Ngiam Tong Dow - Dynamics of The Singapore Success Story PDF

Reprinted with the permission of the Singapore Land Authority.
“For those who are keen to know the secret of the Singapore success story
from Singapore’s most eminent and outspoken former civil servant, this book
is a required reading. Mr. Ngiam’s views are eloquently, clearly, and interestingly
presented in his commentaries, be they on land utilization, land transportation,
taxation, public housing, education, bilingualism, immigration, and monetary and
fiscal policy, or on the CPF. A book like this can only be written by him, drawing
from the development experiences of Singapore and throwing much light on
the development of this country over four decades.”
LIM CHONG YAH
Albert Winsemius Chair Professor of Economics, Nanyang Technological University
“Those born in the 1970s and after have witnessed the rapid development of
Singapore but not always understood the fundamental precepts and processes
of decision making. Benefits are sometimes taken for granted and there may
be grumbling about constraints. In this context, what Mr. Ngiam has presented
in this book is vitally important and well worth listening to—as a long time
and consummate insider to the process, as well as, since his retirement, an
independent voice.”
SIMON SC TAY
Associate Professor, Faculty of Law, National University of Singapore
“As one of the key figures engineering Singapore’s economic ascent, Mr. Ngiam
Tong Dow is in a good position to crystallize the Singapore experience and
present it to the world. One of the success factors Mr. Ngiam has highlighted
in this book is pragmatism that has also characterized the Chinese experi-
ence since 1978. For those concerned about China’s great transformation,
Mr. Ngiam’s speeches provide food for thought in terms of governance and
knowledge economy.”
YAO YANG
Professor, China Center for Economic Research, Peking University
Dynamics of the
Singapore
Success Story
Insights by Ngiam Tong Dow
Edited and introduced by
Zhang Zhibin
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Printed in Singapore
1 2 3 4 5 13 12 11 10
To my wife Jeanette Gan,
our family—
Ngiam Siew Ching and Lee Cheng Dee,
Ngiam Shih Kwang and Ong Yean Sze,
And our grandchildren—
Shaun, Clarissa, and Daniel.
Table of Contents
Foreword ix
Introduction xi
Editor’s Acknowledgments xxxv
Part I: Toward a Knowledge-based Economy:

Dynamics of the Singapore Success Story 1
Musings of a Singapore Administrator 9
From Third World to First? 21
Strategic Pragmatism 27
The Strategic Pragmatism of China and Singapore 35
China, Japan, Singapore: Three Development Perspectives 43
A Socratic Dialogue: Global Competition
in a Knowledge-based World 47
The Ministry of National Development in the 21st Century 51
The Role of the Ministry of Finance in Singapore’s
Economic Development 59
Exporting Knowledge: Can Singapore Compete? 65
Looking within for Solutions: Building and Exporting
Our Knowledge 73
The Bukit Timah Dialogue 79
The Development Economics of Emergent Countries 83
viii Table of Contents
Part II: Pillars of the Knowledge-based Economy 91

Political and institutional pillars
Foreword to Management of Success: Singapore Revisited 93
Singapore Elites for the 21st Century 99
“Sense of Urgency” Drove Creative Ideas 109
Reporting: Then and Now 113
Educational and social pillars
Economics and Economists in the Public Administration
of Singapore 119
On Thinking in an Enlightened Society 131
Of Government, Innovation, and the Social Sector:
An Interview with Ngiam Tong Dow 137
Individual Rights and Public Interest in Development:
Singapore’s Experience 145
HDB Should Also Build Condos 155
A Winning Formula, “But We Overdid It” 165
Singapore in the New World 171
Financial and banking pillars
The World’s First Venture Capitalist 177
Singapore Banking in the 21st Century 185
Part III: Implications of the Singapore

Success Story to China 191
Is China’s Growth Sustainable? 193
The Selection of China’s Top Leaders 197
Land Reform and Sustainable Growth 199
Singapore–China Collaboration and Partnership in Science
and Technology: Possibilities? 203
List of Acronyms 209

Index 213
Foreword
I t is no secret that Singapore has developed into one of the most

successful economies in the world. The GDP of Singapore has in-
creased a hundredfold since its independence forty-five years ago.
How was this achieved?
Strangely, the answer to this question remains a secret. Undoubt-
edly, many books have been written about Singapore’s successes, some
by Singapore’s leaders. All provide valuable insights. However, the full
story still remains to be told and understood.
We need to get more firsthand accounts written by the key players,
especially in the early years. Sometimes a good story tells more than
a long academic treatise. This is why Mr. Ngiam Tong Dow’s accounts
of his many productive years in the Singapore Civil Service are very
important. They provide valuable insights into the thinking that went
on behind the scenes.
There is no doubt that Mr. Ngiam Tong Dow had a ringside view
of many key public-policy decisions made in Singapore in the early
years. No mere spectator, he was in many cases a tough advocate,
fighting for his policy prescriptions. Often, he won. When I joined the
Singapore Civil Service in 1971, I soon learnt that Mr. Ngiam was one
of Singapore’s most respected and trusted civil servants. Hence, I join
other Singaporeans in urging Mr. Ngiam to write even more about his
public policy experiences. This book is, therefore, a valuable follow-
up to his earlier volume, A Mandarin and the Making of Public Policy:
Reflections by Ngiam Tong Dow.
x Foreword
As Dean of the Lee Kuan Yew School of Public Policy (LKYSPP), at

the National University of Singapore, I am truly proud that Mr. Ngiam
has agreed to serve as an adjunct professor at our school. His presence
adds significantly to the prestige of the school. In addition, he gen-
erously shares his wisdom with our students, as in the chapter titled
“The Bukit Timah Dialogue.”
Mr. Ngiam is also setting new standards with his candor. In one in-
terview, he said colorfully: “When I was in the government, I gave free
advice. After leaving the government, I give advice freely.” He has also
had the courage to challenge some of the “sacred cows” in Singapore’s
public policies. For example, he suggested that the government should
not try to retain all of its scholars. It should release half of them to
the private sector. He also suggested that Singapore should not just
rely on multinational corporations but also support its own small and
medium enterprises.
I wish Ngiam great success with this book. I hope he will carry on
speaking and writing, perhaps with even greater candor in future
volumes.
Kishore Mahbubani
Dean
Lee Kuan Yew School of Public Policy
National University of Singapore
Introduction
Zhang Zhibin
The Secret of the Singapore Success Story

The Singapore success story has been widely read. How and why this
transformation came about, however, has seldom been examined and
publicly revealed.1 In particular, very few insiders with firsthand ex-
perience have chosen to illuminate the secret of Singapore’s success,
yet it is this aspect of the Singapore story that most intrigues many
developing countries.
This book fills the gap. Ngiam Tong Dow has mused over the deep dy-
namics of the Singapore story since his retirement from the Singapore
Civil Service in 1999. In his own words:
How did we increase our per capita income from S$500 to S$50,000?
How did we reduce our unemployment rate from over 10 percent to
full employment? How did we resettle and re-house 85 percent of
our people from slums into low-cost apartment housing with lifts
1
There have been few such attempts to figure out the secret behind the Singapore
success story, e.g., W. G. Huff, The Economic Growth of Singapore: Trade and
Development in the Twentieth Century (Cambridge University Press, 1997);
Edgar C. Schein, Strategic Pragmatism: The Culture of Singapore’s Economic
Development Board (MIT Press, 1996); Boon Siong Neo and Geraldine Chen,
Dynamic Governance: Embedding Culture, Capabilities and Change in Singapore
(World Scientific, 2007).
xii Introduction
and modern sanitation? How did we raise our education from pri-
mary to tertiary levels? 2
Based on his rich, forty-year experience in Singapore government as

a senior civil servant, Ngiam’s thoughtful reflections that resulted in a
clear picture of the Singapore way to economic success are embodied
in this book. The book is, then, especially useful for three groups of
people. First, for those interested in Singapore’s past experience, this
book indulges, at least partially, their curiosity about why and how
Singapore succeeded; second, for those in developing countries ea-
ger to learn from and make use of Singapore’s public policies, this is a
guidebook that identifies the underlying dynamics; and third, for those
with a scholarly interest in development economics, this provides a
Singapore case study, with its new mode of economic development.
The new mode of economic development embedded in Singapore’s
success from 1959 to the present, according to Ngiam, is the continu-
ous transformation into a knowledge-based economy, where know-
how and expertise become as critical as other economic resources, or
even the center of the wealth-producing process. The creation, applica-
tion, transfer, and management of knowledge are the driving forces of
economic growth in Singapore. It explains how and why the Singapore
economy worked as it did in the past five decades. Singapore’s national
competitiveness in the long run, Ngiam believes, will be determined
again by its future creation, application, transfer, and management of
knowledge: “How well we do it will determine whether or not we con-
tinue to have a robust competitive economy.”3
A knowledge-based economy is “one in which the generation and
the exploitation of knowledge has come to play the predominant part
in the creation of wealth. It is not simply about pushing forward the
frontiers of knowledge; it is also about the more effective use and ex-
ploitation of all types of knowledge in all manner of economic activity.”4
Peter Drucker popularized the concept of a “knowledge economy” or
Dynamics of the Singapore Success Story, 4.

2
Ibid., 7.
3
Department of Trade and Industry, UK, Our Competitive Future: Building the
4
Knowledge-driven Economy, 1998.

Introduction xiii
a “knowledge-based economy.”5 According to Drucker, the applica-

tion of knowledge produces fundamental changes in the economy and
society in three ways: improvement, exploitation, and innovation.6 In
the classical economic growth model, land, labor, and capital are the
three important inputs of production. Now it is widely recognized that
technological innovation must be the additional, even the most critical
input for continuing development. With knowledge as the input, eco-
nomic growth becomes endogenous.7 The whole world has witnessed
the increasingly intense use of knowledge in economic activities. Thus,
said Lester Thurow, “Today, knowledge and skills now stand alone
as the only source of comparative advantage. They have become the
key ingredient in the late twentieth century’s location of economic
activity.”8
As defined by the World Bank, a knowledge-based economy has
four pillars:9
 An economic and institutional regime that provides incentives
for the efficient generation and application of knowledge and the
flourishing of entrepreneurship;
 An educated and skilled population that produces, shares, and
uses knowledge well;
 An innovation system that effectively creates new domestic tech-
nology and that absorbs, assimilates, and adapts to the growing
stock of global knowledge;
5
Peter Drucker may not have invented the term “knowledge economy” or
“knowledge-based economy,” but he popularized the idea in his books, such as
in The Age of Discontinuity: Guidelines to our Changing Society, chap. 12: “The
Knowledge Society” (Harper and Row, 1969), 263–380, and Post-Capitalist
Society, part 3: “Knowledge” (Harper Business, 1993), 181–218.
6
Post-Capitalist Society, 185.
7
Paul M. Romer, “The Origins of Endogenous Growth,” The Journal of Eco-
nomic Perspectives, 8 (1) 1994: 3–22.
8
Lester Thurow, The Future of Capitalism: How Today’s Economic Forces Shape
Tomorrow’s World (Penguin, 1997), 68.
9
The World Bank, Knowledge for Development (K4D). See http://web.world
bank.org/WBSITE/EXTERNAL/WBI/WBIPROGRAMS/KFDLP/0,,contentM
DK:20269026~menuPK:461205~pagePK:64156158~piPK:64152884~theSiteP
K:461198,00.html#Knowledge (accessed on June 25, 2010).
xiv Introduction
 An information and communication technologies infrastruc-

ture that facilitates the effective communication, dissemination,
and processing of knowledge.
Ngiam explains that the Singapore success story unfolded over

time as the city-state embraced, by intention as well as by necessity, a
knowledge-based economy:
In five decades (1960–2010), the Singapore economy evolved from

a labor- and skill-intensive economic structure to one based on
knowledge. We had to skill up step by step. In the first twenty years,
we concentrated on raising literacy and numeracy. English was
taught to children of all ethnic groups. Their mother tongues, Malay,
Mandarin, and Tamil, was taught as a second language.
Fluency in English enabled us to access science and technology.
Our young people were able to upgrade their work from light man-
ufacturing assembly plants to skill-intensive precision and pro-
cess engineering, such as creating watch movements and refining
oil, and now knowledge-based petrochemical and pharmaceutical
industries.
English also provided our young with facility in banking and fi-
nance. Singapore today is growing to be the wealth management
center of Southeast Asia.
Knowledge-based competition is a marathon, a race without end.
We have to keep adding to our knowledge base.10
In recent years, Ngiam’s speeches, writings, and interviews have

all focused on this theme. This book, therefore, is organized in three
parts. Part I collects Ngiam’s explanations of the secret of the Singa-
pore success story. Part II gathers Ngiam’s examination of the various
founding pillars of Singapore’s knowledge-based economy. In Part III,
Ngiam discusses the implications of the Singapore story to the eco-
nomic development of China.
In this introduction, as editor, I will provide Ngiam’s short biography
and his long list of career titles to facilitate readers’ understanding of
his qualifications and the worthiness of his insights. In the follow-
ing three sections, I will outline Ngiam’s various thoughts on the
Dynamics, 7.
10
Introduction xv
k nowledge-based economy in Singapore. Lastly, I will offer a coherent

framework to capture Ngiam’s core thoughts about the dynamics of
the Singapore success story.
A Thinker of Singapore11
In 1959, immediately after graduating from the University of Malaya
(precursor to the National University of Singapore) with a Bachelor of
Arts (First Class Honors) in Economics, Ngiam Tong Dow joined the
elite Administrative Service12 of the Singapore Civil Service. In 1964,
Ngiam, one of the pioneer civil servants sent by the Singapore gov-
ernment to study at Harvard University, received Harvard’s Master of
Public Administration degree.
Ngiam served with the founding generation of political leaders and
contributed significantly to the Singapore success story as a leading
civil servant. In 1972, Ngiam was promoted and became the youngest
ever permanent secretary13 and remained at the apex of the civil service
as a permanent secretary in economic and infrastructure ministries un-
til his retirement. He served in the Ministry of Finance (1972–79 and
1986–99), Trade and Industry (1979–86), Communications (1970–72),
and National Development (1987–89), and concurrently served as the
permanent secretary (Prime Minister’s Office) (1979–94). As perma-
nent secretary of the Prime Minister’s Office, Ngiam served the first two
prime ministers of Singapore, Lee Kuan Yew and Goh Chok Tong.
11
The biography and career titles of Ngiam in this section are basically adapted
from Simon Tay’s “Introduction: A Mandarin and the Making of Public Policy”
in A Mandarin and the Making of Public Policy: Reflections by Ngiam Tong Dow
(National University of Singapore Press, 2006), 4–6.
12
Singapore Administrative Service is the core group of public service leaders at
the top echelon of the Singapore Civil Service. Its responsibilities are to formu-
late and implement national policies in consultation with political leadership. In
2007, for instance, out of 65,832 civil servants, there were only 228 administra-
tive officers.
The permanent secretary is the most senior civil servant of the Singapore gov-
13
ernment ministries, charged with running the department on a day-to-day basis.

The permanent secretary is the nonpolitical civil service head (and “accounting
officer”) or chief executive of a government department, as distinct from the
political secretary of state, to whom they report and whom they advise.
xvi Introduction
Ngiam has also been the chairman of various key statutory boards
and government-linked companies, including the Economic De-
velopment Board (1975–81), the Central Provident Fund Board
(1998–2001), the Housing and Development Board (1998–2003), the
DBS Bank ( 1990–98), and Sheng-Li Holding Company (1981–91).
Ngiam’s contributions have been recognized with four National Day
Awards: the Public Administration Medal (Gold) in 1971, the Merito-
rious Service Medal in 1978, the Long Service Award in 1995, and, in
1999, shortly after his retirement, the Distinguished Service Order.
The 1971 National Day award recognized his character and attributes:
“Mr. Ngiam has brought to the service a rare combination of ability,
versatility, and a practical bent gained with experience. . . . These quali-
ties enabled him to help formulate and implement a re-organization of
the system of public transportation, and thereby contributed towards
making the traffic problem in Singapore manageable.”
The 1978 Meritorious Service Medal especially recognized his
mid-1970s efforts toward dealing with Singapore’s economic chal-
lenges in the aftermath of the oil crisis. It acknowledged how Ngiam,
as chairman of the Economic Development Board, was able to “turn
around the pessimism about Singapore as an expert manufacturing
base” and to generate sufficient investments so that full employment
was sustained. He was also credited with undertaking the task of re-
structuring Singapore’s economy to meet “the current complex of
problems brought about by the unfavorable global economic climate
and growing protectionism.”
The 1999 Distinguished Service Order for a lifetime of service rec-
ognized that, “Mr. Ngiam’s astute advice in economic and fiscal policy,
mixed with a good dose of wisdom and pragmatism, has contributed
in no small measure to the success story of Singapore.”
Since his retirement, state affairs have weighed heavily on Ngiam’s
mind. He has been active in examining Singapore’s experience of
success and lessons of failure as well as reflecting critically on current
challenging issues. His suggested alternative policies for Singapore’s
future, in many cases, caused controversy.
In his long public service career, Ngiam was not a rigid, unimagina-
tive follower of law. He made a difference with his creative practicality
and great wisdom. In retirement, he continues to voice his distinc-
tive perspective with penetrating insights into state affairs and an
unswerving advocacy of freedom to think.
Ngiam is a thinker of Singapore.
Introduction xvii
Dynamics of the Singapore Success Story

For Ngiam, the secret dynamic underlying the Singapore success sto-
ry is the transformation to a knowledge-based economy. Most of his
post-retirement speeches, writings, and interviews revolve around this
theme.
The first part of this book addresses Ngiam’s explanations of the
Singapore success story in thirteen speeches and writings delivered
between 2006 and 2009. In the first, Ngiam discusses the dynamics
of the Singapore success story at the Global Infineum Leadership
Forum. In the second, Ngiam shares his musings on the Singapore
path toward success with the Singapore Chinese Chamber of Com-
merce and Industry. In the third, he describes Singapore’s journey
from third world to first to Chicago Business School alumni. These
three speeches, based on a full description of Singapore’s development
since self-government in 1959 until the present, identify the dynamics
underlying the Singapore success story as a steady movement toward
a knowledge-based economy. According to Ngiam, this came about
by force of circumstance, and “with virtually no land base.”14 Singa-
pore became a global economy long before the term “global economy”
entered the economic dictionary: “We had literally to compete with
everyone else in the world.” Driven by this global economy, Singapore
was forced to rely on knowledge to compete with others.15
So what is it that we have that others do not to sustain our position

as a regional financial and trading hub?
In one word: Knowledge . . .
The classical factors of production—land, labor, and capital—are
no longer enough. Knowledge is the new frontier of competition.16
Hence, the transformation of Singapore has been its firm strides for-
ward from a Third World city to a knowledge-based economy.
Dynamics, 24.
14
The emergence of a global economy is recognized as one of most important

15
drivers for emerging knowledge-based economies. See John Hougton and Peter
Sheehan, A Primer on the Knowledge Economy (2000), 4–9, http://www.cfses.
com/documents/knowledgeeconprimer.pdf (accessed on August 10, 2010).
Dynamics, 13, 15.
16
xviii Introduction
In 1959, when the PAP first came to power, the new government
inherited a stagnating entrepôt economy. Yet, barely half a centu-
ry later, Singapore had transformed itself to be what it is today: a
global city of the 21st century. Starting off as a low-wage, labor-
intensive, light-manufacturing production base (garments and
wigs), it transitioned to become a precision and process engineering
center (watch movements, optics, wafer fabs, refrigerator compres-
sors, miniature ball-bearings, petroleum refining, petrochemicals,
and pharmaceuticals). In mechanical engineering, our ship repair
yards evolved to build state of the art oil rigs. Today, our universities
research in the life sciences, nanotechnology, and media animation.
In banking and finance, Singapore is rapidly becoming the region’s
wealth management hub, serving not only the rich and famous, but
also the rising middle class in neighboring countries.17
Part I of this book includes Ngiam’s writing on strategic pragmatism

and one speech comparing strategic pragmatism between China and
Singapore given at the International Conference on Chinese Enterprise
Research. Why did the dynamic toward a knowledge-based economy
work in Singapore? “Largely because we adopted a pragmatic approach,
not a doctrinaire one.”18 Guided by sheer practicality, Singapore pre-
served the legacy of the British colonial power as the foundation for
an independent Singapore, namely “the rule of law, religious toler-
ance, and meritocracy”19—in one word, good governance. With no
natural resources and an abundance of unskilled labor in the initial
years, Singapore chose to start with labor-intensive light manufactur-
ing industries, a practical decision. Meanwhile, the city-state had to
embrace knowledge to compete in a globalized world, and constantly
added to its knowledge base. Industrial training centers, polytechnics,
and engineering faculties in universities were established. All helped
the Singapore economy take off in the 1960s. Most importantly, it pre-
pared generations of young Singaporeans with the discipline, tenacity,
skills, and knowledge required for working in the knowledge-based,
high-tech industries of the future.
Dynamics, 13–14.
17
Ibid., 12.
18
Ibid., 84.
19
Introduction xix
Viewed from a comparative perspective, the experience of both

