You may have heard that Singapore is run like a corporation and that it is successful.
The country has had significant GDP growth since independence in 1965, and now its per capita GDP is among the highest in the world.
Government coffers and Singapore's population grew as well.
How rich is the country and its people? And how did Singapore get so rich in the first place?
Today we are going to explore the answers to these questions.
So keep reading!
Singapore used to have nothing
In the past, Singapore had one of the worst slums in the world,according to a 1947 British colonial government Housing Committee Report.
Singapore also could not afford significant natural resources such as oil, coal or gas. These are goods that can be used for the country's own use or to be sold to third parties.
Furthermore, Singapore is simply a small parcel of land measuring 50 km from east to west and 27 km from north to south.
The odds were against the survival of this small island.
What has changed?
The turning point could be said to have been when Singapore became an independent nation with the late Lee Kuan Yew as Prime Minister.
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How rich is Singapore now?
Singapore's progress is simply a rags-to-riches story. Modern Singapore is manicured, clean and green.
SingaporeGross Domestic Product (GDP), one of the main indicators of economic progress, has grown by 183% over the last 20 years. Total GDP (at current prices) in 2020 was S$469.1 billion.
|GDP (at current prices; millions of dollars)||165.632,4||160.885,6||165.698,1||170.117,9||194.433||212.723||236.158,8||272.697,6||273.941,6||282.394,5||326.980,1||351.367,9||368.770,5||384.870,3||398.947,9||423.444,1||440.372,2||474.115,1||507.123,9||510.737,8||469.095,9|
When we look at thePIB per capita, increased from S$41,121 in 2000 to S$82,503 in 2020, a growth of 100%.
|PIB per capita (USD)||41.121||38.880||39.679||41.343||46.664||49.867||53.655||59.429||56.607||56.619||64.408||67.783||69.417||71.283||72.938||76.503||78.536||84.478||89.936||89.547||82.503|
Also, Singapore is rich in terms of the amount of money it has.
These are the three organizations in Singapore that run thethe country's reserves and their holdings:
- Monetary Authority of Singapore (MAS): S$535 billion in June 2021 [fact]
- GIC Private Limited: At least $100 billion (or S$135 billion) by August 2021 [completed]
- Temasek Holdings: S$381 billion by March 2021 [completed]
No total,Singapore has assets of at least S$1.05 trillion or US$777 billion. The actual number is likely to be higher, as the size of the GIC's fund is "well over $100 billion."
According to the Sovereign Wealth Fund Institute (SWFI), the two SWFs, GIC and Temasek, rank 6th and 7th in the world, respectively, in terms of total assets.
singapore is tooone of 11 countries in the world with a AAA credit rating, which means strong credibility.
Are Singaporeans rich too?
The country appears to be doing well. And your people?
Let's take a look at two financial components: the population's income and wealth (or net worth).
Over the past 10 years, theaverage gross monthly income(including employer's CPF contributions) increased from S$3,000 to S$4,534. This is for full-time employed residents.
|middle of the year||2010||2011||2012||2013||2014||2015||2016||2017||2018||2019||2020|
And to investigate furtherWealth of Singapore Residents, let's see theInforme Global Wealth 2021 do Credit Suisse Research Institute.
Average wealth per adult in Singapore is $332,995, the 12th highest in the world. But the average wealth per adult, which best represents the population, is $86,717.
Singapore's adult population has an estimated total wealth of US$1.627 billion, or US$1.63 trillion.
According to the report, there are269,925 millionaires, of which 60 are worth more than half a billion dollars. Some ofrichest people in singaporethey include Eduardo Saverin, Forrest Xiaodong Li and Wee Cho Yaw.
Although these statistics show that there are many wealthy people in Singapore, there are still 720,000 adults in Singapore with less than $10,000 in wealth.
Inequality of income and wealth in developed countries is common. If we were to take into account therising cost of living in singaporeWill members of lower income groups be able to cope?
Fortunately, the government has made fighting inequality a national priority and has reduced it over the years. It does this by using government transfers (ICMS vouchers, CPF recharges, etc.) to redistribute wealth to low-income families. In 2020, oneaverage of S$13,670 in government transfers, the highest in any given year, were awarded to each family member staying in one- and two-bedroom HDB apartments.
The government may be in a position to provide more to those in need because of the reserves it has built up over the years.
Next, we discuss the ways in which the government can accumulate such an amount.
Why is Singapore such a rich country?
Singapore's success is made up of many small decisions.
While not exhaustive, here are five main reasons why Singapore is so rich and how it came to be.
1) Have a strong and pragmatic leadership
To run a profitable and successful business, you certainly need good leadership.
Likewise, Singapore was fortunate to have capable leaders at the helm.
One such person was the late Lee Kuan Yew, also known as the founding father of the nation. He was the first Prime Minister of Singapore and first took office on June 5, 1959 and spent a total of31 years and 178 days in office. One of Lee's focuses was economic development.
