foreign investment – billions of dollar poured in, ensuring the country’s success.

Lee maintained a tight grip on domestic finance by preventing the internationalisation of the Singapore dollar and limiting the operations of foreign banks. This meant international firms saw an opportunity to establish themselves in the tiny island nation. Sound financial and economic policy coupled with a corruption free environment and technological advancement meant many multinational firms chose Singapore as a regional hub. Lee championed free trade, which helped Singapore attract a free flow of foreign investment and multinational giants such as General Electric.

One clear factor in Singapore’s rise was Lee’s ability to take consistent advantage of global financial upheavals. This began in 1971 when America de-linked the dollar from gold. Lee was quick to grasp this opportunity and established Singapore as a regional centre for foreign exchange.