Singapore and China highlights the important role of strategic
pragmatism in economic development. According to Ngiam:
In my opinion, [Deng Xiaoping’s] greater contribution to political

thought was his exhortation to his countrymen to “seek truth from
facts.” When Mr. Deng visited Singapore in 1978, I believe he was
seeking truth from facts. How is it that this tiny city-state peopled
by southern Chinese could achieve a standard of living higher than
their country of origin?
We practice . . . strategic pragmatism. . . . In spirit, our development
philosophy is similar to Mr. Deng’s “to seek truth from facts.” 20
Also in this speech, Ngiam puts forward an insightful formula:
In development economics, all countries go through three stages and

four phases of growth. The three stages of growth are (a) primary–
agriculture, (b) secondary–manufacturing, and (c) tertiary–services.
I now add a post-tertiary stage, (d), namely knowledge, which
underpins all three stages.
The four phases of growth are (a) low cost, low tech, (b) low cost,
medium tech, (c) high cost, medium tech, and (d) high cost, high
tech. All developing countries including Singapore and China began
as low cost, low tech producers.21
Put in a larger context by introducing Japan’s experience, Ngiam

further justifies his argument. Thus, Part I also includes Ngiam’s
speech to the Mayors’ Class at Nanyang Technological University.22 It
compares the different development perspectives of China, Japan, and
Singapore.
Besides the unique culture of Singapore and its pragmatic choic-
es, what else underpins the dynamics of the Singapore success story?
Dynamics, 39.
20
Ibid., 39.
21
22
The Master of Science in Managerial Economics program and the Master of
Public Administration program at the Nanyang Technological University, de-
signed to provide training for mid-senior Chinese governmental officials since
1998, has been dubbed as the “Mayors’ Class” by the mass media.
xx Introduction
ccording to Ngiam, it is good governance. “Good governance is based

A
on the rule of law, not on the power of an absolute monarch or a party
secretary.”23 Good governance in Singapore is sourced in its political
leadership and that provided by the Singapore Civil Service.
Throughout the book, Ngiam recognizes the great contributions
of the first generation of political leadership. “Fortunately for Singa-
pore, we were led by an able, driven, and incorruptible prime minister,
Mr. Lee Kuan Yew”24 and his associates. The first generation, through
building up honest, stable, and pragmatic governance, provided the
critical bedrock.
The most important work of the first generation, Ngiam indicates,
is a democratic political structure that provides space for freedom
to think. He says, “there are basically three types of states, namely
(a) the theocratic state, such as present-day Iran or the Vatican;
(b) the ideological state, such as China, North Korea, and Cuba.
Ideological states do not necessarily have to embrace Communism. In
my view, Confucian China may be considered an ideological state. And
finally, (c) the democratic state, exemplified by the United States.”25
By a stroke of fate, the Western-educated first generation of Singapore
political leadership chose democracy.
The second underlayer of good governance in Singapore, to Ngiam,
is the civil service and public administration. Thus Part I continues with
three other speeches delivered to the Economic Development Board
(EDB), the Ministry of National Development (MND), and the Min-
istry of Finance (MOF). Ngiam believes that the EDB, the MND, and
the MOF illustrate the role of civil service in transforming Singapore
into a knowledge-based economy. Given the continuous efforts of the
Singapore Civil Service, Ngiam envisions a completely new Singapore:
By mid-century, it is my dream that Singapore be a home and
not just a place to earn a living. We can be out in front, a lead-
ing global knowledge-based metropolis. Our infrastructure and
communications can be completely integrated. Singapore can be
an integrated intelligent island, not merely a cluster of islands of
intelligence.
Dynamics, 31.
23
Ibid., 10.
24
Ibid., 26.
25
Introduction xxi
Our schools and universities can move from teaching acquisition

of know-how to absorption of know-why. Singapore can be a knowl-
edge exporter, not just an exporter of goods and services.
Singaporeans can be known as a thinking people. From just
having a global economy, we can transform Singapore into a global
city of knowledge and culture. This is only one person’s dream of the
New Jerusalem. I invite my younger colleagues to dream their own
dreams and realize their own Singapore.26
For Ngiam, the Singapore Civil Service has generated the most
competitive knowledge in the world in one particular area—public
administration.
Do we have any knowledge that the rest of the world wants and does
not possess? Were you to ask me to identify the knowledge domain
that Singapore is most competitive in, without undue modesty, I
would say public administration. While the sine qua non of good
government is incorruptibility and integrity, good administration is
what delivers the public goods and services.27
Looking into the future, in his speech to the Central Provident Fund
Board and his writing on the solutions to the current financial cri-
sis, Ngiam advocates exporting Singapore’s indigenous knowledge,
particularly its knowledge of public administration.
Over the last fifty years of rapid economic development, Singapore

has acquired expertise and experience in knowledge domains that
will stand us in good stead for competition in a global knowledge-
based world. The Port of Singapore Authority, the Civil Aviation
Authority of Singapore, and Jurong Town Corporation have used
their knowledge base in industrial parks and seaport and airport
development to win business in new overseas markets. . . .
SIA, however, is not the only one [knowledge exporter]. The
Housing and Development Board, the Port of Singapore Authority,
the Civil Aviation Authority, and Jurong Town Corporation have
become knowledge exporters, winning management contracts in
overseas markets against stiff c ompetition.
Dynamics, 56–57.
26
Ibid., 14.
27
xxii Introduction
The Central Provident Fund Board can also be a knowledge

exporter. Countries like China, India, and Vietnam will find our
experience invaluable as they go about establishing their own social
security programs. . . .
The Central Provident Fund Board has the knowledge base to
export services in the domain of social security administration. So
do our schools, polytechnics, universities, hospitals, the Land Trans-
port Authority, and the National Environment Agency, each in
their own knowledge domain. Even my old ministry, the Ministry
of Finance, can export its expertise to assist other administrations
to introduce consumption taxes, such as the goods and services tax
and the certificate of entitlement, with the least political cost.28
Part I includes two other speeches in which Ngiam treats the mate-
rial from a broader perspective. In the first, drawn from a seminar
delivered to students of the Lee Kuan Yew School of Public Policy,
Ngiam again emphasizes the importance of an open society. Histori-
cally, he says, how Europe caught up with and overtook China and
India, the two leading nations up to the 16th century, lies in the fact
that “Europe, and later the United States, were relatively more open
and inclusive societies,” which encouraged greater freedom of thought.
In the second, delivered to African policy-makers in the S. Rajaratnam
School of International Studies, Ngiam suggests that African countries
must add to their knowledge base to sustain economic growth.
African countries such as yours are blessed with abundant natural

resources, including oil. Will this be enough to sustain your econo-
mies? I am afraid not. Knowledge and technology are required, not
just for raw exploitation of resources, but to go upstream into the
value chain.29
Pillars of the Singapore Dynamics

Having interpreted the dynamics underlying the Singapore success
story as movements toward a knowledge-based economy, Ngiam
proceeds to examine in Part II the pillars bolstering this dynamic.
Dynamics, 70–71.
28
Ibid., 87.
29
Introduction xxiii
ccording to Ngiam, there are at least three: political and institutional

A
pillars; educational and social welfare pillars; and financial and bank-
ing pillars. Hence, Ngiam’s speeches, writings, and interviews in Part II
are organized into three sections.
The first section addresses the political and institutional pillars
with five presentations around this theme, dating from 2006 to 2009.
For Ngiam, in his foreword to Management of Success: Singapore
Revisited,30 managing Singapore’s success embodies uncertainties.
In his own words, the answer to the question, “How do we remain
competitive in a global, knowledge-based world?” is crucial because
“managing economic success is tough. Managing political success is
even tougher.”31 To sustain Singapore’s dynamics, political and insti-
tutional pillars are the first requirements.
In the political realm, Ngiam points out that leadership succession
is the key. Both the Plato Republic model, in which the philosopher
king is selected by his peers, and the ballot box general election model
are flawed, he says, because the former may result in dictatorship and
the latter could elect a rogue government. As a remedy, the People’s
Action Party offers better-educated candidates to remain competitive
in a knowledge-based world.32 However, such candidates are not as
streetwise as their less-educated opponents. Thus, the PAP introduced
group representation constituencies as a protective cover for these
candidates. The problem is: “Are group representation constituencies a
protective cover for young PAP rookies who are not streetwise enough
to fight their own battles? As ministers themselves begin their political
careers in group representation constituencies, is there a danger that
even minister-led group-representative constituencies may one day be
lost to the opposition?”33 Here, Ngiam calls for Singaporeans to pay at-
tention to this critical issue, but does not provide a clear answer to it.
30
The book of Management of Success: Singapore Revisited, edited by
Dr. Terence Chong, was published in 2010 by Institute of Southeast Asian Stud-
ies, S ingapore.
Dynamics, 96.
31
People’s Action Party (PAP) is the ruling party in Singapore from 1959 to the
32
present.
Dynamics, 97.
33
xxiv Introduction
In addition to political succession, the nurturing and deployment of

Singapore elites has great import. In his speech to the Oxbridge Soci-
ety, Ngiam divides Singapore elites into three categories: political and
administrative; professional and business; and social and community.”
Singapore needs more professional and business elites as they are
creators of wealth, says Ngiam, but the current system in Singapore
deploys most of its elites in the public sector:
Is it any wonder, then, that we have a lopsided state with a strong,

some would say dominant and even domineering public sector
that is efficient at regulating but hopeless when it comes to creating
wealth?
Deployment of talent is crucial for the survival of the state. My
personal view is that the UK, once a great industrial state, no longer
holds the pole position because most of its Oxbridge elite went into
the City of London, where they manage but do not create wealth.34
Hence, Ngiam advocates redeploying elites from the public sector

to the professional and business sector. Similarly, the social and com-
munity elites are “generally well-balanced altruistic individuals with a
higher sense of ‘doing good.’ Their satisfaction is derived from the felt
but often unspoken appreciation of their fellow members and peers.
These social elites are in my book the bedrock of society.”35 Ngiam,
therefore, advocates that “we should encourage them. There will then
be many hands, instead of just those of the government, to assist the
poor and the disadvantaged.”36
With regard to nurturing Singapore elites, especially the adminis-
trative ones, Ngiam, in his interview with The Strait Times, argues that
cultivating a “sense of urgency” is necessary to foster an innovative
civil service with creative ideas. This would in turn develop a risk-
taking mindset among civil servants to “develop the next big thing to
foster growth” based on knowledge.37
Dynamics, 105.
34
Ibid., 105.
35
Ibid.
36
Ibid., 109.
37
Introduction xxv
The press, according to Ngiam, is another important institutional

pillar. A free press is the key to the hearts and minds of the people—
and provides space for the free thinking vital to a knowledge-based
economy. Thus, in his speech at the Singapore Press Holdings Lecture,
Ngiam shared that he believes “passionately in the sacred mission of
the press, which is to uphold truth, and to protect the integrity of our
nation” so as to nurture and uphold democratic rule and create an in-
novative society.38
Also required are the educational and social pillars that generate
knowledge, produce an educated and skilful population, and encour-
age spontaneous initiatives from an autonomous society. The second
section of Part II thus collects seven of Ngiam’s presentations that con-
centrate on the educational and social pillars of a knowledge-based
economy.
In his speech to the National University of Singapore Economics
Alumni, Ngiam first asks what sort of education makes an individual
well prepared for this sort of economy:
In the late 19th and early 20th centuries, thousands of hungry, able-
bodied young men from China and India arrived on the shores of
Nanyang, namely Malaya, Singapore, Java, and Sumatra. Hardly
with a shirt on their back and little education, they toiled in the
heat of the tropical sun. A few made good and became the legends
of their time. My question is: Can these young men succeed today
on sheer grit and native cunning?
The 21st century is a knowledge-based globalized world of compe-
tition. The question to ask is: What sort of education should today’s
cohort of young men and women have to succeed in life? Should it
be in the hard sciences or the liberal arts? Or music and dance? And
so on.39
Ngiam offers a solution:
My personal answer is to do a double E degree, that is, engineering

and economics. Why economics? At the risk of being dismissed as a
super egotist, I say that while engineering teaches one how to count
Dynamics, 117.
38
Ibid., 128–9.
39
xxvi Introduction
and measure, economics teaches one how to calculate risks and

rewards.
Engineering is a quantitative science founded on the laws of phys-
ics. Economics has a body of theory, more abstract and ambiguous.
I believe that engineering and economics, while they best prepare
one for a business career, do not guarantee success.40 . . .
The nimbleness of mind of the economist combined with the
structured logic of the engineer will, I believe, give one better odds
for success in business [in the knowledge economy era].41
In his speech to the Academy of Principals, Ngiam argues that the

other need is to change the philosophy or goal of education. That is,
“we [in education] need to foster and cultivate inductive reasoning,
thinking outside the box”42—namely, critical thinking. This is crucial
for an enlightened society and a knowledge-based economy. What is
required, then, of educators and teachers?
. . .the greatest gift that teachers and mentors can give their students
is the gift of freedom to think. Do not constrain their minds nor
constrict their hearts. Remember that we are students and teach-
ers at the same time. Asking questions is harder than giving an-
swers. When we think within the box, we demonstrate competence.
When we think outside the box, we explore the unknown. It requires
courage to do so.
I prefer Singapore to be an Athens rather than a Sparta. Freedom
to speak, freedom to act, freedom of association—all are subsets of
the freedom to think, the most precious freedom of all.43
Ngiam has faith in the spontaneous forces of the social sector. To

deal with complex and challenging social issues, in his interview with
the magazine Social Space,44 he says “the government should identify
Dynamics, 129.
40
Ibid., 130.
41
Ibid., 134.
42
Ibid., 136.
43
44
Social Space is a professional magazine published annually by the Lien Center
for Social Innovation, Singapore Management University.
Introduction xxvii
needs in society and facilitate the emergence of solutions from many

sources” particularly from the social sector.45 Hence, “when something
spontaneous is doing well, leave it alone and don’t interfere, even with
good intentions.” To sustain innovative systems that are the core of a
knowledge-based economy, the ideal relationship between government
and society should be:
Government facilitates and mobilizes the altruistic intentions of

people into action. Let me start with my own positioning of the so-
cial sector: First, the social sector should do what the government
and the private sector cannot do. The social sector is in a unique po-
sition and it should find a niche that the government or private sec-
tor is not addressing. Second, during discussions called “The Next
Lap” some years ago, the late Dr. Tay Eng Soon wrote a paper on the
social sector, and he mentioned the need for more than one helping
hand. That is how the concept of “many helping hands” arose. Third,
the social sector should help people at the point where they need
help the most.46
Government should leave the society alone. Nevertheless, in his

speech to the Singapore Academy of Law, Ngiam reminds with the
query, “Does this mean that an individual has an unfettered right to
choose his own course of action without regard for the possible harm
he can inflict on society? . . . My own belief is that the state can and
should intervene in the working of the marketplace [and society] when
it is manifestly clear that public interest will be better served.”47 In sum,
Ngiam believes that “what’s in the best public interest will ultimately
have to prevail. Society will have to decide what this is.”48
The last, but not least, pillar that propels Singapore toward a
knowledge-based economy, according to Ngiam, is an innovation
system buttressed, promoted, and funded by the financial sector.
The third section of Part II includes two speeches, delivered to the
Singapore Venture Capital and Private Equity Association, and the
Dynamics, 139.
45
Ibid., 141.
46
Ibid., 151.
47
Ibid., 153.
48
xxviii Introduction
United Overseas Bank Luncheon, respectively, on this topic. In fact,

throughout the book, Ngiam always emphasizes the importance of
indigenous knowledge. For him, the most important act in the creation
of Singapore’s own timber is to grow globally competitive domestic
enterprises:
It is almost high noon. Is it too late for us to grow our own timber?
In plain English, this means establishing, nurturing, developing,
and growing our own Singapore-owned and Singapore-managed
companies. Most critical, we need to develop the confidence and the
skills to drive these companies ourselves. We can.49
To grow Singapore’s own timber, according to Ngiam, the venture

capital companies play crucial roles.
Venture capital and private equity companies have a crucial role to

play if Singapore is to grow its own timber. More than do banks, the
venture capital and private equity companies have the knowledge
and the experience to evaluate start-up companies for direct equity
participation. To really be of use to Singapore, venture capital and
private equity companies operating here should not just wait for a
structure to reach the mezzanine floor, or, worse, swoop down like
vultures on the carcass of an old established company that has lost
its way. How about talking to EDB, MAS, and ABS to establish to-
day’s equivalent of the Small Industries Finance Scheme, which has
fulfilled its mission? Today, banks make a selling point of their SME
loan portfolio.50
The Implications of the Singapore

Success Story to China
In Part III, Ngiam discusses the implications of the Singapore success
story to the development of China in his three lectures to the Mayors’
Class and one speech to the Singapore–China Association for Ad-
vancement of Science and Technology. To sustain economic growth
Dynamics, 181.
49
Ibid., 182–3.
50
Introduction xxix
in the long run, Ngiam prescribes that China should also adopt a
development path toward a knowledge-based economy. He is confi-
dent that China has prepared well for it.
Classical economics has taught us that land, labor, and capital are
the three factors of production. To these we must now add science,
technology, and entrepreneurship. In today’s idiom, competition is
knowledge-based. Knowledge, however, must embrace more than
just science and technology. Knowledge is also about connections,
connectivity, culture, and the arts. Manipulated or integrated
creatively, knowledge provides the building blocks of sustainable
growth.
In this respect, China, with its 1.3 billion people, is blessed with
deep talent pools. So is India. These two countries, with their un-
broken, 3,000-year-old civilizations, are well placed to compete in a
global knowledge-based world.
The key is equal opportunity in education. I am convinced that in
this new century, more and more Nobel laureates will be of Chinese
or Indian origin. The sustainability of China’s and India’s economic
growth and social progress will have to be founded on knowledge.51
Following the four-phase growth model developed by Ngiam

himself, namely (a) low cost, low tech, (b) low cost, medium tech,
(c) high cost, medium tech, and (d) high cost, high tech, he argues that
China’s sustainable growth toward a knowledge-based economy “has
to begin with increasing productivity in agriculture.”52 With increased
agricultural productivity, released labor can be redeployed into “pro-
ducers and suppliers of components for the advanced manufacturing
industries of Chinese and foreign MNCs.”53 Hence, China can move
from the low cost, low tech phase to the low cost, medium tech phase,
laying a solid foundation on which to step forward.
Accordingly, says Ngiam, the future leaders China selects must
be “strong, capable, and knowledgeable” to materialize a movement
that would “bring about the transformation of the Chinese economy
from its present largely rural structure to one based on industry and
Dynamics, 194.
51
Ibid.
52
Ibid., 194–95.
53
xxx Introduction
[knowledge].”54 Meanwhile, China should also undertake fundamental

land reforms to achieve an industrialized agriculture through mechani-
zation. Based on such a prospect, in his speech to the Singapore–China
Association for Advancement of Science and Technology, Ngiam ad-
vanced his belief that there are many possibilities for Singapore–China
collaboration, especially given that, “Singapore can add value to China
[with knowledge] by acting as a bridge or contact point” to the global-
ized knowledge-based world.
The Ngiam Framework for the Dynamics

of the Singapore Success Story
How does one capture the essence of Ngiam’s thoughts about the deep
dynamics of the Singapore success story? What is the core theme of
this book? To facilitate our understanding of the secret behind the Sin-
gapore success story, I offer this descriptive figure called the Ngiam
framework as shown in Figure 1, to depict his model.
Booster 2: Good Governance
Knowledge-
Dynamics
based
Low cost, Low cost, High cost, High cost,
low tech medium tech medium tech high tech
Economy:
Agriculture Manufacturing Services Knowledge The
Singapore
Success Story
Booster 1: Strategic Pragmatism
Political and Educational Financial