While others may consider the Singapore operation as “soft authoritative”, made progress easier as there wasn’t constant resistance along the way. But this will only be possible if the country is governed by capable leaders in clean and honest government.
How did Lee do it?
He established anti-corruption legislation and tied the salaries of those in government to the best professionals in the private sector. This allowed the government to attract and retain competent people.
As of today, the Prime Minister of Singapore is thehighest paid politician in the world, earning approximatelyBRL 2.2 million per year, including bonuses. The president earns around S$1.5 million a year.
Ministers who manage their ministries receive fixed salaries and bonuses linked to the performance and socio-economic outcomes of Singaporeans. These ministers usually earn S$1.1 million a year.
By comparison, America's top political leader, the president, earns a$400,000 per year salary.
In practical terms, when government leaders are paid well and their performance is linked to socioeconomic outcomes, they are more inclined to focus on building the country (and less on making money through unscrupulous means).
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2) Take advantage of your strategically located port
Although Singapore has no natural resources and not much land, it does have a competitive advantage, which is its port, which is strategically located on the world map.
The government fully maximizes the use of its port to increase its GDP.
For example, it engages in warehouse trade, importing natural resources or partially manufactured products regionally and globally, refining them, and then re-exporting them. This can be seen in the wafer manufacturing and petroleum refining industries.
In 2020, ortotal merchandise trade (at current prices) was S$969.1 billion, of which S$453.5 billion were imports and S$515.6 billion were exports. With over 130,000 ship calls in a year, Singapore is thebusiest port in the world in terms of shipment tonnage. The maritime industry has contributed7% of Singapore's GDP in 2017.
While Singapore has since diversified into other ways to boost GDP, it continues to invest in the maritime industry, recognizing that what worked must continue to work. With the emergence of competition at the regional level, the government intends to strengthen the port's leading position, which will also boost other sectors.
3) Openness of the country to attract foreign investment from multinationals
Knowing that the port of Singapore cannot do much, the government looked to other areas to further boost the economy.
An important decision was to open up the country to attract foreign investment from all over the world.
She did this by implementing business-friendly government policies and providing valuable human capital.
Here are some of the reasons why Singapore was able to attract foreign investment:
- tax breaks
- Ease of establishing business.
- Robust, business-friendly ecosystem
- liberal immigration policies
- corruption free government
- politically stable environment
Furthermore, the government has invested heavily in education so that Singaporeans are well prepared to handle complex roles. English has also become the "standard" language in Singapore, allowing its people to communicate with others on a global scale.
Going a step further to provide a more diverse workforce, the government allowed companies to hire foreign professionals. This has closed the skills supply gap and shortage to keep Singapore attractive to global companies.
These factors, among others, helped increase overall GDP and allowed the economy to grow without natural resources.
As of 2020, theindustries that contributed the most to GDPThey were manufacturing, wholesale, and finance and insurance, contributing 21.5%, 16.8%, and 15.7%, respectively.
4) Budget and spend wisely
When the economy grows, the operating income received by the government usually also increases. Most of it comes from corporate and income taxes.
The government budgets its money annually so that it can be maximized to further build the nation, such as building schools and health facilities and spending money on development.
In the early 1970s and 1980s, the government had to borrow money to build infrastructure such as the MRT and Changi Airport, but since the 1990s it has been able totake advantage of budget surpluses for infrastructure projects.
5) Thinking ahead to build strong reserves
Singapore remains a country with few natural resources. Your port may be under threat. And globalization can reduce the effectiveness of human capital coming from Singapore.
One way for the government to try to mitigate these risks is by creating reserves.
By investing the country's surpluses and assets (with land sales, etc.), you can build up a considerable sum.
The three organizations that manage the reserves, MAS, Temasek and GIC, collectively own at leastS$1.05 trillion (US$777 billion) in assets.
They have three objectives, which are to act as an emergency fund, protect the Singapore dollar, and provide a continuous stream of income.
Investment returns from reserves help ensure that Singapore consistently runs a budget surplus while continuing to accumulate reserves. This will help the current generation and future generations to come.
What can we learn?
A key factor in Singapore's success was Lee Kuan Yew. He helped shape the economy and brought prosperity to the country and the people who lived in it.
Charlie Munger, partner of Warren Buffett, said that the only mantra he followed in life came from Lee, and that was "find what works and do”.
While personal finances can be tricky at times, to be rich (or have a higher net worth) you need to focus on the core areas that are completely within your control.
The first is to increase your income by being excellent at what you do (investing in your career). Since income is needed to pay bills and allow you to save, make sure you have insurance to protect you. you should toobudget your money effectivelyso you spend less and save more. And finally, you want to have aemergency fundand invest excess savings to generate healthy returns (andbeat inflation).
Do not know where to start? Consider going through acomprehensive financial planning session.
Disclaimer: Any statements or opinions expressed on this site are my own. The information is for informational purposes only and should not be construed as financial advice.