Pillars
Institutional and Social and Banking
Figure 1 The Ngiam Framework for the Dynamics of the Singapore Success
Story.
According to Ngiam, Singapore’s success story is all about a move-

ment toward a knowledge-based economy. Boosted by good governance
and strategic pragmatism, the Singapore story is the result of continu-
ous generation, exploitation, application, and diffusion of knowledge
54
Dynamics, 200.
Introduction xxxi
in all economic activities. Reflected in Ngiam’s economic growth

model, this path goes through four phases of (a) low cost, low tech,
(b) low cost, medium tech, (c) high cost, medium tech, and (d) high
cost, high tech, which are embodied in four stages of growth:
(a) primary–agriculture, (b) secondary–manufacturing, (c) tertiary–
services, and (d) knowledge. In other words, the constant enhance-
ment of knowledge in the economy is the secret that ultimately leads
to the S ingapore success story.
Underpinning this dynamics are at least three categories of pillars
which enable the dynamics to operate: political and institutional pil-
lars, educational and social pillars, and financial and banking pillars.
The Ngiam framework recognizes that leadership succession, elite
deployment, creative civil service, and a free press are the crucial com-
ponents of the political and institutional pillars. Smooth leadership
succession is key to the political stability that allows a functioning
knowledge-based economy. The deployment or redeployment of more
elites to the private sector and civil society is essential to uphold the
innovative systems that generate and exploit knowledge.
A free press is another critical institutional pillar to encourage free
thinking that is a precondition for knowledge production.
Regarding the educational and social pillars, the Ngiam framework
further identifies that the change of curriculum and educational goals
as well as a spontaneous society are the most important factors. It ad-
vocates a curriculum more relevant to a knowledge-based economy,
one that includes, for example, engineering and economics. It also
emphasizes that the goal of education should be to nurture critical
thinking. Meanwhile, a spontaneous, autonomous, and innovative so-
ciety is indispensible in the Ngiam framework for a knowledge-based
economy.
Enterprises, especially small and medium enterprises, are the most
active forces in knowledge generation, application, and innovation.
The Ngiam framework, therefore, recognizes the financial and bank-
ing systems that can finance enterprises to innovate, as the third cat-
egory of pillars that sustain a knowledge-based economy.
This is a coherent framework.
It displays the secret of the Singapore success story—a clear progres-
sion toward a knowledge-based economy. It provides the best foot-
notes illuminating the past policy changes.
xxxii Introduction
For instance, as then Deputy Prime Minister Lee Hsien Loong said
in 2003, “we needed to rethink all our economic policies and strate-
gies. The Economic Review Committee (ERC) report sets out what
policies we need to change, and what new strategies to pursue.55 The
ERC made many specific recommendations to prepare Singapore for
the transition to a knowledge-based economy. But underlying them all
are three fundamental, related ideas:
Firstly, we must promote innovation, creativity, and entrepreneur-
ship.
Secondly, we must deregulate and liberalize the economy to allow
enterprises to flourish.
And thirdly, we must encourage self-reliance complemented by
community support, and minimize dependence on the state.
These ideas emphasize that private enterprises must increasingly
lead growth, and that to continue to thrive, we must be willing to ven-
ture into the unknown, explore new ideas, and establish new enter-
prises. To succeed, the initiative must come from individuals rather
than the state. The government’s role is to facilitate the creation of
wealth and to enable individuals to do well. It is not to provide hand-
outs or excessive social safety nets.”56
The Ngiam framework also points out a clear direction for the fu-
ture for Singapore to move forward.
This future direction, as outlined by the Economic Strategies Com-
mittee57 in 2010, is that, “we have to deepen skills and expertise within
55
The Economic Review Committee (ERC) was formed in December 2001 and
finished its work in February 2003. Its mission was to make policy recommen-
dations after the economic recession hit Singapore in 2001. See http://app.mti.
gov.sg/default.asp?id=505 (accessed on August 10, 2010).
56
Remaking the Singapore Economy, keynote address by Deputy Prime Minis-
ter Lee Hsien Loong at the Annual Dinner of the Economics Society of Singa
pore, April 8, 2003. See http://www.mas.gov.sg/news_room/statements/2003/
Remaking_the_Singapore_Economy__Keynote_Address_by_DPM_Lee_
Hsien_Loong_at_the_Annual_Dinner_of_the_Economics_Society_of_
Singapore__8_April_2003.html (accessed on August 10, 2010).
The Economic Strategies Committee was established in May 2009 and com-
57
pleted its tasks in February 2010. Its duties were to develop strategies for eco-
nomic development in Singapore after the global financial crisis started in 2008.
See http://www.esc.gov.sg/index.htm (accessed on August 10, 2010).
Introduction xxxiii
every sector of our economy. Higher productivity does not mean that
Singaporeans have to work longer on the job. It will mean working
smarter. We must equip everyone with more skills so that we can do
higher quality jobs—such as by handling more complex tasks or by pro-
viding better service. We must make a collective and sustained effort
to up-skill our workforce through Continuing Education and Training
(CET). Equally, our enterprises must innovate. They must make great-
er use of technology and reorganize work to create better and higher
paying jobs. Every employer must see this as their responsibility.”58
This book, with the inspiring Ngiam framework, will shed light on
what lies beneath the Singapore success story.
“Report of the Economic Strategies Committee,” 5. See http://www.esc.gov.

58
sg/attactments/ESC%20Main%20Report.pdf (accessed on August 10, 2010).

Editor’s
Acknowledgments
T his book is a product of collective efforts. I wish to acknowledge

the valuable assistance and help of the following people during the
editorial process:
 Kishore Mahbubani, dean of Lee Kuan Yew School of Public Pol-
icy, National University of Singapore, for his foreword.
 Han Fook Kwang, editor of The Strait Times, for his kind help with
four articles by or on Mr. Ngiam published in The Straits Times.

 Chong Yin Fong, Gokelam Ponniah Achary, Tay Sok Cheng, and
Zarinah Mohamed from Information Resource Center, Singapore

Press Holdings Ltd., and Wang Hui Fen from The Straits Times
Picture Desk, for searching and providing Mr. Ngiam’s photos.
 Randy Lim, director & secretary, Corporate Development Depart-
ment, Housing and Development Board, and Kelly Koh, Corpo-

rate Administrative Officer, for providing the HDB photos used
on the front cover.
 Lim Ming Khai, head of Geospatial Operations and Development,
Singapore Land Authority, for providing a map of Singapore.

 Elizabeth Sheares, Singapore Academy of Law, for giving per
mission to use an interview with Mr. Ngiam published in the

Inter Se.
 Jane Lael, the copy editor, for her great editorial work.
 Cao Yidan, for her tremendous assistance in creating the index
entries.
xxxvi Editor’s Acknowledgments
 Tan Tat Chu, president, Asia Pacific Group, Cengage Learning,

for his sponsorship to initiate this book project.
 Paul Tan, senior sales director and publishing director, Cengage
Learning Asia Pte Ltd, for his steady support and leadership
during the whole process.
 Yang Liping, editorial manager, Cengage Learning Asia Pte Ltd,
for his great assistance in organizing almost everything for this

project.
 Mr. Ngiam Tong Dow for providing all the book materials
and, most importantly, his comprehensive mentoring in the

development of this book.
Ngiam Tong Dow, chairman of CPF Board and HDB, gives a speech during
the Investment Fund Awards in February 2000. (Source: The Business Times
© Singapore Press Holdings Limited. Reprinted with permission.)
Ngiam Tong Dow (left) with Singapore Press Holdings’ English and Malay
Newspapers Division editor-in-chief Patrick Daniel at the Pioneers seminar
at the Arts House. This seminar was organised by the EDB Society and
The Straits Times in May 2008. (Source: The Straits Times © Singapore Press
Holdings Limited. Reprinted with permission.)
Historic scene on the City Hall steps. Singaporeans turned out in their
thousands to welcome home the self-government mission from London.
Mr. Lee Kuan Yew is clenching his fists whilst giving a speech on April 14,
1957. (Source: The Straits Times © Singapore Press Holdings Limited.
Reprinted with permission.)
At a press conference in Singapore, Prime Minister Lee Kuan Yew called on
his people to remain firm and calm. Singapore was separated from Malaysia
on August 9, 1965. (Source: The Straits Times © Singapore Press Holdings
Limited. Reprinted with permission.)
Thousands take part in the National Day Parade in front of the City Hall on
August 9, 1966, celebrating the first anniversary of the independence of
the Republic of Singapore. (Source: The Straits Times © Singapore Press
The most decisive factor in the selection of Jurong as the industrial sector of
Singapore is its strategically located natural deep water harbor facilities. This
photo was taken on March 8, 1963. (Source: The Straits Times © Singapore
Press Holdings Limited. Reprinted with permission.)
Finance Minister, Dr. Goh Keng Swee at the opening for the National Iron
and Steel Mills Limited on January 31, 1964. The company is deemed the
cornerstone of the ambitious Jurong industrial project. (Source: The Straits
Times © Singapore Press Holdings Limited. Reprinted with permission.)
Housing Board balloting for sale of flats. This photo was taken on
September 14, 1964. (Source: The Straits Times © Singapore Press
Housing Board flats at Cantonment Road. This photo was taken on

August 6, 1965. (Source: The Straits Times © Singapore Press Holdings
Limited. Reprinted with permission.)
Singapore youths reporting for the National Service call-up at the Kallang
Manpower Headquarters on August 17, 1967. (Source: The Straits Times
Prime Minister Lee Kuan Yew and his family together with some members of the Singapore delegation posing for a picture
at Lake Taihu, Wuxi in 1976. This is Lee’s first visit to China. (Left to right) Ngiam Tong Dow, SR Nathan, Ahmad Mattar,
Lee Wei Ling, Mrs. Lee, Lee Kuan Yew, and Hon Sui Sen. (Source: The Straits Times © Singapore Press Holdings Limited.
A total of 1,663 hectares of eastern Singapore was allocated in 1980 for
the building of Phase 1 of Changi Airport. This S$228 million complex was
designed to handle 10 million passengers annually. (Source: The Straits Times
Groups of students and families take in the grandeur of the much-talked-

about airport terminal on June 1, 1981, the first day it was opened to the
public. (Source: The Straits Times © Singapore Press Holdings Limited.
The changing face of the world’s second busiest port. The two dry docks,
once the pride of colonial Singapore, are gone. In their places are two berths
modern enough to service the newest container vessel. The two photos were
taken on October 12, 1983. (Source: The Straits Times © Singapore Press
Opening of MRT system—Day 2. Trains were running along the six-kilometer
stretch between Toa Payoh and Yio Chu Kang. (Source: The Straits Times
Official opening of the MRT system. Prime Minister Lee Kuan Yew (right) and
Mrs. Lee are passing through the fare gates at City Hall station on March 12,
1988 to take a train ride with other dignitaries. (Source: The Straits Times
PART
1
Toward a Knowledge-based
Economy: Dynamics of the
Singapore Success Story
1
Dynamics of the Singapore
Success Story
Edited excerpt of an address delivered to the Global
Infineum L
eadership Forum on June 15, 20101
A s Singaporeans and former Malaysians would know, the Singapore

story began in 1959 when the colony of Singapore was granted in-
ternal self-government by the British government. The People’s Action
Party (PAP) led by Lee Kuan Yew won an overwhelming electoral ma-
jority to form the first elected government of Singapore.
Mr. Lee and his cabinet could not have inherited a more unpromis-
ing state to govern. After the Korean War boom of 1952, the economy
was stagnating with unemployment at over 10 percent. The British co-
lonial administrators cruised along in maintenance mode.
The scintillating city you see today was in a state of disrepair recov-
ering fitfully from the ravages of the Second World War. The new PAP
government faced the twin challenges of finding jobs for the young
and rehousing the population.
1
Reprinted with permission from The Business Times, a newspaper published
by Singapore Press Holdings. Infineum is a global leader in the field of additives
for lubricants and fuels. It is a private company with Shell and Exxon Chemi-
cals as the two main shareholders. Singapore is the regional headquarters for its
Asia-Pacific operations.
4 Dynamics of the Singapore Success Story
By themselves, these would be monumental tasks testing the limits

of any administration. Mr. Lee and his English-educated cabinet col-
leagues had to guard their flanks from the party’s Chinese-educated
left wing. The communist-inclined left, far from supporting their
government, were assiduously undermining the leadership.
Yet within the short span of fifty years (1959–2009), Mr. Lee, in the
words of Henry Kissinger, was able to transform Singapore from third
world to first.
How did we increase our per capita income from S$500 to S$50,000?
How did we reduce our unemployment rate from over 10 percent to
full employment? How did we resettle and re-house 85 percent of our
people from slums into low-cost apartment housing with lifts and
modern sanitation? How did we raise our education from primary to
tertiary levels?
In 1960 when we started, these achievements would have been
dismissed as wishful thinking. Progress did not come easily. There were
numerous bumps along the road, most of which were man-made.
In the late 1950s and early 1960s, international division of labor trans-
ferred consumer industries, such as garments, toys, transistor radios,
and TV sets from Japan, the first to recover from World War II (WWII),
south to Hong Kong and then Southeast Asia, including Singapore.
Assembly plants required manual dexterity and not much more.
Excessive Labor Turnover

Endowed with a youthful population literate in English, Singapore was
able to pluck the low hanging fruits of simple labor intensive technolo-
gy. By the end of the decade, Singapore achieved full employment. The
unemployment rate fell to 3 percent. Singapore imported female labor
from neighboring Malaysia and Thailand to man our assembly plants.
Young men from Bangladesh, Myanmar, and India were recruited for
heavier work in our ship-repair yards.
They broke up old ships for their scrap. The plates were melted in
electric arc furnaces and rolled into steel bars to construct our low-
cost Housing and Development Board flats.
By the end of the first decade, we reached the limits of labor-intensive
light manufacturing. Our school leavers with secondary education
prefer to work in the air-conditioned comfort of banks and hotels. The
Asian Dollar Market was conceived by a Dutch banker. Working in
the Singapore branch of the Bank of America, he saw an opportunity

for Singapore to trade forex in the time slot between the closing of the
Tokyo market and before the opening of the London market. By fol-
lowing the sun, Singapore grew to be the fourth-largest forex trading
center in the world.
By the late 1970s, excessive labor turnover became a serious bottleneck.
The average worker “hopped” from job to job. As jobs were plentiful, the
worker did not stay long enough in any job to upgrade his or her skills.
The National Wages Council (NWC) was established as a tripartite
consultative body of the government, employers, and unions, to make
recommendations on what we hoped would be a regime of “orderly
wage increases,” avoiding the risk of runaway wage explosions.
I was one of three government representatives on the NWC. In ret-
rospect, the council treated the symptom but not the root cause of the
disease. In a simplistic way, we thought that when demand exceeds sup-
ply of labor, the best way of reducing labor turnover is to raise wages.
The council mandated three years of high wage increases
(1979–1981). The tripartite parties were happy with the recommenda-
tion. CEOs and HR managers simply adopted the recommended rates
of wage increases without having to ask themselves whether productiv-
ity would rise to offset the rising cost of labor. The unions were natural-
ly elated. But lurking in the minds of some astute union leaders was the
fear that if wages were raised excessively, unemployment would follow.
The government was happy that industrial peace continued to p revail.
All this complacency evaporated in 1985 when Singapore suffered
its first recession. What caused the rude shock? From the wisdom of
hindsight, it is easy to see that we brought the recession upon ourselves.
Wage increases far exceeded productivity gains.
The Monetary Authority of Singapore, as guardian of our currency,
made matters worse by allowing the Singapore dollar to appreciate way
above our international competitiveness.
When this became painfully clear, the government acted decisively.
The employer’s CPF contribution was reduced from 25 percent to
10 percent. Equilibrium was restored. The economy recovered within
eighteen months.
I had hoped that the CPF cut in 1985 would be the only occasion that
we would use it as a policy instrument. To my regret, the government
continued to “tweak” CPF rates. This is akin to missing the wood for
the trees.
It is said that management consultants are people who borrow your

watch to tell you the time. There are exceptions. McKinsey is one of the
few exceptions.
The consultancy was commissioned by the board of the Overseas
Union Bank to advise us on growth strategy. The one takeaway that
stays indelibly in my mind was the message that to scale up, a bank has
to skill up. This is as true for a bank as it is for Infineum. More so, for
the Singapore economy.
Only now, twenty years later in 2010 that the Singapore government
has come out front to lead the marathon race of raising total factor pro-
ductivity (TFP). In my view, raising TFP is the core function of the CEO
of a company. For the government, the prime minister is the CEO.
The CEO has to own the whole process. He cannot simply delegate it
to others. Performance bonuses have to be tied inextricably to TFP.
Expansion has to be differentiated from growth. Expansion occurs
when the input-output ratio is unity. One new unit of input produces
one unit of output. Growth occurs when one unit of input produces
two or more units of output. The input-output ratio has to be more
than one before performance bonuses kick in.
Singapore’s GDP increases of the last twenty years were due largely
to expansion rather than growth. Import of large numbers of foreign
work permit holders enabled the economy to expand at GDP rates of
6–8 percent. Productivity stagnated at one percent. In some years, it
was negative.
This is the Achilles’ heel of the Singapore success story. We expanded
but did not grow. We scaled up but failed to skill up. Without skilling
up, it is not possible to raise TFP.
The economic nightmare scenario for me is not just the repeat of
the self-inflicted 1985 recession when rising wages and an appreciat-
ing currency combined to cut our international competitiveness. An
infinitely worse predicament would be to find ourselves trapped in low
productivity and high wages.
Is it all doom and gloom for Singapore? Is there light the end of the
tunnel? Fortunately for city-states such as Singapore, global compe-
tition is no longer exclusively resource-based. Continental countries
such as China and India can no longer dominate the world economy
because of sheer size.
The World Trade Organization has created an almost seamless world
of international trade flows, mobility of labor and capital.
Competition in this brave new world is knowledge-based. As

Singapore has no abundance of land, labor, or capital, it has to compete
on the strength of our knowledge base.
Knowledge-based Economy
In five decades (1960–2010), the Singapore economy evolved from a
labor- and skill-intensive economic structure to one based on knowl-
edge. We had to skill up step by step. In the first 20 years, we concen-
trated on raising literacy and numeracy. English was taught to children
of all ethnic groups. Their mother tongues, Malay, Mandarin, and
Tamil, were taught as a second language.
Fluency in English enabled us to access science and technology. Our
young people were able to upgrade from light manufacturing assem-
bly plants to skill-intensive precision and process engineering such as
creating watch movements and refining oil, and now knowledge-based
petrochemical and pharmaceutical industries.
English also provided our young with facility in banking and finance.
Singapore today is growing to be the wealth management center of
Southeast Asia.
Knowledge-based competition is a marathon, a race without end.
We have to keep adding to our knowledge base. Our education system
is universal and comprehensive. Each child is educated to his or her
highest potential.
After twelve years of academic schooling (Primary to A levels) a
child, depending on his potential and aptitude, can enroll in one of
the following: industrial training institutes, six polytechnics, and four
universities offering science and technology, humanities and the arts,
finance, medicine, and law.
The National University of Singapore and the Nanyang Techno-
logical University and their specialized institutions are also research
universities.
The bulk of our national budget is now spent on education and
training. In a knowledge-based global economy, spending on educa-
tion is an investment into our future. How well we do it will determine
whether or not we continue to be a robust competitive economy.
Whether a robust economy will create a strong society depends ul-
timately on whether we remain an open society welcoming talent and
ideas from the rest of the world.
2
Musings of a Singapore
Administrator
Speech to the Singapore Chinese Chamber of
Commerce & Industry, September 7, 2007
W hen Seow Choke Meng and Claire Chiang invited me in April

to speak at your function, I was delighted. The Chinese Cham-
ber of Commerce was and still is a very august body of the best and
brightest of ethnic Chinese business entrepreneurs in Singapore. The
Chamber was at its zenith in the 1950s, led by legendary businessmen
such as Lee Kong Chian, Ko Teck Kin, and Tan Lark Sye. They all made
their fortunes astutely trading rubber. The height of their success was
during the Korean War boom in 1952.
Musings
Choke Meng suggested that my talk revolve around my musings as
a Singapore administrator. Musing is derived from the verb to muse,
which is to ponder, reflect, to meditate, like a cow chewing cud. As I
was born in 1937, an Ox year, I hope you will grant me the indulgence
of chewing cud, giving you my take on events and situations.
Earlier in the year (April 10), I spoke to a group of students and
their teachers at the Lee Kuan Yew School of Public Policy. The stu-
dents and most of their teachers belong to the post-independence
1965 generation. I told them of the privations of the Japanese

occupation of Singapore (1942–45) and the hard times of the imme-
diate post-war years.
Third World City

In the 1950s, Singapore was the archetypal Third World city. One of
every ten citizens was unemployed. Thousands of hawkers eked out
a living on the streets. Hygienic conditions were appalling. Some in
this audience may remember tucking into the famous prawn mee on
Hokkien Street, oblivious to the rats scurrying around in the open
drains. Or enjoying the best satay in the world amidst the fumes of
the Tay Koh Yat buses at their Beach Road terminus. Indian rojak
tasted divine in the back lanes of the Rex Theater. Or dancing un-
der the stars at West Point in Pasir Panjang for the price of a soft
drink.
Singapore is a young country. On August 9, 1965, political inde-
pendence was fortuitously thrust on us. We separated from Malaysia,
hardly two years after we joined. Back in history, Sir Stamford
R affles, who started life as a young clerk in the British East India
Company, exchanged Bencoolen in Sumatra with the Dutch for the
little red dot of Singapore, strategically located at the southernmost
tip of the continent of Asia, straddling the Pacific and the Indian
Oceans. Sir Stamford established Singapore as a free port in 1819,
188 years ago.
Singapore attracted immigrants from China, India, the Middle East,
and Malaya and Indonesia, then known as the Dutch East Indies. The
British governed Singapore as a colony until 1959, when Singapore was
granted self-government. Except for security and defense, we became
responsible for our own lives.
By then, the sun was setting on the British Empire. Mr. Harold Wilson’s
government decided to withdraw east of Suez. By 1968, it closed down
all the British military bases in Singapore, leaving the wage earners of
25,000 Singapore families without jobs.
Fortunately for Singapore, we were led by an able, driven, and
incorruptible prime minister, Mr. Lee Kuan Yew. Mr. Lee was the pri-
mus inter pares of Singapore’s first cabinet, comprising Dr. Toh Chin
Chye, Dr. Goh Keng Swee, Mr. S. Rajaratnam, Mr. Ong Pang Boon,
Mr. Yong Nyuk Lin, Mr. Lim Kim San, Mr. Jek Yuen Thong, Mr. Othman
Wok, and Mr. E. W. (Eddie) Barker.
Post-1965 Generation
The post-1965 generation, born after Singapore’s independence, have
grown up in a bright and promising Singapore. Not familiar with the
past, they are now searching for a new national identity. Friends of
Singapore may be forgiven if they mistake Singapore for an alphabet
soup of aspirations. Acronyms and labels abound. We have variously
described ourselves as “Singapore-incorporated, global economy, re-
naissance city, and First World,” and the most recent, “extraordinary
country” and “the city of possibilities.”
Lee Kuan Yew

In Singapore’s first general elections held in May 1959, the People’s Ac-
tion Party led by the young and charismatic 35-year old Lee Kuan Yew,
swept into power. Though Mr. Lee and his close comrades in arms
were Western educated, their counterparts in the government estab-
lishment and the Chinese business elite were skeptical of their political
credentials. Half the permanent secretaries in the colonial civil service
resigned.
The Chinese-educated left wing of the PAP rallied support from the
poor and dispossessed, known later as the HDB heartlanders. Eupho-
ria punctuated by shouts of Merdeka! (Freedom!) soon gave way to the
daily grind of earning a living. On gaining self-government, the PAP’s
first order of business was finding jobs for the unemployed in a crum-
bling city of slum housing and primitive sanitation.
The prime minister, a Cambridge-educated lawyer, dispatched
Dr. Goh Keng Swee, a London School of Economics PhD in econom-
ics, to the Finance Ministry. The ministry was more than the conven-
tional revenue-collecting treasury. It was structured as a Ministry of
Economic Development to create jobs and wealth. Dr. Goh in turn
appointed Mr. Hon Sui Sen, considered by the prime minister as his
ablest permanent secretary, to establish and lead the Economic Devel-
opment Board (EDB) as its founding chairman. Mr. Hon was to follow
Dr. Goh into the Finance Ministry as minister later.
Jobs, Jobs, Jobs

The sole focus of the Economic Development Board was creating
job opportunities for the thousands of graduates pouring out of our
schools each year. Though fairly literate and numerate after ten years
of schooling, our young did not have much of the technical or voca-
tional skills required for an industrialized economy.
In the first decade of economic development, our industrial strategy
was light manufacturing. Separation from Malaysia in 1965 forced
us to abandon the protective import substitution development pol-
icy advocated by Third World economists. It was just not feasible for
Singapore to adopt such a policy with our minuscule domestic mar-
ket. We had no choice but to embrace a totally export-oriented policy,
competing against the best and most competitive economies of the
world.
By 1972, Singapore was able to achieve full employment. The un-
employment rate had fallen from 10 percent a decade earlier to just
under 3 percent, which economists categorize as frictional unemploy-
ment, which means that anyone looking for a job would be able to
find one. How did we achieve full employment in the first decade of
industrialization?
Largely because we adopted a pragmatic approach, not a doctrinaire
one. In the initial years, the EDB scoured the world for companies
that would employ our young and old. There was no minimum wage
legislation. Nor did we sniff at low-tech jobs. In fact, any job was
welcome—high-tech, low-tech, or no-tech.
Our early industries were in labor-intensive manufacturing, such
as garments, wigs, toys, and the assembly of radio and TV sets. Cut-
ting up old ships for their plates to be melted down and rolled into
steel bars for construction was another early industry that mopped up
unskilled manual labor.
Though it was tough at the time, separation from Malaysia and the
withdrawal of British forces sent a torrent of ice-cold water that braced
us for global competition. We persuaded American, European, and
Japanese multinational companies (MNCs) to partner with us to train
our eager young workforce in the higher skills required by the preci-
sion engineering and process plants that these companies were mov-
ing into Singapore. Our wage rates weighted by our skill levels were
lower than in their home countries.
The MNCs have no sentiments. They will relocate from Singapore

when we are no longer competitive. This is a fact of life that a global
economy like Singapore has to accept and continue to adjust to. To
not face reality is to allow structural unemployment to creep up on
us. Should we slack and become complacent, we may yet retrogress to
high unemployment rates—a disaster for a city-state like Singapore.
Global Competition
Economic development is a long-term process. Continental agrarian
countries, like China and India, have taken millennia to evolve into the
modern economies they are today. Peace and prosperity is the dream
of every nation and race. Dynasties and empires carved out by force
of arms do not endure. Neither do countries driven by doctrine and
dogma. Not being a philosopher, my humble opinion is that common
humanity and knowledge are the underpinnings of strong societies
and economies.
Economists today speak of knowledge-based global competition. As
I have said earlier, Singapore is the original global economy model.
Hong Kong, before its return to China, is the other. Singapore has no oil
or gold, or any other natural resource to fall back on. What Singapore
has is its strategic geographical position.
Though we manage billions of dollars for our foreign banking cus-
tomers, our foreign exchange reserves are modest in relation to our
needs. We have to bear in mind that, as an international trading hub
in oil and other commodities, we require vast holdings of foreign ex-
change reserves as backing to keep the Singapore dollar liquid and our
currency rates stable. A stable currency serves as a strong store of value
for international traders, including forex traders. So what is it that we
have that others do not to sustain our position as a regional financial
and trading hub?
Exporting Knowledge
In one word: Knowledge. In 1959, when the PAP first came to power,
the new government inherited a stagnating entrepôt economy. Yet,
barely half a century later, Singapore had transformed itself to be what
it is today: a global city of the 21st century. Starting off as a low-wage,
labor-intensive, light-manufacturing production base (garments and
wigs), it transitioned to become a precision and process engineering

center (watch movements, optics, wafer fabs, refrigerator compres-
sors, miniature ball-bearings, petroleum refining, petrochemicals, and
pharmaceuticals). In mechanical engineering, our ship repair yards
evolved to build state of the art oil rigs. Today, our universities research
in the life sciences, nanotechnology, and media animation. In banking
and finance, Singapore is rapidly becoming the region’s wealth man-
agement hub, serving not only the rich and famous, but also the rising
middle class in n eighboring countries.
Earlier in the year (March 28, 2007), I made a speech at the Cen-
tral Provident Fund Board’s Learning Forum, asking: “Exporting
Knowledge: Can Singapore Compete?” Singapore is a net knowledge
importer. The MNCs bring with them not only their markets, but also
their technology. Nearly half the teachers and researchers at NUS,
NTU, and SMU come from abroad. In a global world, talented indi-
viduals go where they are needed and wanted.
So, you may consider me an incurable optimist to ask whether
Singapore can compete in the export of knowledge. Do we have any
knowledge that the rest of the world wants and does not possess? Were
you to ask me to identify the knowledge domain that Singapore is most
competitive in, without undue modesty, I would say public adminis-
tration. While the sine qua non of good government is incorruptibility
and integrity, good administration is what delivers the public goods
and services.
Without claiming that the Singapore Civil Service is perfect (no ad-
ministration is), over the years we have integrated our knowledge and
experience in the planning, design, and construction of the Housing
and Development Board’s new towns and industrial parks.
My own company, Surbana Corporation, is developing three new
towns, in Chengdu, Wuxi, and Xi’an, which will provide condominium-
class housing for the rising Chinese middle class. Similarly, Ascendas,
of Jurong Town Corporation (JTC) parentage, is building new genera-
tion industrial parks in China, India, and Vietnam.
Besides being a premier transportation hub, Singapore is now ex-
porting our logistics expertise to build or upgrade new ports and
airports in the two emerging Asian giants of China and India, and,
soon, further afield into the Middle East, South Africa, and as far away
as Central America. Our major statutory boards—the Housing and
Development Board (HDB), the Port of Singapore Authority (PSA),
the Civil Aviation Authority of Singapore (CAAS), and Jurong Town

Corporation (JTC)—have commercial offshoots exporting both
hard and soft knowledge to a globalized world, where competition is
knowledge-based.
The classical factors of production—land, labor, and capital—are no
longer enough. Knowledge is the new frontier of competition. Knowl-
edge goes beyond science and technology. Knowledge can be timely
information. It can be mined from operating data. Market research is
not merely a random walk in the park. It probes what a customer really
wants in a product or service.
In our field of competition, Surbana Corporation integrates our
knowledge and experience in urban planning, architectural design,
engineering network, and, most critically, accurate reading of income
levels of prospective buyers, so that commercially, we can cost and
price to sell. We do not speculate.
Universities
I will quote, again, David Ignatius of The Washington Post who wrote:
“When people think about American power in the world, they usually
list the country’s forbidding arsenal of bombers, aircraft carriers, and
troops. Yet America’s greatest asset these days might not be its guns,
but its universities.”1
At the same time, I will quote Francois Bourguignon, the chief
economist of the World Bank, who wrote: “Social equity is not the same
as equality of income. By equity we mean equality of opportunities.” To
me, the most important social equity is equal access to e ducation.
Equal opportunities for education are the well-spring of Singapore’s
social and economic success. No child in Singapore is denied an edu-
cation because of family circumstances. Bursaries, scholarships, and
even pocket money at schools, polytechnics, and universities, will be
given for every child to assist them to reach their full potential.
Equal access to education is, to me, the bedrock of the social compact
between a government and its people. As Singapore’s only resource is
our people, the only way to compete is the acquisition of knowledge.
Mr. Ignatius is right in saying that America’s greatest asset might be
its universities. As a tax-paying citizen, I do not begrudge for one
“Higher-Ed Superpower,” Wall Street Journal, March 12, 2007, 12.

1
oment the billions of dollars we spend on our schools, polytechnics,

m
and u
niversities.
Natsteel and Jurong Shipyard

In 1959, the entrepôt-trade dependent economy was stagnating.
Singapore’s merchant class were essentially traders, adept and agile in
trading rubber, sugar, and rice. They lacked knowledge about and the
technology involved in manufacturing, transportation, or even man-
aging five star hotels. In critical areas, the state had no choice but to
co-invest with private entrepreneurs, providing risk capital and access
to technology.
The very first ground-breaking ceremony at the green field Jurong
Industrial Estate was that of the National Iron and Steel Mills, Natsteel,
a rolling mill using steel scrap obtained by breaking up old ships on
the beaches at Pasir Panjang. The Economic Development Board part-
nered with Mr. Goh Tjoei Kok and his commodities trading group to
establish Natsteel.
The EDB also took stakes in the Mandarin and Shangri-La Ho-
tels, and in the Jurong Shipyard, established by Ishikawajima-Harima
Heavy Industries (IHHI) of Japan. Keppel and Sembawang Shipyards
were established directly by the Ministry of Finance. So was Singapore
Airlines, the flagship of state entrepreneurship.
The Singapore government did not start off wanting to own business
enterprises. But when the risk was or is too big for the pure private
sector to bear, the government steps in, prepared to share the risk,
partnering with private businessmen. In certain situations, we had no
choice but to start industries and businesses on our own, such as the
Singapore Technologies group of defense companies. Whether an en-
terprise is partly or fully owned by the Ministry of Finance, it leaves
the management work to professional management and independent
boards.
Growing Our Own Timber

Being traders, the forte of private Singapore business entrepreneurs lies
more in commodities trading, banking and finance, and taxi and bus
companies. Even in banking, our banks in their early years financed
mainly trade, not industry, given industry’s long gestation periods.
Starting off as building contractors, every young Chinese entre-

preneur in the 1950s, dreamed of becoming a property developer—
reaching the apex of business success when he garnered enough
capital to qualify for a banking license. In banking too, we are com-
fortable at the retail end of the business in credit cards and housing
and car loans. Corporate lending is to small and medium enterpris-
es, rather than to large multinational companies. Though Singapore
is rated the fourth largest forex center in the world, our banks do not
have the treasury capacity to do mega-deals. The large MNC banks
in Singapore dominate forex, including trading in the Singapore
dollar.
Though I am a passionate advocate of growing our own timber,
Singapore could not have developed to be what it is today without hav-
ing been open and welcoming both foreign talent and enterprise.
English-educated and Chinese-educated:

Is There a Divide?
As I am more comfortable speaking on economic issues, Pang Cheng
Lian asked me whether, for a change, could I also discuss the social
values and mindsets of those educated in the English medium schools
(like myself) and those educated in Chinese medium schools (like Lee
Yiok Seng).
In a famous speech in the 1960s, Minister Mentor, as Prime Min-
ister, described English school students as goldfish swimming in an
ornamental bowl, and Chinese school students as piranhas in the wild.
Dr. Goh Keng Swee, the Finance Minister, in an equally provocative
speech, told his English-educated civil servants that we should go
down on our bended knees and thank the PAP. The Civil Service was
bewildered and confused for the government had just cut the pay of
civil servants.
Soon after, the Barisan Sosialis2 wing split off from the PAP over
merger with Malaysia. If the mainstream English-educated leadership
of the PAP led by Mr. Lee Kuan Yew had lost the intra-party struggle,
2
Barisan Sosialis (Malay for Socialist Front) is a former Singaporean left-wing
political party established in 1961 by left-wing members of Singapore ruling
party, the People’s Action Party. The party was officially dissolved in 1988.
the senior, English-educated core of the Civil Service would have been
promptly replaced. The history of Singapore would have been totally
different.
Mindsets
When Electronic Road Pricing was first introduced in the mid-1970s,
civil service colleagues and I would drive into the city before 7:30 am to
avoid paying the charges. That was how I came to know Lee Yiok Seng,
then the Senior Parliamentary Secretary of the Ministry of National
Development. He asked me whether I knew the difference between the
mindsets of English-educated and Chinese-educated officers. I said I
did not. He told me that, as a rule, the Chinese-educated like himself
had more guile.
Guile
Guile, he said, was necessary in administration. As the Senior Parlia-
mentary Secretary, Yiok Seng had oversight of the Resettlement De-
partment. When rural areas had to be cleared for building new towns,
such as Yishun, the village shopkeeper, like everyone else, had to be
relocated. The shopkeeper, however, could not be convinced that the
rental offered was fair and reasonable. To persuade the shopkeeper
that he was being offered a fair rental, the minister and he decided to
tender out some of the shops. When the rentals tendered came out
much higher than the set rentals, the shopkeepers promptly accepted
the Ministry of National Development’s offers. The shopkeeper was
also allowed to let part of his shop to subtenants at the market rate,
making him able to extract economic rent from his Housing and De-
velopment Board shop. It was a win-win situation.
Being First World

Minister Mentor, in the second part of his Memoirs, had spoken of
Singapore’s journey from Third World to First. Those of us who grew
up in the pre-1965 generation knew very well what a Third World
Singapore was like. We still recoil at the memory of having to share
communal kitchens, bathrooms, and toilets. When we moved from
unsewered kampongs to HDB flats with running water, flush toilets,
and electric bulbs, it was like moving to paradise.
We now aspire to be First World. Do we know what it takes to be

First World? Is it just gleaming condominiums, state of the art trans-
port systems, the Esplanade concert halls, superb, congestion-free
highways, top schools and universities, excellent medical care, and
enjoying a lifestyle that even our neighbors talk about?
Being First World is not a permanent state. We learn from history
how great empires have risen and fallen, how great cities have blos-
somed and decayed. Even as individuals, we begin to be aware of our
human frailties as we age. If it is inevitable that a human mind atro-
phies over time, can a city-state like Singapore avoid atrophy? What
can we do as parents and grandparents to ensure a strong and prosper-
ous Singapore for our children and grandchildren in the next 50 or
100 years?
It is all these and more. To me, being First World is a state of mind.
We have to be a society ruled by reason, driven by passion.
3
From Third World to First?
Speech delivered to Chicago Business School Alumni
on July 15, 2009
T hose who arrived in Singapore on the evening of June 3, 1959, were

greeted with the thunderous roar of Merdeka! Freedom! piercing
the night sky from the steps of City Hall. The People’s Action Party, led
by thirty-five-year old Lee Kuan Yew, had three days earlier on May 30,
1959, swept the polls, winning forty-three out of fifty-one seats, earn-
ing the mandate to form Singapore’s first fully elected, post-colonial
government.
After 140 years of colonial rule, the British government granted in-
ternal self-government to its former colony. Other than defense and
foreign affairs, the new Singapore government led by Prime Min-
ister Lee Kuan Yew was free to pursue its own social and economic
policies.
Mr. Lee and his cabinet colleagues could not have inherited a more
unpromising state to govern nor a worse state of the economy. The
Korean War boom of 1952 had long passed. The unemployed and un-
deremployed population was approximately 300,000. The physical in-
frastructure was fitfully recovering from the destruction and neglect
of the Japanese occupation of Singapore (1942–45). There was no
hinterland to absorb the tens of thousands of underemployed.
Outside the public service and the British military bases, the poor
and illiterate eked out a living as street hawkers and odd job laborers.
Gangsterism was rife and petty corruption pervasive. Singapore was
a city of urban slums and unsewered rural villages called kampongs.
Night-soil carriers removed human waste in buckets slung on a pole
over their shoulders.
Young Singaporeans were barely literate. The average literacy was Pri-
mary 6. My compatriots who made it to O levels found employment
only as clerks, nurses, teachers, and policemen. Less than one percent of
a Primary 1 cohort went to university. Even then, the medical school was
the only professional school in Singapore, founded by farsighted mer-
chant philanthropists in the 1930s. Those who wanted to study law had
to go to London. The engineering school started in 1954, just five years
before self-government. The business school started out as part of the
Economics Department around the same time. Even then, the faculty
was moved to Kuala Lumpur during the years we were part of Malaysia.
The political climate was tinder dry. More than the very real dif-
ficulties of joblessness and stagnation on the ground, Mr. Lee and his
English-educated cabinet colleagues had to face the challenge of the
left (some say communist) wing of their own party.
Chronic unemployment, racial strife, and religious intolerance could
easily have rent the fragile social and political fabric of Singapore. Ra-
cial riots erupted not once but thrice. Leftwing-inspired industrial
strikes were a daily occurrence.
A Third World City

In the 1950s, Singapore was like any other city in the Third World, tee-
tering on the verge of social and economic collapse. No risk manager
would have bet a penny on our survival. Though we have come a long
way since, it is foolish in 2009 to think that our work is complete.
Our children and grandchildren will never know abject poverty. In
the 1950s, when the old were dying, their families would move them
to funeral parlors grimly called the “death houses” of Sago Lane, to die.
There was just no place at home for the old to spend their last days.
Laborers rented bed space on eight-hour shifts in shophouse slums.1
1
A shophouse is a vernacular architectural building type that is commonly seen
in areas such as urban Southeast Asia. This hybrid building form characterizes
the historical center of most towns and cities in the region. See “Shophouse,” at
http://en.wikipedia.org/wiki/Shophouse (accessed June 16, 2010).
I have read about the scrap heap Tondo slums in Manila. Slumdog
Millionaire, a resounding Oscar-winning film, brought the limelight to
the plight of Bombay’s slum dwellers. On my visits to Djakarta in the
1960s, I recall passing the central canal of the town where men and
women lined the banks to brush their teeth and do their ablutions in
the river, all at the same time.
1959–1965 Hopes Dashed

With the grant of internal self-government in 1959, our social and
economic future was in our own hands. I joined the Singapore Ad-
ministrative Service in August 1959 and was posted to the economic
development division of the Ministry of Finance. Economist
Dr. Goh Keng Swee, Singapore’s first finance minister, established a
new division to deal with the dangerous threat posed by high unem-
ployment. Left-wing cadres of the People’s Action Party could easily
have fanned the suffering and despair of joblessness to topple their
own government.
Except for the rich oil states, most developing countries in the
early 1960s could offer only low skills at low wages to foreign in-
vestors. Light manufacturing was the development route chosen to
mop up high unemployment. Young Economic Development Board
(EDB) officers like myself scoured the region for manufacturing jobs
to employ the thousands of students pouring out of our schools each
year.
As their own labor markets tightened, garment, toy, transistor ra-
dio, and wig factories from Hong Kong and Japan soon trickled into
Singapore, providing much sought-after jobs to our young women,
who welcomed alternatives to working as maids or hawker a ssistants.
1963 Merger with Malaysia

The merger of the states of Singapore, Sabah, and Sarawak with the
Federation of Malaya to form Malaysia in September 1963 boost-
ed the confidence of Singapore’s entrepreneurs, encouraged by the
prospect of a Malaysian Common Market. Their hopes were rudely
dashed two years later on August 9, 1965, when Singapore separated
from Malaysia to become an independent country, choosing to sur-
vive on its own with no economic hinterland. Even our best friends
feared for us.
1965–1990: Triumphs and Tribulations

Instead of being frustrated in interminable trade negotiations with
Malaysia and the other ASEAN neighbors,2 Dr. Goh decided that our
manufacturers had to survive on their intrinsic merit, with no tariff
preferences. The minister, in what he would himself call a robust move,
removed all import tariffs, retaining only the high-revenue-yielding
excise duties on petrol, tobacco, liquor, cars, cigarettes, and the tote on
the turf club.
Exchange controls were completely removed. We figured that for-
eign funds would flow in freely only when assured they could flow
out freely, without let or hindrance. The Singapore dollar became
fully convertible. By law, the Singapore Currency Board exchanges
one unit of the Singapore dollar for a fixed amount of gold. This auto-
matic convertibility of the Singapore dollar laid the foundation for the
development of Singapore into a global financial center.
British Withdrawal East of Suez

In 1968, hardly three years into independence, the British government
announced that it would be withdrawing its military bases (three air
and one naval) from Fortress Singapore. By dint of hard work and belief
in ourselves, we transformed the 25,000 jobs lost to British withdrawal
into a skilled and high-value-added aviation and maritime industry.
We converted the naval base at Sembawang into Sembawang Ship-
yard, and the dockyard at the Port of Singapore into Keppel Shipyard.
The airbase at Changi was transformed into Changi International Air-
port. Today, Sembawang and Keppel are capable of building deep-sea
submersible oil drilling rigs.
Becoming a Global Economy

Long before the term “global economy” entered the economic diction-
ary, Singapore by force of circumstances became a global economy.
With virtually no land base—231 square miles, including islands—we
had literally to compete with everyone else in the world.
Multinational companies (MNCs) invest in Brazil, Russia, China, and
India—the BRIC economies—for their vast domestic markets, and their
2
The Association of Southeast Asian Nations. Founded on August 8, 1967, it is a
geopolitical and economic organization of 10 countries located in Southeast Asia.
natural and human resources. Even if the Malaysian common market

had materialized, it would not have been possible to attract large-scale
industrial projects to establish themselves in miniscule Singapore.
Yet Singapore today, on Jurong Island, hosts the world’s largest
integrated oil refining and petrochemical complex. Leading pharma-
ceutical firms have established sophisticated research laboratories and
processing plants in Singapore.
The parent companies of these world scale plants chose Singapore
over other locations because Singapore is politically stable. Political sta-
bility has enabled us to deliver good governance on a consistent basis.
Knowledge-based Competition
Modern cutting edge industries require more than skills and capital.
Global competition is now knowledge-based. Capacity can be in-
creased simply by injecting capital to build mega power stations, giant
dams, and state of the art industrial parks.
Raising capability is another ball game. The capability of a popula-
tion can be raised only through education and training. And education
has long gestation periods.
True learning requires inner discipline. In the 1970s, the Economic
Development Board partnered German, Japanese, and Indian com-
panies to establish joint industrial training centers to teach our young
school graduates machining skills for precision engineering industries.
Initially, trainees had to learn machining manually. When CAD/
CAM machines were introduced for machining, I asked the Japanese
head of the Singapore–Japan Industrial Training Center whether the
trainees had wasted their time learning to machine metal parts by
hand. The Japanese instructor told me that working with hands re-
quires more discipline and patience than does working with machines.
Once these qualities are instilled in an individual, he will strive for
perfection, machining down to the last micron of precision.
Freedom to Think
I had the privilege of visiting the Forbidden City in Beijing as a mem-
ber of Singapore’s first official delegation to China, led by Prime Min-
ister Lee Kuan Yew in 1976. We were shown the imperial examination
scripts from the Chinese archives. In the early years of the imperial ex-
amination system, scholar candidates were asked practical questions.
For instance, the best minds of China were asked to write essays on
how they would alleviate floods in their home provinces.
In later years, candidates were tested on their ability to compose
poetry, and were required to quote precedents from the Analects of
Confucius to justify their answers. Subject to learning by rote, once-
bright, -robust minds were emasculated into absolute obedience to the
emperor. We learn from history that, in spite of the absolute power
exercised by emperors, dynasties rose and fell.
In 1976 in China, the same process of mind control was applied.
Sharp at 12:00 noon, all work stopped. Everyone was forced to listen
to the Thoughts of Chairman Mao blaring over the public address sys-
tem. The waitresses serving us at the state guest house simply switched
it off and took to their knitting.
Knowledge grows best when there is freedom to think. The degree of
freedom depends on how the state is structured. There are basically three
types of states, namely (a) the theocratic state, such as present-day Iran
or the Vatican; (b) the ideological state, such as China, North Korea, and
Cuba. Ideological states do not necessarily have to embrace Communism.
In my view, Confucian China may be considered an ideological state. And
finally, (c) the democratic state, exemplified by the United States.
In the contest for ideas, I wonder which of the two leading nations
today will prevail. Will it be the historically younger 300-year-old
United Sates? Or will it be China with its 3,000 years of uninterrupted
civilization?
I do not know the answer, but let me tell you what an American
demographer told my Eisenhower Fellowship class in Philadelphia in
1985. He said that the most potent asset the United States has is the
Statue of Liberty in New York harbor. With outstretched arms, the
statue faces the direction of Europe as a symbol to welcome the poor
and the oppressed to America.
In the 1930s, when the Second World War was imminent, tens of
thousands of educated Europeans, including Einstein, left their home-
lands to emigrate to the United States to escape Nazi persecution. Since
then, some of the best and brightest from other lands, including China
and India, have emigrated to America.
What is it they are seeking? I believe they are seeking the freedom
to think. I am of the view that, in a knowledge-based world, the con-
test for ideas will be won by societies that are more open and more
pluralistic. Closed societies such as North Korea will simply implode.
4
Strategic Pragmatism
October 17, 2008
I n the late 1940s and early 1950s, ambitious young men and women
from Singapore and Malaya who wanted to study law had to go to
England to fulfill their ambition. Minister Mentor Mr. Lee Kuan Yew
was one of them. He took a double first in law from Cambridge Uni-
versity.1 He and his fellow students, who grew up during the Japanese
occupation of Singapore (1942–45), took destiny into their own hands
and decided to wrest independence from Britain.
On their return home, they formed the People’s Action Party, PAP,
in 1952, which went on to win self-government from Britain in 1959.
Later, by a stroke of fate, Singapore became an independent country
when it separated from the Federation of Malaysia in 1965. The PAP de-
scribed itself as a democratic socialist party. I wonder, sometimes, what
system of government Singapore would have now if Mr. Lee Kuan Yew
1
A “double first” refers to first-class honors in the same subject in subsequent
examinations, such as subsequent parts of the Tripos at Cambridge. See “Brit-
ish undergraduate degree classification,” http://en.wikipedia.org/wiki/British_
undergraduate_degree_classification (accessed June 16, 2010).
and his political colleagues had studied at Beijing University instead

of Oxbridge.
In 1959, Singapore was a port city much like Aden. It was founded in
1819 by an Englishman, Sir Stamford Raffles, who started his working
life as a clerk in the British East India Company. Appointed Lieutenant
Governor of Bencoolen in Sumatra, Raffles exchanged it with the
Dutch East India Company for Singapore.
Singapore has been described as a little red dot on the map. But
this little red dot sits at the southernmost tip of the Asian continent, a
geographically strategic position.
Unlike his Dutch counterpart, Stamford Raffles established Singapore
as a free port. Peoples and merchants from all over the world were
welcome to come to Singapore to ply their trade. When we obtained
self-government in 1959, our first prime minister, Mr. Lee Kuan Yew,
declared that no street name would be changed. Hence, street names of
Middle East origin, like Arab Street, Bussorah Street, and Synagogue
Street, were left unchanged. So, also, were names that resonate their
Malay, Chinese, Indian, British, and European origin.
Why did we do this? For sentimental reasons? In my view, we
preserved our history. Singapore—a city-state of just 600 square
kilometers, 231 square miles—has survived and prospered only be-
cause of its links to the rest of the world. Unlike continental coun-
tries, whose domestic markets are large enough to sustain their
growth, Singapore is totally dependent on exports of both goods and
services.
One could say that Singapore practices “strategic pragmatism.” Pro-
fessor Edgar H. Schein coined the term in his book Strategic Pragma-
tism: The Culture of Singapore’s Economic Development Board (EDB),
published in 1996 by MIT Press. This is the first study of the working
of the EDB, thirty-five years after its establishment in 1961. As its name
suggests, the Economic Development Board was set up by the Ministry
of Finance to spearhead the economic development of Singapore. We
practiced strategic pragmatism, strategic in thinking and pragmatic in
execution.
In a country with no natural resources, not even water, the sole
objective of economic development is employment. When we were
granted self-government in 1959, we inherited a stagnant economy
and a literate but relatively unskilled population. Singapore was highly
dependent on entrepôt trade, the buying and selling of rubber, tin, and
other tropical commodities. The heyday of entrepôt trade was during

the Korean war boom of 1952 and 1953.
Some 25 percent of our labor force were employed as clerks, techni-
cians, cooks, and domestic maids by the British forces and their fami-
lies at the Sembawang naval base, and the Changi and Tengah airbases.
The naval base was converted into Sembawang Shipyard, and Changi
airbase is now Changi Airport. The home base of Singapore Airlines,
Changi now is a busy international air hub.
Singapore was considered Britain’s Fortress of the East. It came as a
great shock to us when the British Defense Secretary Dennis Healey,
informed us in 1967, barely two years after we became an indepen-
dent country, that Britain was no longer able to maintain their military
bases in Singapore. Britain was withdrawing from East of Suez.
In 1959 when we started, there was high unemployment. The slight-
est instigation or provocation would spark off riots. Indeed racial riots
broke out in 1963 and 1969.
We knew that the only way to bring about political stability was rapid
economic development. Young EDB officers like myself were tasked to
identify and promote industries and businesses that could create jobs
for our young school graduates. We welcomed any industry, high tech,
low tech, or no tech. In the first phase, in the early 60s, labor-intensive
industries, such as garments, toys, wigs and TV assembly plants, set
up shop in Singapore, providing relief to our dangerously high rates of
unemployment.
These early labor-intensive industries, though no longer competitive
in Singapore today, played a key strategic role. Rising employment rap-
idly reduced the political temperature. A conducive political climate
attracted capital-intensive industries with long gestation periods. After
Shell’s nearly a century of operating only as a storage and bunkering
station in Singapore, the chairman of Shell Eastern visited us in the
Ministry of Finance to apply for a pioneer industry tax incentive cer-
tificate to set up Shell’s first refinery in Singapore. We were more than
happy to award Shell our Pioneer Industry Certificate No. 1 in 1963.
Around the same time, Ishikawajima-Harima Shipyard of Japan
also applied for a Pioneer Industry Certificate to establish the Jurong
Shipyard to service and repair IHI’s tankers and Freedom class cargo
vessels. Singapore was one of the three ship-repair-yard locations es-
tablished by IHI to service their clients and customers, chosen because
Singapore’s location straddles the Indian and Pacific Oceans.
However strategic our geographical position may be, without natural

resources, we survive only when our economy is knowledge-based.
For example, Mr. Ridley, an early director of the Singapore Botanic
Gardens, founded the Malayan rubber industry. As an experiment,
the curator planted rubber seeds from Brazil. The trees flourished, as
Singapore is in the same tropical belt. Rubber trees yield latex, the base
material for making rubber tires. He also devised a method for tapping
latex from the bark of the rubber tree. The rubber industry remains
a mainstay in the economy of Malaysia, Indonesia, and recently the
tropical island of Hainan in southern China.
Singapore and other developing countries have to constantly add to
their knowledge base. In the early 1960s, the Singapore labor force was
primarily service oriented. Our school education in English medium
schools largely prepared us to be clerks, teachers, nurses, policemen,
and junior civil servants.
Even light manufacturing requires some technical skills. The gar-
ment industry from Hong Kong was the first to establish in Singapore
because they found our women to be good seamstresses. To attract
other light industries, we launched a program partnering the govern-
ment with multinational companies, such as Philips, Rollei, and Seiko,
to establish industrial training centers. The companies provided the
instructors, course materials, and software. Our government provided
the building, the training machinery, and overall administration. It
was the best investment we ever made in education, for some of the
young trainees went on to establish their own businesses, supplying
parts and components to the multinational corporations.
Industrial training instilled in our young the discipline and tenac-
ity required for working in high-tech industries. Singapore today has
two engineering schools. One is the National University of Singapore,
NUS, and the other is the Nanyang Technological University, NTU,
where I teach a course in development economics to students from
China.2 Historically a mercantile city, Singapore’s engineering faculty
at NUS was set up only in 1962. Nevertheless, Singapore has moved on
from producing garments and toys—to the construction of oil drilling
rigs, operating and maintaining petrochemical plants, producing phar-
maceuticals, making computer chips in wafer fabrication plants, and
The students of the Mayors’ Class.

2
making watch movements and miniature ball bearings. And we design

and make electronic control systems for the automotive i ndustry.
Singapore built on its strategic geographical position to become a
leading logistics, air, sea, and oil refining hub, and will soon be a media
and infocom hub. All these would not have been possible without po-
litical stability and good governance. Good governance does not come
about by chance. Political stability and good governance attracted the
world’s leading commercial banks to our shores. They have helped to
develop Singapore into the world’s fourth largest forex center. For-
eign exchange is the largest financial market in the world, with over a
trillion US dollars changing hands daily.
Good Governance
Good governance is based on the rule of law, not on the power of
an absolute monarch or the party secretary. The prime minister of
Singapore is only the first among equals. In public administration, the
minister and the permanent secretary treat each other as intellectual
equals. Decision making is open and robust.
Public administration decisions are typically not of epic scale. In
practice, most decisions are quite ordinary, even pedestrian. Cost-
benefit analysis may be the only tool one needs. In Singapore’s recent
history, the epochal economic decision we had to make was: Do we or
do we not separate from the Federation of Malaysia? In 1963, Singapore
merged with Malaya, Sabah, and Sarawak to form the Federation of
Malaysia. We had hoped for the creation of a Malaysian Common
Market to provide us with an economic hinterland. A common mar-
ket is formed through the consolidation of the domestic markets of
its member states behind common external tariffs, such as the com-
mon market of the European Economic Community, the EEC. The
economic strategy we relied on was import substitution. But it deterio-
rated into a zero sum game: no member government found it politi-
cally convenient to open its own domestic market to the more efficient
producer of another member state.
In sum, Singapore obtained self-government in June 1959. We
merged as a component state of the Federation of Malaysia in 1963.
After two acrimonious years, we separated to become an independent
country on August 9, 1965. We celebrate National Day (Independence)
on this date each year.
As permanent secretary of the Ministry of Finance, I’d also spent

five years toiling with ASEAN, exploring the feasibility of forming an
even larger ASEAN Common Market. However, upon political sepa-
ration from Malaysia in 1965, Singapore went back to the drawing
board. Our minister of finance, Dr. Goh Keng Swee, told his shell-
shocked troops that, henceforth, Singapore had to compete with the
rest of the world, not just our immediate neighbors. Though the word
was not yet in the economic vocabulary, Singapore’s economy had just
become the world’s first global economy, which required the disman-
tling of all import tariffs.
By thus freeing up the economy, we were able to import raw materi-
als, components, and semi-finished products from the cheapest sourc-
es in the world. Our small and medium enterprises felt betrayed. The
Economic Development Board had only recently urged them, with
pioneer tax incentives, to set up light manufacturing industries on the
promise of a Malaysian common market.
Our decision to go for broke paid off. Soon after, multinational com-
panies moved to Singapore to produce color TV picture tubes, hard
disk drives, watch movements, and pharmaceuticals. As we raised
our skill levels, we moved up the value chain to petrochemicals, semi-
submersible oil drilling rigs, and computer wafer chips. Though other
countries may have richer human and natural resources, foreign in-
vestors are put off by the red tape and general hassle of doing busi-
ness with some of them. Good governance is a precious resource that
Singapore should never neglect.
Mass Rapid Transit System

I was the permanent secretary at the ministry having to deal with a ris-
ing tide of road congestion as ownership of a car came within the reach
of the average family. Deputy Prime Minister Dr. Goh Keng Swee, who
was also the first finance minister of Singapore, asked me to draft a
policy paper on how to achieve zero car population growth allowing
increase in new car registrations only in tandem with expansion of
road capacity.
I consulted our chief transport planner, who told me that new road
capacity could accommodate an increase of about 3,000 motor ve-
hicles each year without making congestion worse. The problem was
how to allocate these 3,000 new vehicle licenses. Under the Certificate
of Entitlement scheme, which all Singaporeans are now familiar with,

one has to bid for a certificate to register a new vehicle, valid for ten
years. The certificate is essentially a pricing scheme to allocate the lim-
ited number of new car licenses through the market mechanism, not
by administrative fiat or rationing. Restraints on car ownership are re-
inforced by road usage charges. Under the Electronic Road Pricing
system, road charges are levied on vehicles as they pass through gantry
control points during the restricted hours. In effect, tolls are imposed
on vehicles that use congested roads during peak hours.
As the chief transport planner quietly explained to me, the Public
Works Department can never build enough roads to cater to peak hour
traffic. There is simply not enough land. The logical conclusion was to
introduce a mass rapid transit (MRT) system. But which system?
The Ministry of Communications was asked to evaluate two MRT
system alternatives: (a) an all bus system or (b) an all rail system. We
appointed a consulting team from Harvard University to advocate for
(a) all bus and Wilbur Smith Consultants to argue for (b) all rail.
Dr. Goh and the Harvard team were in favor of an all bus system.
My mentor, who always exhorted us to be robust in policy making,
favored an incremental approach of expanding the existing bus fleets
instead of making a quantum leap into an all rail system.
To convince me, I was invited by Mr. Lim Leong Geok to join him
in monitoring morning peak traffic on South Bridge Road, a major
arterial road serving Chinatown. We observed a long convoy of buses
slowly crawling along in the bus lanes reserved for them. Walking the
talk settled at least for me that an all bus system was not workable.
It should have been obvious from the start of the policy debate that
in land-scarce Singapore a rail-based MRT system is clearly the better
alternative. Instead of a vast road network freezing the use of land, a
rail-based MRT opens up the use of space over the stations and the sur-
rounding vicinity. By providing accessibility, a rail-based MRT raises the
development potential of all land in Singapore. It is a win-win public
policy.
So, in the mid-1980s, we decided to take the plunge to build for our-
selves a rail-based mass transit system. At a cost of S$5 billion, it was
Singapore’s largest single public infrastructure project. With the MRT,
every part of Singapore became accessible to every other part. In this
way, the land value of the whole Singapore was raised.
5
The Strategic Pragmatism
of China and Singapore
Keynote speech delivered at the International
Conference on Chinese Enterprise Research at the
Ritz-Carlton Hotel in Beijing on November 15, 2008
S tructurally, China in 2008 remains an agricultural economy. Two-

thirds of its people, some 850 million, live on and off the land.
Through dint of hard work, Chinese farmers through the ages, till-
ing small plots of land, have been able to produce enough rice, wheat,
sorghum, meat, and fish to feed ever-growing populations. But only at
subsistence levels. When nature fails, when the rain doesn’t fall, famine
is not far away.
Agriculture produces very thin economic surpluses. The challenge
for China’s economic planners is to transform China from an agri-
cultural to an industrialized economy. In 1978, Deng Xiaoping, pa-
triarch of today’s China, opened up the Chinese economy to global
competition. He dismantled the people’s communes, and state owned
enterprises were to be gradually transformed into market-based
corporations.
In China, the equivalent of the chief executive officer is no longer the
party secretary, but a professional cadre appointed because he is more
expert than red. The more fundamental change has to come about in
the structure of land ownership.
In traditional agriculture, millions of subsistence farmers own and

till their little precious plots of land. However hard they work, there
is a limit to what the small individual farmer can get out of his land.
He has little or no access to capital, science, and technology. Peasant
farmers have no knowledge of commodity markets.
In contrast, farming in countries such as the United States, Canada,
Argentina, South Africa, and now the Punjab, the richest state in India,
is commercialized. Such large-scale farms have access to private capi-
tal. With economies of scale in production, these commercial farms
sell directly to world markets. They pose a formidable challenge to
traditional farmers in China, India, and Thailand. What should be the
response of Asian countries?
In the ongoing Doha round of multilateral trade negotiations and
in previous rounds, trade in agriculture is the biggest stumbling block.
Traditional farmers fear being swamped by commercial farmers in
developed countries. For obvious political reasons, no government in
developing countries is willing to open their agricultural markets to
cheaper imports. That would be committing political suicide.
Yet the economic logic to industrialize agriculture is compelling.
Capital, science, and technology could be made available from banks
and university research departments. The ministries of agriculture
could be staffed by the ablest officers, their job assignment to help
industrialize the rural economy. Yet progress is painfully slow.
In my view, the greatest impediment is cultural. Through the mil-
lennia, peasant farmers have struggled to own their little patch of land.
The land is not only their livelihood, it is also their way of life. Fiercely
independent, they are happy eking out a living from the farm they own.
Without economies of scale, peasant farmers and their families sur-
vive at subsistence levels. To progress, one-hectare farms have to be
consolidated into thousand-hectare farms.
How do we go about consolidating tiny, individually owned farms
into large-scale enterprises? The challenge is to persuade the individu-
al farmer to give up direct ownership of his precious plot of land.
The worst possible way is to expropriate the land to form communes.
While some economies of scale may be extracted from commu-
nal farming, communes undermine individual initiative. As the com-
mune belongs to everyone, in practice it belongs to no one. Everyone
eats from the same iron rice pot. The peasant farmer who diligently
tills the farm he once owned no longer works as hard.
The sense of ownership, of belonging, must remain. One way of re-

taining the sense of ownership is through corporatization. In exchange
for giving up ownership of his land, the enterprise would issue him
shares. The shares he owns would entitle him to receive annual divi-
dends. How much he receives would depend on the profitability of the
enterprise as a whole.
The individual farmer would continue to work on his own plot of
land as an employee of the enterprise, and be paid performance-based
wages. The wages would depend on his output. In factories, industrial
workers are paid performance-based piece rates. The piece rate system
could be adapted for agricultural production.
Nobody would eat from the iron rice pot. The farmer would eat from
his own porcelain bowl.
As the rural economy is the foundation of the Chinese economic
pyramid, the productivity of agriculture has to be raised if China is to
achieve self-sustainable growth. For such a large economy, domestic
demand rather than exports has to be the driver of growth.
Only when the primary farming sector produces an economic sur-
plus will there be demand for manufactured goods. In turn, surpluses
from the secondary manufacturing sector will generate demand for
the tertiary services of the teacher, physician, and entertainer. Pro-
fessor Walt Rostow of Columbia University enunciated this model of
growth in a university textbook published some fifty years ago, when
I was an undergraduate.
Chinese exports are soaring today. China is rapidly moving from
producing consumer products to producing capital goods such as cars,
ships, power stations, and commercial aircraft. As a low cost producer,
the terms of trade are very much in China’s favor. Your major trading
partners, such as the United States, Western Europe, and even Japan,
will pressure you to let the RMB appreciate.
As you raise the productivity of agriculture through mechanization
and technology, the surplus labor released from farming can be reem-
ployed in light manufacturing and in service sectors such as tourism. In
Japan, Toyota, Nissan, Honda, and Subaru are supported by thousands
of smaller companies making automotive parts and components.
Today this division of labor is known as outsourcing. The whole in-
dustry, whether automotive, aircraft manufacturing, or ship building,
is a huge integrated pyramid with a broad base of smaller companies
making parts and components for the giants at the top. Small, they
are nimble, adaptable, and resilient. They are more able to ride out
recessions.
When I visited the Boeing Company in Seattle in the early 1972,
as a director of Singapore Airlines, I asked the president what type of
company Boeing was. I expected him to say that Boeing was an aircraft
manufacturing company. Instead he described Boeing as an aviation
marketing company.
He explained that Boeing constantly monitors and evaluates the
growth of air traffic on domestic, regional, and intercontinental routes.
Analysis of the data collected enables Boeing to forecast the range and
optimal capacity of new aircraft that will be in demand in the vari-
ous market sectors. The Boeing 707 aircraft series is a classic example
of how diligent data collection and rigorous evaluation enabled the
company to design a winner.
A Boeing aircraft is assembled from 64,000 parts and components,
including the Pratt & Whitney engine. This leads me to think that, as
China industrializes its rural economy, the abundance of labor released
from farming will provide a low-cost labor force for the manufacture
of industrial parts and components.
In its present phase of growth, China is a low cost, medium to high
technology economy. China can become a leading industrial coun-
try alongside the United States, Europe, and Japan to produce motor
vehicles, aircraft, ships, power stations, and supercomputers.
I am told that even during the worst days of the Cultural Revolution,
the Chinese government kept its technical and engineering schools
in the universities intact. China has also benefitted from the re-
turn of scholars who studied abroad. Many of China’s older cadres
were trained in the USSR. Today, China sends hundreds of thou-
sands of its young students to study abroad, including to Singapore,
yielding a brain gain, not a brain drain. China is a country of the
future.
At this point, you may want to ask what is it that the city-state of
Singapore, a tiny, 600-square-kilometer, county-sized piece of territory,
has in common with China, a continental giant?
My first visit to China was in 1976 as a member of the Singapore del-
egation led by Prime Minister Lee Kuan Yew. We visited Guangzhou,
Shanghai, and Beijing. The skies were grey. Everyone was dressed in
grey, blue, or black, a grim determination etched on their faces.
The slogan of the day was “Learn from Dazhai in agriculture.”1 Our
delegation visited this dry, parched, model commune. Water was scarce.
China was then a planned economy. In Guangzhou, at that time, if you
wanted to buy a drink from a street peddler, you had to hand over your
ration coupon for sugar.
Mr. Deng Xiaoping is known throughout the western world for
his “black cat, white cat” aphorism. In my opinion, his greater con-
tribution to political thought was his exhortation to his countrymen
to “seek truth from facts.” When Mr. Deng visited Singapore in 1978,
I believe he was seeking truth from facts. How is it that this tiny city-
state peopled by southern Chinese could achieve a standard of living
higher than their country of origin?
We practice what an American economist, Professor Edgar H. Schein
of MIT, calls strategic pragmatism. He wrote a book on the culture of
Singapore’s Economic Development Board. Our EDB champions stra-
tegic thinking and pragmatism in implementation. In spirit, our devel-
opment philosophy is similar to Mr. Deng’s “to seek truth from facts.”
In development economics, all countries go through three stages
and four phases of growth. The three stages of growth are (a) primary–
agriculture, (b) secondary–manufacturing, and (c) tertiary–services.
I now add a post-tertiary stage (d), namely knowledge, which under-
pins all three stages.
The four phases of growth are (a) low cost, low tech, (b) low cost,
medium tech, (c) high cost, medium tech, and (d) high cost, high tech.
All developing countries including Singapore and China began as low
cost, low tech producers. As you know, Singapore inherited from the
British a stagnant economy and thousands of people with no jobs. Yet
this abundance of unskilled, low wage labor enabled Singapore to be
competitive producers of garments and wigs. These labor-intensive
industries helped absorb our unemployed workers.
As unemployment dropped, wages began to rise. The MNCs from
the United States, Europe and Japan were attracted to Singapore not just
1
The slogan “learn from Dazhai in agriculture” was coined by Mao in 1964.
Dazhai is a mountainous North China village with several hundred farmers who
worked on their own on the principle of self-reliance, without any financial or
technical assistance from the government or others. Dazhai thus represented
Mao’s strategy to transform the Chinese countryside based on self-reliance,
egalitarianism, and frugality.
because of good governance, though this is a precious resource we have

painstakingly built up. They came because we began to raise our edu-
cational standards and upgrade skill levels through industrial training
centers, polytechnics, and the engineering faculties of our universities.
They were also attracted by our open economy, one that operates
without exchange controls. Though some other countries are better
endowed, the MNCs are put off by their red tape, the general hassle of
doing business, and the pervasive corruption of many.
Singapore moved up the value chain of industries offering low cost,
skilled labor to manufacturers of color TV picture tubes, watch move-
ments, computer chips, and pharmaceuticals. Like other globalized cit-
ies, Singapore also developed into an international financial center. Our
best graduates, including those in engineering, join our banks and prop-
erty development companies for higher pay and faster promotion.
Singapore is fast becoming a high cost economy. But are we becom-
ing a high-tech economy?
A high-tech economy is an economy based on knowledge, not
just on skills and education. An economy cannot excel in all fields of
knowledge, least of all Singapore. Nor even China. Knowledge derived
from actual experience is often the most useful and valuable.
Let me give two examples. In 1994, I accompanied Dr. Richard Hu,
our finance minister, on a visit to China as guests of the Chinese fi-
nance minister. As we had expressed an interest in the Three Gorges
Dam project, our hosts arranged for us to visit the construction site to
see for ourselves. The chief engineer explained to us that the project
had taken time, but not because China lacked the financial resources.
Time was spent conducting detailed hydrographic studies to deter-
mine the most effective way of preventing siltation of the main dam.
Silt reduces the capacity of dams to hold the volume of water needed
to generate electricity.
A Chinese hydrographic engineer designed a network of smaller
dams in the upper reaches of the Yangtze River to trap the silt, slowing
siltation of the main dam. This piece of engineering knowledge is criti-
cal for the design of giant hydroelectric dams.
Recently I had the pleasure of lecturing to a group of Brunei stu-
dents. As you know, Brunei is a leading oil producer. They asked me
how to sustain the growth of their economy when the oil runs out.
The thought came to my mind that instead of stashing their currency
reserves in US treasury bills, the Brunei Government could team up
with a Chinese company to finance, build, and operate hydroelectric

dams in African countries blessed with abundant water resources.
Africa’s huge rivers, like the Yangtze in China, can be dammed to pro-
duce electricity. The electricity generated will help industrialize the
host country. The surplus power can be sold to neighboring countries
for hard cash, giving a rate of return on capital higher than US treasury
bills.
I read in a newspaper report that the chief project engineer of the
Three Gorges Dam was willing to help other countries design and build
hydroelectric dams like the Three Gorges Dam. This is how China will
grow to be a knowledge exporter.
Another example of knowledge engineering is in the building of in-
cinerator plants. As land is scarce in Singapore, we decided in the 1970s
to incinerate our waste and garbage instead of using the traditional
landfill method. The first four incinerator plants were all designed by
a German engineering consulting firm, which was paid the handsome
fee of 10 percent of the project cost of S$500 million per plant.
As permanent secretary of the Ministry of Finance, I visited the
fourth incinerator plant just after its commissioning. The German
project manager thanked me profusely. I asked him, “Are you thank-
ing me for the handsome fee?” He shook his head vigorously and said,
“No!” He thanked me instead for the operating data they had collect-
ed. The rates of fuel injection for burning wet rubbish in a humid cli-
mate would enable them to design more efficient incinerator plants for
other tropical cities. The operating data from the new Singapore plant
gave them a leg up over their competitors.
Though Singapore is a small city-state, we do invest in state of the art
public infrastructure projects. Currently, we are building a deep tunnel
sewerage system to save on land. Costing S$5 billion, it is currently the
largest project of its kind in the world. More and more mega-cities will
build such systems.
Deep tunnel sewerage projects require the same type of hydro-
engineering expertise as hydroelectric dams. The Chinese engineers
who built the Three Gorges Dam are well equipped to design and
construct deep tunnel sewerage plants.
Singapore and Chinese engineering firms can combine to bid for
engineering projects requiring specialist knowledge. The new free
trade agreement between Singapore and China provides the ideal
framework for joint business initiatives into third markets.
6
China, Japan, Singapore:
Three Development
Perspectives
Lecture to the Mayors’ Class, Nanyang Technological
University, October 10, 2007
China
China, a continental giant with 6,000 years of history and civilization,
considers itself the Middle Kingdom, self-reliant and self-sufficient.
The Chinese race is able to think from first principles. Even in ancient
times, they made major discoveries in science and technology—paper,
gunpowder, even the humble fishhook. China, however, suffers from
periodic periods of disunity and civil wars.
In its recent history, there has been a clash of ideologies. Historical-
ly, China prospers when ruled by strong enlightened rulers. Its saving
grace is that it is able to return from chaos to the center.
In my view, the Chinese are big thinkers. The Great Wall, the North-
South Canal, and now the Three Gorges Dam. In essence, these are
mega civil engineering projects with strategic development objectives.
Arguably, the Great Wall was for defense purposes, to keep the barbar-
ians out. However, it did not stop the Mongols and the Manchurians
from conquering China. Hard power did not stop the tribes who excel
in warfare. Instead the conquerors were assimilated by the soft power
of the Han Chinese.
Metaphorically, the Great Wall was a symbol of China,s Middle

Kingdom arrogance. Unfortunately, it did not stop Marxism from
penetrating Chinese thought. It could have been a disaster for China
had Deng Xiaoping not introduced the concept of Socialism with a
Chinese face. The North-South Canal and the Three Gorges Dam are
projects with clear strategic development objectives. The canal was the
world’s first inland waterway. The Three Gorges Dam uses the roaring
water of the Yangtze River to generate electricity for four of China,s
most populous provinces. The dam also alleviates floods and channels
the water to irrigate arid northern provinces.
Japan
Though Japan is only one-tenth the size of China, she is the world’s
second largest economy, second only to the United States. More than
its sheer size, Japan’s economy is the world’s most productive, with one
of the world’s highest per capita GDPs, excluding those of the oil rich
countries. Japan’s modernization from a feudal to an industrial state
began barely 250 years ago, with the rise to power of the Tokugawa
Shogunate.
How did Japan do it? In my view, Japan is the one country I know
that makes the most out of the least. With little arable land, Japanese
rice farmers have cultivated the little land they have at the foot of
mountains to be not only self-sufficient, but also to accumulate sur-
pluses for huge stockpiles paid for by the Japanese government. Japan
has to import almost all her energy needs. Yet, she is able to produce
some of the finest steel in the world, making the oil tankers and gas
vessels that bring crude oil and natural gas to feed the furnaces that
make the steel.
In the 1970s, I was privileged to visit Matsushita’s pioneering VCR
TV plants in Osaka as chairman of the EDB. What struck me most
about the plant was its layout. Vertical rather than horizontal, it was a
high rise rather than a traditional longitudinal building. Components
were loaded at the topmost floor. The assembly line flowed from one
floor to the next. The final product was subject to inspection by the
human eye before it was loaded onto the delivery trucks.
For me, it was a fascinating demonstration of production engineer-
ing. Unlike the Chinese, the Japanese are flawless in execution. The
Chinese genius is in bold design. So, while the original gardens in
China, Japan, Singapore: Three Development Perspectives 45
Hangzhou may have been breathtaking, it is today’s miniature Japanese

gardens that are exquisitely beautiful.
In my view, higher productivity comes from careful attention to de-
tail. Japanese production engineers practice Professor Deming’s qual-
ity control system more diligently than others.1 As a result, the quality
of Japanese cars is way above the competition. If the Chinese wishes to
compete in the export of capital goods, their quality has to be equal,
if not better than, that of the Japanese. The recent scandal about con-
taminated food and unsafe toys from China has dealt a body blow to
Chinese export capability.
Unlike China, which looks inwards, Japan has always looked out-
wards for technology and talent. In a recent visit to the Museum of
Mitsubishi Heavy Industries shipyard at Nagasaki, I was told to my
great surprise that the shipyard, Mitsubishi’s first, was designed by
a Dutch sea captain. Similarly, the Zero fighter was designed by a
German aeronautical engineer.
Culturally, however, the Japanese have kept the outside world at bay.
The Japanese government does not encourage the learning of English
as a second language. However, a huge translation industry translates
books and publications from other countries into Japanese. In this
way, Japanese imbibe the best of the West without collateral cultural
damage.
Singapore
So where does little Singapore position itself? We have no choice but to
plug ourselves into every nook and cranny of the world. As I have said
before, Singapore became the world’s first global economy—not by
choice but by necessity. Unlike China and Japan, Singapore’s domestic
market is too minuscule to sustain domestic industry.
1
William Edwards Deming (1900–1993), an American statistician, professor,
and consultant, is the founder of Total Quality Management. Deming is best
known for his significant contribution to Japan’s reputation for innovative high-
quality products and its economic power. There, from 1950 onward, he taught
top management how to improve design (and thus service), product quality,
testing and sales (the last through global markets) through various methods, in-
cluding the application of statistical methods. He is regarded as having had more
impact upon Japanese manufacturing and business than any other individual
not of Japanese heritage.
Fortunately for us, the world is entering into an era of knowledge-

based competition and mobile human talent. Our potential GNP is
no longer limited by land, labor, or capital. We will grow so long as we
retain the drive to acquire knowledge. Every day, our knowledge re-
serves will have to expand at the individual, institutional, and national
level. Only in this way can we keep up with the Chinas and Japans of
the world.
Reverence and Respect for Education

Though my observation of the development paths of China, Japan, and
Singapore are by no means exhaustive or adequately in depth, I am quite
convinced that the underpinning of the social, economic, and political
progress made by all three societies is their reverence and respect for
education. The poorest of families will scrimp and stint to send their
children to school. Education is the foundation of k nowledge.
Knowledge accumulated in a society is the driver for the very rapid
rates of economic growth in the first decades of opening up an econo-
my. Japan, Singapore, and China achieved 10 percent growth rates in
the 1960s, 1970s, and 1980s. As our reserves of knowledge plateau off,
so will our GDP growth rate. China will see growth settle down to 7 to
8 percent, Singapore 5 to 6 percent, and Japan 2 to 3 percent. Only in-
fusions of new knowledge and talent will lift our growth rates beyond
the optimum.
7
A Socratic Dialogue:
Global Competition in a
Knowledge-based World
Dialogue Session with the Economic Development
Board, August 21, 2006
L ike Dr. Goh Keng Swee, economic mentor to most of us in the pre-
1965 generation, I am tongue-tied when I have to make a speech in
front of a seasoned audience such as yourselves. Dr. Goh advised me
that when you find yourself in such a corner, the best thing to do is to
write out every word you want to say, take off your specs, and read into
the crowd, a blur of faces in front of you.
This afternoon, I will throw caution to the wind and speak off the
cuff. The talk today is my maiden effort at public speaking. Lest I
become incoherent, I set out the thrust of this Socratic dialogue as
“Global Competition in a Knowledge-based World.”
As I have said in my book,1 from 1965 on, after we were kicked out of
Malaysia, fledgling Singapore was thrown screaming and kicking into
the world of global competition. We had to sink or swim. No quarter
was asked and no quarter given. The playing field was hilly, jagged, and
certainly uneven.
1
A Mandarin and the Marking of Public Policy: Reflections by Ngiam Tong Dow
published in 2006 by the National University of Singapore Press.
Each ASEAN country, then, protected its own markets tightly. The
irony was that these same countries expected to enter the markets of
the other countries freely.
In such an inhospitable regional environment, those of us in
Singapore had to live by our wits finding niches, opportunities, and
lubang2 whenever and wherever we could. We welcomed MNCs and
anybody else who could give Singaporeans jobs, any job, high tech,
low tech, or no tech.
The bedrock of our success was a strong, incorrupt, and clean gov-
ernment led by the People’s Action Party with Mr. Lee Kuan Yew as
prime minister. We conscientiously practiced good government.
I recall a backhanded compliment given by an Indonesian Chinese
businessman who said that Singapore was the easiest place in the
world to do business, as it is well administered, with clear laws and
transparent regulations. Yet it was also the hardest place in the world
to do business as he could not bribe our civil servants to bend the
rules in his favor. As he put it, in his own country: terus boleh bengkok,
and bengkok boleh terus. In plain English, “the straight can be made
crooked and the crooked straight.”
The days when even strong economies like the United States, Japan,
and Western Europe indulge in the labyrinth of protectionist policies
are over. However earnestly their liberal economists preach free trade,
deep down in their hearts they, and certainly the politicians among
them, are not totally convinced that international trade can be more
than a zero-sum game.
The advent of the World Trade Organization (WTO) in 1995 changed
the whole landscape of international trade. A WTO-structured global
economic system is both a challenge and a threat to small countries
such as ours. By helping to level the playing field of international trade,
it gives small countries like Singapore access to global markets.
At the same time, a global economic system has sent shock waves
through all economies, wreaking seismic changes. Singapore now has
to compete head-on with the best economies in the world. We have to
be best of breed or first in class, or we’re in trouble. In essence, we have
to become a knowledge-based economy. We have to climb from Third
World to First in knowledge leagues.
2
Lubang (also lobang) is Malay slang meaning opportunities, contacts, and
tips.
A Socratic Dialogue: Global Competition in a Knowledge-based World 49
Knowledge is an amorphous concept. It can embrace everything,

anything, or nothing. In the Singapore context, I break knowledge
down into expertise and experience. A Japanese vice-minister of MITI,
Japan’s Ministry of International Trade and Industry, and paraphrasing
Francis Bacon, once told me that, “Knowledge is power when applied
with wisdom” or “experience.” In examining knowledge-based compe-
tition, we need to ask ourselves where and how we stand in expertise
and experience.
The first point to note about knowledge is that expertise and
experience resides in the individual. Technology is embedded in ma-
chinery and plants. More important is the man who drives the ma-
chine, not the machine that drives the man. Start-ups driven by the
owner-entrepreneur are more likely to succeed than start-ups managed
by professional managers.
The CEO and owner of a leading Japanese machine tool company
once told me, angrily, that post-war Japan was rebuilt by entrepreneurs
like himself, Honda, Matshushita, and Morita, and definitely not by
the Todai elite. He was a naval second lieutenant who returned home
from the war defeated and dejected, but not beaten. He and his friends
collected scrap metal and turned the proverbial sword into a plough,
turning out pots and pans for sale to housewives. Making cookware
was the start of his precision engineering enterprise.
The old technology-based economy was capital-intensive, requir-
ing substantial financing by the state, or private capital. The new
knowledge-based economy requires vast infusions of individual talent.
And talent resides in the individual. More than ever, we need to grow
our own timber, nurture our young, restless and driven, to start up
new enterprises in IT, bio-medical engineering, materials science, edu-
cation, healthcare, logistics, art and media, and a whole host of service
industries sprouting up in a knowledge-based economic ecosystem.
Why am I so obsessed with the idea of growing our own timber? Is
it an addled state of mind? As knowledge resides in the individual, and
the talented now operate in an almost borderless world, it is more vital
than ever that our young and talented sink their roots and raise their
families at home in Singapore. Taken literally, growing our own tim-
ber may not be inspiring enough. Being rooted may also conjure
the p icture of being stuck in one place.
International business in a global economy operates without bor-
ders. But for Singapore to survive economically and politically, the
irecting mind of a business, an institution, a charity, or indeed the

d
state, has to be Singaporean. It is inconceivable that a non-Singaporean
can ever be the CEO or prime minister of Singapore.
Professor Shih Choon Fong, President of the National University
of Singapore, has a more engaging icon, that of the Atlantic salmon
that returns year after year to its home waters to spawn, and nurture
its young before heading out for the deep blue waters of the ocean to
grow and mature, and return each year without fail to its home waters
to start a new cycle for a new generation.
I will end here and take questions.
8
The Ministry of National
Development in the
21st Century
Speech presented at the Ministry of National
Development on June 3, 2009
T hank you Tee How for giving me this opportunity to meet up with
old and young colleagues of the Ministry of National Development
family. I was permanent secretary of this ministry for just over two
years (1987–89) concurrent with my principal job as permanent sec-
retary of the Budget. At the Ministry of Finance, I was the “chief bean
counter,” an epithet thrown at me by Mr. Philip Yeo, then chairman of
the Economic Development Board.
Well, the Economic Development Board was certainly a more excit-
ing place to work in than was the Ministry of Finance, which by the
very nature of its role has to be austere and thrifty.
This afternoon I want Philip to know that there is another ministry
that generates even more exuberance and verve than the EDB. It’s the
Ministry of National Development. Your departments and statutory
boards—the Housing and Development Board, the Urban Redevelop-
ment Authority, the Public Works Department, the Land Transport
Authority, and National Parks—are literally responsible for changing
the face of Singapore.
Only the Agri-Food and Veterinary Authority was more functional.
Its mission, however, is no less critical. The AVA is responsible for the
security and safety of our food supplies. What can be more basic than
food?
This afternoon, your permanent secretary has asked me to speak on
“The Public Servant in the 21st Century.” You have given me a splen-
did platform to speak from. I am glad that the emphasis is on being a
servant or “servanthood.” It is not a cliche to stress that the mission of
the Singapore public service is to serve the people.
Nowadays, the management idiom is good governance. Governance
connotes a process, detached, without a soul. The motto of the Economic
Development Board is “Dare to Dream.” Dr. Martin Luther King, Jr.
rallied his people with the cry, “I have a Dream.” Does the Ministry of
National Development have a dream? Do you dare to dream?
I will adjust the title of my talk accordingly to “The Ministry of
National Development in the 21st Century.” Well, we are already into
the sixth year of the 21st century. The 20th century seems distant now.
Those of us who grew up in the immediate post-war years will re-
member the fetid slums of Chinatown and the unsewered kampongs
of Geylang, Toa Payoh, and Ang Mo Kio.
When Minister Lee Kuan Yew first established the Housing and
Development Board in 1961, under the leadership of Mr. Lim Kim
San as chairman and Mr. Howe Yoon Chong as CEO, the dream was
to build new towns to rehouse the people in clean, affordable flats pro-
vided with basic amenities.
Now, Singapore is a lively throbbing city of four million people. To-
day’s Singapore was but a gleam in the eye for those of us who started
work in the 1960s. Serviced by the MRT and air-conditioned bus fleets,
we now have a transport infrastructure second to none. Middle class
parents from China and India send their young children to our schools.
Their older children enroll in our polytechnics and universities. Patients
from neighboring countries come to be treated in our hospitals.
The Ministry of National Development is an integral part of the
Singapore story, just as much as the Economic Development Board. Its
men and women are largely responsible for the physical transforma-
tion of Singapore, making our home one of the most livable cities in
the world.
Yet are we perfect? In life, the journey is always more fulfilling than
the destination. How do we move to a new level of perfection?
You asked me to discuss the role of the public servant in the 21st
century. In 2006, every country in the world welcomes talent and
investment from abroad. On gaining our independence in 1965,

we made a virtue out of necessity and threw open our doors to all
comers to establish their businesses and compete on a level playing
field.
India and China did not welcome foreign investment. We did.
Singapore Airlines became a global airline because there were no
domestic routes to fly, except, improbably, from Changi to Seletar.
In public administration, Singapore could get away with a top-down
approach because everyone else was even more heavy-handed and,
worse, corrupt. In 2006, when everyone rolls out the red carpet for the
MNCs that bring their markets and technology with them, we can no
longer adopt a stiff upper lip, top-down approach.
In recent years, we say we have moved from control to regulation.
My golfing partners tell me they have yet to see the difference.
It is the second nature of all administrators, and I include myself as
one, to want to feel on top of every situation. In extremis, we become
control freaks. In the 21st century, changes will cascade down at the
speed of light. In such an unstructured world, the role of the adminis-
trator is to facilitate, not to control or regulate. Let me illustrate what
I mean by facilitation.
In the early 1990s, I visited Hong Kong regularly to attend the board
meetings of the Wing Lung Bank, representing the Development Bank
of Singapore shareholder. On one of these occasions, an old friend,
Mr. Robert Kuok, invited me to lunch. I took the opportunity to ask
him whether or not there is a difference between the regulatory regime
of our Urban Redevelopment Authority and its Hong Kong counter-
part. He told me that, on paper, the planning regulations were identi-
cal, as both were derived from the original British legislation, as both
had been British colonies.
In practice, he said, there’s a world of difference. In Hong Kong,
when you submit a development proposal that does not fit in exactly
with the regulations, the planner will engage with the entrepreneur to
see how the proposal can be accommodated. According to Mr. Kuok,
the mindset of the Hong Kong bureaucrat is to say “yes.” In Singapore,
when the circle does not fall exactly within the square, it is rejected out
of hand. The mindset is to say “no.”
I often wonder why we find it so difficult to say “yes.” Saying “yes”
requires more work on our part. Do we lack the confidence to say
“yes” and stand by our decision? Or, do we have a dim view of the
erchant class, thinking that they will attempt to bribe us at the drop

m
of a hat? Are we a Third World country?
The Pacific Place in Hong Kong is an integrated commercial de-
velopment consisting of three five-star hotels, a world-class shopping
mall, luxurious serviced apartments, and state of the art office blocks.
The development sits on an irregular piece of former state land. The
bureaucrat and the businessman engaged and partnered with one
another to turn out a development to be proud of.
In the mid-1980s, I came to know Mr. Gotoh, scion of the Tokyu
Group of Japan. The group invests in railways, real estate, and
construction. On one of our official visits to Japan, the Japanese gov-
ernment hosted a lunch for the Singapore delegation at Mr. Gotoh’s
family home, right in the heart of Tokyo, set in an exquisitely beautiful
Japanese landscape garden.
Mr. Gotoh explained that his family no longer owned the house. It
belonged to the Japanese Ministry of Finance, as the family was not
prepared to pay the whopping estate duty. The family was, however,
allowed to continue staying in the house, so long as they kept it in its
original pristine state. Would a Singapore Ministry of Finance be as
flexible?
When I asked Mr. Gotoh whether his company was interested in
tendering for Housing and Development Board contracts, he said “no.”
He explained that his company was geared up to design and build com-
plete new towns—road system, housing, schools, hospitals, shopping
centers, and bus and train stations.
When I put such a proposal to Mr. Teh Cheang Wan, Singapore’s
Minister for National Development, he was impressed by the boldness
of the proposal. But he said that it was not feasible in the Singapore
context, as there were few Singapore contractors with the expertise to
compete on such a scale.
Thirty years down the road, my company, Surbana Corporation,
is such a comprehensive knowledge-based company. We plan, de-
sign, and build new towns in China, and soon India and the Middle
East.
In Chengdu, Surbana Corporation is building a new town of 8,000
housing units targeted at the rising Chinese middle class. Work will
soon start on a similar 6,000-unit project in Wuxi. By declining to con-
sider Mr. Gotoh’s proposal for building complete new towns, Mr. Teh
gave my colleagues twenty more years to hone our skills to become a
knowledge-based company that exports Singapore’s planning, design,

and building expertise to Asian and Middle East markets.
I see other knowledge domains that Singapore statutory boards and
corporations can package and export to the world, such as transporta-
tion systems, technical education, health, and even media.
The role of the public service in the 21st century is to facilitate,
develop, and promote the export of knowledge and expertise where
Singapore has a cutting edge. And it should not be done in a bureau-
cratic format.
The Sentosa Cove1 and the Southern Islands2 reclamation projects
have given our planners the scope to exercise their imagination to plan
development from completely virgin sites.
However, the business model adopted remains the traditional one
of tendering out sites to developers plot by plot. Individual buyers or
developers will develop their hard-won sites the best way they know,
which is to optimize the commercial value of their land. Will the
outcome be a pleasing mosaic, or just a rojak3 of disparate styles and
tastes? Can we achieve a better outcome by tendering out the whole
site to a consortium of developers to achieve unity of design, style,
and ambience? Will not such a development be even more valuable
commercially?
Surbana is essentially a knowledge-based consulting company. In
China, together with two other financially strong partners, we are de-
veloping two new towns in Chengdu and Wuxi. We bid successfully
for sites large enough for integrated development of residential apart-
ments and commercial and social facilities. Though our roots are in the
Housing and Development Board, our planners and architects, once
1
Sentosa Cove, a residential enclave in the east of Sentosa Island in Singapore,
will house about 2,500 units when fully developed. Largely constructed on re-
claimed land, it is being marketed as an “exclusive oceanfront residential com-
munity” and the “only true seafront residential property” in Singapore. See
http://en.wikipedia.org/wiki/Sentosa_Cove (accessed on August 10, 2010).
2
The Southern Islands are an urban planning area in the Central Region of
S ingapore, along with the ten offshore islands south of the city. The islands en-
compass a total land area of about 5.58 square kilometers. See http://en.wikipedia.
org/wiki/Southern_Islands (accessed on August 10, 2010).
3
Rojak is a traditional fruit and vegetable salad dish commonly found in
Malaysia, Singapore, and Indonesia. The Malay term rojak means m
ixture.
freed from bureaucratic constraints, are able to design and build new
towns that make our best HDB towns look dated. The Botanica, the
residential apartment development in Chengdu, sits in a park s etting.
Besides the reclaimed waterfront sites of our new Marina city, there
is only one other potential site for world-class residential housing in
Singapore: the rolling valleys of the former Singapore Turf Club in
Bukit Timah. We moved the turf club to free this suburban piece of
land for top-of-the-range residences. Hopefully, they will be attractive
enough to draw world tycoons to locate one of their several homes in
Singapore as their businesses move to Asia. But if we tender out this
last piece of real estate plot by plot, it is unlikely that we can achieve the
quality to attract the world’s high-flyers to stay in Singapore.
Dare I propose that we break from our mold, and, as suggested by
Mr. Gotoh of Japan, invite a consortium of developers to develop this
pristine site? The Suntec City development is a harbinger of the new
Singapore to come.4 Do we dare to dream?
The core role of the Ministry of National Development in the 21st
century is to transform the Singapore of 2006 into a completely new
Singapore by the year 2050, and to do it on the same dramatic scale as the
creation of today’s metropolitan city from what it was in 1960—a crum-
bling town with a stagnant economy, faced with an uncertain f uture.
By mid-century, it is my dream that Singapore be a home and not
just a place to earn a living. We can be out in front, a leading global
knowledge-based metropolis. Our infrastructure and communica-
tions can be completely integrated. Singapore can be an integrated
intelligent island, not merely a cluster of islands of intelligence.
Our schools and universities can move from teaching acquisition of
know-how to absorption of know-why. Singapore can be a knowledge
exporter, not just an exporter of goods and services.
Singaporeans can be known as a thinking people. From just hav-
ing a global economy, we can transform Singapore into a global city
of knowledge and culture. This is only one person’s dream of the
4
Suntec City is the single largest privately owned commercial development in
Singapore, comprising convention and exhibition centers, office towers, and a
shopping and entertainment center. It was financed entirely by a consortium
of some of Asia’s most successful entrepreneurs, whose vision was to create a
futuristic city to meet the challenges of a global metropolis and to be a premier
landmark of Singapore in the 21st century.
New Jerusalem. I invite my younger colleagues to dream their own

dreams and realize their own Singapore.
On my watch as the permanent secretary of national development,
from 1987 to 1989, and later as chairman of the Housing and Develop-
ment Board, from 1998 to 2003, I was privileged to engage in and to sup-
port three models of “thinking out of the box” initiatives by our officers.
The first was Dr. Tan Wee Kiat’s concept of turning Singapore, the
garden city, into a city set in a garden. It is not merely semantics. In a
garden city, land and space are set aside and developed into gardens
and parks, such as our world-renowned Singapore Botanic Gardens.
These gardens, however beautiful and exquisite, are in essence oases
where people go to escape from the hustle and bustle of the city. By
considering the whole of Singapore as one beautiful garden, the pos-
sibilities for the National Parks (NParks) to exercise their imagination
and c reativity soar.
Dr. Tan and his colleagues proposed and implemented a plan to link
all the major parks in Singapore by a network of cycling tracks. In this
way, NParks created a unity of vision of Singapore as not merely a gar-
den city, but the first city garden in the world. I think even Babylon,
with its legendary hanging gardens, cannot be conceived of as the city
garden Singapore aspires to be.
The second example of thinking outside the box was hatched be-
tween my deputy secretary, Mr. Lim Hng Khiang, and myself. Hng
Khiang, who had joined me from the Ministry of Defense, used as
he is to moving large units of men and equipment around in military
exercises, was irked by the micro-planning approach of the Urban Re-
development Authority. As a general economist, I was also more com-
fortable with thinking in broad macro terms rather than micro, using
strategy more than tactics.
So we proposed to Mr. Liu Thai Ker, the chief planner, that there
could be interim regional development guide plans between the de-
cennial revision of the Singapore Master Plan. We also invited the
Singapore Institute of Architects to form teams to propose their
conceptual plans for the six major regions of Singapore.
Out of this exercise came the recommendation to transform the
Upper Bukit Timah/Woodlands area from an industrial to a residen-
tial/commercial zone. This broad-brush approach was far more effec-
tive than the prevalent modus operandi of landowners having to apply
for change of use plot by plot. Developers could purchase land with
greater assurance that their residential condominium project propos-

als have approval in principle.
Industrial sites, such as Humes, Yeo Hiap Seng, and the Hillview
Estate, have been turned into highly prized condominium develop-
ments. Perhaps you will permit Hng Khiang and myself to claim some
credit for speeding up the remaking of Singapore through the concept
of regional development guide plans. Through these guide plans, we
signal government’s intention to free up designated areas in the old
Master Plan for new developments,
Finally, may I end on a lighter note in administration? In the mid-
1980s, conservation zeal was at its height. Heritage was the buzzword
of the day. So one fine day, the Urban Redevelopment Authority, on
behalf of the Conservation Board, proposed to us at the ministry to
gazette Keong Saik Road as a conservation area, just as Chinatown was
on the other side of South Bridge Road.
In an earlier era, many rich Chinese merchants had built beautiful
art deco homes on Keong Saik Road. It was, in fact, the millionaires’
row until they moved out to the suburbs of Tanglin. Many of these
homes were bought by clan associations and remain until today as clan
premises.
Apparently, when the taipans moved their family homes to more salu-
brious surroundings, they retained their Keong Saik properties as places
for trysts with their mistresses and concubines. In the late 19th century,
it was almost a badge of honor for a millionaire to keep a concubine.
Time took its toll, and, in time, these once glorious premises were
used as bordellos. So, if the Ministry of National Development had
acceded to the conservationists’ request, we would have been the first
government in the world to gazette and preserve a bordello district.
As far as I know, only one other town in the world achieved this dis-
tinction. The gold mining town of Kalgoorlie in Western Australia has
turned its bordello street into a tourist attraction! Was the Ministry too
squeamish by refusing to gazette Keong Saik Road for conservation?
Well, if we can now accept Integrated Resort5 casinos, how about
also giving the Keong Saik precinct its place in the sun?
5
An Integrated Resort (IR) is a Singaporean euphemism for a casino-based
v acation resort. To date, licenses have been awarded to Marina Bay Sands and
Resorts World Sentosa. See http://en.wikipedia.org/wiki/Integrated_Resort
(accessed on August 10, 2010).
9
The Role of the Ministry
of Finance in Singapore’s
Economic Development
Speech to the Ministry of Finance Ceremony
to Celebrate Its 50th Anniversary, June 3, 2009
T hank you for inviting me to join the Ministry of Finance celebrating

its 50th anniversary. The year of our founding, 1959, was a fate-
ful one for Singapore, granted self-government by the British after
140 years of colonial rule. Other than internal security and defense,
the new Singapore government, led by Prime Minister Lee Kuan Yew,
was free to pursue its own social and economic policies.
Mr. Lee chose Dr. Goh Keng Swee, the only economist in his team,
as Singapore’s first finance minister. The Ministry of Finance and its
departments were housed on the second to fifth floors of the Fullerton
Building. The General Post Office occupied the entire ground floor, its
sorting office in a dark cavernous basement below.
The ugly duckling has since been transformed into the six-star
Fullerton Hotel. Dr. Melanie Chew, who wrote a coffee table book to
inaugurate the opening of the hotel six years ago, said that behind the
façade of its Greco-Roman columns was a grey and dispirited build-
ing, its dimness lit only by a few bright minds working in the Ministry
of Finance (MOF).
As MOF alumni, we can be proud of belonging to the pioneering

team under the inspiring leadership of Dr. Goh Keng Swee, our min-
ister, and Mr. Hon Sui Sen, our permanent secretary. We worked hard
to pull the economy out of stagnation.
Dr. Goh’s Ministry of Finance is not your average treasury. Together
with Mr. Hon, Dr. Goh created the Economic Development Divi-
sion to spearhead Singapore’s economic development. The Economic
Development Board (EDB) was set up as the operating arm of the di-
vision, tasked with finding jobs for the thousands of young students
pouring out of our schools each year.
The Economic Development Board was given a grant of $100 million
to get going. It was not subject to the controls of line budgeting. In
return for the freedom to operate, our performance was continuous-
ly assessed. We were rated on outcome more than output. The EDB
chairman has to report annually the dollar value of foreign direct
investments committed to Singapore. He still does.
The Economic Development Board’s bottom line was the unit cost
spent to attract a dollar of foreign direct investment and the number of
jobs created. As a former chairman of EDB, I can tell you that this per-
formance rating is an excruciating process, notches more demanding
than what I normally have to account for as the Ministry of Finance
permanent secretary.
MOF’s fiscal policy focus is to stimulate growth through investment.
In the current global economic recession, almost every government is
rushing to introduce what is touted euphemistically as “stimulus pack-
ages.” Though we should not look a gift horse in the mouth, as MOF
officers we would be failing in our duty if we did not.
As permanent secretary of the Budget, I accord higher priority to
the development budget over the recurrent budget. The development
budget invests for the future. In the early stages of development, we
spent it mainly on infrastructure. World Bank loans were sought for
building highways, airports, seaports, MRT systems, power stations,
dams, and reservoirs.
Physical infrastructure in itself only increases capacity. In the
21st century, the global economy competes on knowledge. Building
capability is the name of the game. Unlike the early days, education
now accounts for the lion’s share of the budget. The last fifty years have
seen Singapore’s budget priorities move from physical infrastructure
to defense capability, and from now on, to education and training.
The Role of the Ministry of Finance in Singapore’s Economic Development 61
Though we are not totally free of “white elephant” boo-boos, the

Ministry of Finance’s track record in allocating scarce capital is par
for the course. But let me first articulate my own budget stance. As
permanent secretary of the MOF, I have often told my fellow perma-
nent secretaries that my revenue-taking right hand, out of necessity,
not caprice, always has to be longer than my expenditure-giving left
hand. For eight years under my watch, we achieved an overall budget
surplus. In plain language, our current revenue was enough to pay for
both operating as well as development expenditure. Had the govern-
ment been a private corporation, it would have financed all capital ex-
penditure without a cent of debt.
Is there such a private company? The answer is yes. Singapore
Airlines. Singapore Airlines was able to finance all its purchases of new
aircraft in the 1980s. It didn’t borrow a cent.
Was Singapore’s Ministry of Finance more virtuous than our
counterparts elsewhere? The fact of the matter is that we did what we
did because we had no alternative. Without gold, oil, or other natu-
ral resources, budget surpluses and Central Provident Fund savings
were the only sources for accumulating reserves. The fundamental
role of reserves is to back up our currency. A stable and convertible
Singapore dollar is our lifeline to international trade, upon which our
very survival depends.
In spite of the immense pressures exerted by the rest of government
on the Ministry of Finance, I was wary of dipping into our reserves to
tide us over the troughs of business cycles. I remember the first global
oil crisis of 1972. Mr. Hon Sui Sen refused to subsidize consumption.
Singapore swallowed the medicine of inflation in one gulp, and the
cost of living index stabilized within eighteen months.
Henceforth, the MOF’s mission as guardian of the national budget
will be more challenging. For instance, before we can decide on how to
allocate the research budget, we need to know the knowledge domains
Singapore has a more than even chance to compete in. Is it in biotech-
nology, nano-engineering, solar energy, or any of the new frontiers in
science and technology that emerge from fertile minds every day?
Spending on research and development in my view is too narrow
a focus as a growth strategy. In any case, we simply do not have the
breadth and depth of talent we need to compete successfully with the
Americans, the Europeans, the Japanese, the Russians, and, in the near
future, the Chinese and the Indians.
We may be able to hire a few superstars in science and technology

to head our research institutions. A Nobel Laureate cannot work in
isolation. He or she needs teams of competent young researchers to do
the basic experiments. Young PhDs in China work for a fraction of the
wages we pay our young dons at our two research universities.
Olivia Lum, who singlehandedly established Hyflux,1 told me that
the core membrane research work of her company was done at Hyflux
laboratories in China.
Rather than pursuing high science whatever the cost, we may have
to adopt a less lofty approach. We should forthrightly ask ourselves:
What knowledge domains can we excel in?
I can think of several. Singapore has a fair track record in building
towns, industrial parks, container ports, submersible oil rigs, voca-
tional and technical education institutions, and water treatment in-
stallations like Hyflux.
The greatest satisfaction that Joe Pillay, Lim Chin Beng, and I have
had is from the experience of building up a fledgling Singapore Air-
lines from a small regional carrier to what it is today. SIA is a great way
to fly, and not just because of the glamorous image of our Singapore
Girl. Our team of technicians and engineers work arduously to keep
our aircraft flying. SIA aircraft are in the air more hours than our com-
petitors, spreading the cost of depreciation over more revenue miles,
helping to buttress profits.
The main point I wish to make about the SIA example is that it is
possible to build up a world-class Singapore company on our own. The
founding board, working from 1972 to 1996, had no foreign director
or CEO. We built from first principles.
As the global economic landscape changes, the way forward for us is
to have the guts and the gumption to build another twenty-five world-
scale “SIAs” in the knowledge domains where we have a competitive
advantage. It can be done.
As an earlier-era permanent secretary, I could afford to make
mistakes—but only on the back of used envelopes. Today, it seems to
1
Hyflux is a leading provider of integrated water management and environmen-
tal solutions with operations and projects in Singapore, Southeast Asia, China,
India, Algeria, the Middle East, and North Africa. See http://www.hyflux.com/
(accessed on August 20, 2010).
The Role of the Ministry of Finance in Singapore’s Economic Development 63
me that consultants are called in at the drop of a hat. Whatever has

happened to what Dr. Goh proudly called reverse engineering?
I have learnt many lessons in economic policy making from
Dr. Albert Winsemius, Singapore’s first economic advisor. The most
valuable lesson was that you have to do the things that matter yourself.
He told me that while he can teach me how to drive or even repair a
car, I have to drive it myself. In the event the car crashes, I will have the
satisfaction of crashing it myself. No one else will or can.
After pulling ourselves up from our own bootstraps in the pioneer-
ing years to build world-beaters like SIA, ST Engineering, Sembcorp
Marine, Keppel Shipyard and yes, even the Development Bank of
Singapore, which I once chaired, we now outsource the CEO’s job to
foreign talent. We have become so kia-su2 that we hire others to take
the rap in case the enterprise collapses.
The irony is that when trouble looms, the foreign CEO just dusts off
the seat of his pants and walks away with his sign-off bonus, negotiated
when he first signed on.
I refuse to believe that the Singaporean has so lost his confidence
that he has to outsource every critical job. While having gourmet
tastes, have we forgotten how to fry an omelet? I am told that the pyra-
mids of Egypt were built by the Pharaohs’ Hebrew slaves. The Egyptian
Pharoanic race is now lost in antiquity. The Jewish Hebrew nation
continues to thrive. Quo vadis Singapore?
2
Kia-su is a Hokkien word for “fear of losing.” It is widely used in Singapore to
describe the social attitude of Singaporeans.
10
Exporting Knowledge: Can
Singapore Compete?
Speech to the Central Provident Fund Board,
March 28, 2007
F irst, thank you for this opportunity to meet up with old and young
colleagues in the Central Provident Fund (CPF) Board. I enjoyed
very much my three years as your chairman from 1998 to 2001. Though
the tenure was short, it was intellectually stimulating. It coincided with
the beginning of deep structural changes in the world economy.
The Central Provident Fund Savings Bank,1 established in 1955, was
structured on the assumption of life-long employment. It was a self-
funding contributory scheme for retirement, with equal contributions
from the employer and the employee. Each CPF member has his own
unique account number, which is portable. Unlike traditional pension
programs, savings remain with the member no matter who he or she
is employed by.
The Central Provident Fund has over 1.5 million active members,
which makes it the largest savings bank in Singapore. From its earliest
1
The Central Provident Fund (CPF) is a government-run social security scheme
in Singapore. It is administered by the Central Provident Fund Board. More like
a mandatory savings bank, it is also called the Central Provident Fund Savings
Bank.
beginnings, it has invested in computerization. If my memory serves

me well, the CPF Board was the second government institution to pur-
chase a mainframe computer after the Ministry of Finance.
The CPF could have cruised along on autopilot if the laws of classi-
cal economics had not changed. When I was at university in the mid-
1950s, we were taught that the three factors of production are land,
labor, and capital. Countries richly endowed with all three are likely to
be wealthier than countries less endowed, such as Singapore. So, how
has Singapore, a tiny rock outcrop at the southernmost tip of Asia,
triumphed over adversity to become today’s global city?
When in the mid-1970s I visited the Japanese Ministry of Inter-
national Trade and Industry, known as MITI, to make the case for
Singapore to host the Sumitomo petrochemical complex, I met with
MITI’s director of industrial policy. When I asked him what Japan’s
industrial policy was, he gave me an enigmatic reply. He said, sim-
ply, that knowledge is power, when applied with insight. But what is
knowledge?
Knowledge may simply be timely information. In the early 1960s,
the rice and rubber merchants of Carpenter and Hong Kong streets
gathered each morning at Lau Pa Sat,2 the old Ellenborough market, to
yam char.3 Over their cups of fragrant tea, amid the banter and the gos-
sip, someone might talk about the low rainfall in peninsular Malaya or
Sumatra, where their rubber estates were.
Latex yield is lower when the weather is drier. These rubber traders
would then sell rubber futures long or short depending on what they
expected the weather to be. This was the supply side of the equation.
Our rubber merchants made a killing on the demand side during the
Korean War boom when demand for all raw materials shot up.
Knowledge may also be mined from operating data, which are nor-
mally filed away. As the permanent secretary of the Budget in the mid-
1980s, I was invited by the Environment Ministry to visit the latest
incinerator plant built at Tuas. Each plant costs around S$500 million
and was designed by a German consulting company.
2
Lau Pa Sat is the colloquial name for Telok Ayer Market in Singapore. It is
located in Singapore’s central business district and was gazetted as a national
monument in 1973.
A Cantonese term, meaning “drink tea.” It’s also spelt as yum cha.
3
The consultant who was showing me around thanked my ministry

profusely for what I thought was his handsome consulting fee. He was
actually thanking me for the operating data he was collecting from
our new plant. Unlike incinerator plants in temperate countries, which
burnt dry garbage, Tuas has to burn wet waste, in a hot and humid
Singapore. Our data enabled the German engineers to be more precise
in determining the operating parameters for similar incinerator plants
in Kuala Lumpur or Jakarta, cities at or near the equator.
Market research is not just a random, walk-in-the-park sampling
opinion of passers-by. It aims at finding out, in depth and detail, what
a customer really wants in a product or service. In the early 1970s,
Toyota and Nissan sent research teams of engineers and industrial de-
signers to Hamburg, Germany, to find out what the German motorists
require of a new car.
The Japanese automakers realized that if they could satisfy the
technically demanding German customer, they could readily meet
the expectations of motorists in other countries. After spending three
years researching the needs of the German motorists, the teams re-
turned home and designed some technically efficient cars to prices set
by the presidents of the companies. However technically sound the
vehicles, they have to sell in a volume necessary to break even and turn
a profit.
Another example of the crucial role of market research is the Boeing
Aircraft Company. When I visited Boeing in Seattle as a Singapore
Airlines director in the early 1970s, its president told me that
Boeing is more of a marketing than a manufacturing company. When
I expressed surprise, he said that his company’s research teams as-
siduously pore over the figures of traffic growth between cities and
continents. The most crucial decision in building a new aircraft is
determining its optimum size for the particular sector it’s designed
to serve. Hence, the legendary 707 series spun off into 737, 747, and
now the 777, to serve different market sectors. Market research is soft
knowledge, and companies who are not meticulous enough will rue
the day. The Concorde, for example, was a technological marvel, but
a commercial flop.
As a Singapore administrator, I am more a generalist than a special-
ist. All of us in the Singapore Civil Service are familiar with the concept
of having a helicopter view. According to the Shell doctrine, a leader in
business must fly high enough to have an eagle’s sweep of the terrain.
At the same time, like an eagle, he must have the agility to swoop to the
ground to pounce on the hapless field mouse for dinner.
Since my retirement as a generalist administrator in the Singapore
Civil Service, my hobby is studying business models of enterprises. In
assessing a business to invest in or to lend to, I always do my best to
fathom the most critical piece of knowledge for success.
As chairman of the Development Bank of Singapore from 1990 to
1998, I was asked to approve a fairly substantial loan to an Indonesian
Chinese businessman to build cold storage facilities for his vast prawn
farm in Indonesia. The farm was the size of Singapore and it would
require me to fly in a helicopter to see it.
When asked, the man told me that the most important ingredient
for success in large-scale prawn farming is the fertility of the moth-
er prawns. The more fry the mother prawn produces in a season, the
greater the output of prawns from the farm. He did not have the scien-
tific knowledge to increase the fertility of mother prawns. So, he hired
a top zoologist from Hawaii who devised a technique to stimulate
mother prawns to produce more fry.
In the current, sometimes heated, debates on what our research
and development directions should be, perhaps we should invite more
business entrepreneurs to sit on the research policy panels. They have
the savvy to point Singapore in directions that could accelerate its
economic transformation.
The founding entrepreneurs of Singapore were men who migrated
here with barely a shirt on their backs. Fleeing poverty and turmoil,
they came from homelands in Arabia, Iraq, and Oman in the Middle
East, India, China, and Indonesia, which was a country of adoption
for some. Most had only elementary school education. A few were
unschooled.
In a relatively benign and open British colonial administration,
they competed fiercely. A few succeeded beyond their wildest dreams.
With little formal schooling in their backgrounds, they became great
benefactors of education, endowing schools, polytechnics, and uni-
versities. Their foresight and vision laid the foundation for the current
generation of Singaporeans to compete in a global knowledge-based
world.
Sociologists speak of a digital divide. I prefer the more embracing
concept of a knowledge divide. How do we ensure that we fall on the
right side of the divide?
Dr. Pannenberg, then the R&D director of Philips of Holland,

was Singapore’s first technology advisor. Without a large population
base and depth of talent, he advised us to first raise our technological
competence before we embarked on cutting edge research on the fron-
tiers of science. He told us to expand our science and engineering
faculties in the universities. NTU was established as a result.
Dr. Pannenberg’s view was that when we have the trained man-
power, multinationals will naturally gravitate to Singapore to establish
production facilities for fine chemicals, pharmaceuticals, advanced
electronics chips, and complex engineering components. I am there-
fore in full support of A*STAR’s thrust to train 1,000 PhDs in science
and engineering over the next decade.4 They will indeed be our cut-
ting edge in the tough and demanding world of knowledge-based
competition.
Olivia Lum’s Hyflux, a pioneer and leader in membrane water
technology, is a forerunner of Singapore’s very own knowledge-
based industries. Olivia has a BSc in Chemistry from NUS. With
more scientific competence, there will be many more Singaporean
knowledge-based enterprises in the next decade.
The pressing question, however, is: How do we compete in a
knowledge-based world? The stakes in the knowledge race are high.
Singapore has chosen to compete in the life sciences domain of stem
cell research, unraveling the human genome. The world’s leading
pharmaceutical companies are pouring billions of dollars worth of
research effort into therapies that will cure hitherto incurable diseases.
At its most fundamental, it is man’s search for longevity, if not im-
mortality. Longevity is in the realm of knowledge. God forbade Adam
and Eve to peer into the book of life, which is immortality. He allowed
them to eat the fruit of the tree of knowledge, however bitter.
As an individual citizen, I will not prejudge the outcome of research
in the life sciences. Singapore may yet be the first nation to discover
some of the secrets of life. I don’t know enough to second-guess our
scientists.
There are, however, many other knowledge domains in which
Singapore can compete. I will start with my own company, Surbana
4
A*STAR is the Agency for Science, Technology and Research, Singapore’s lead
government agency dedicated to fostering world-class scientific research and
talent for a vibrant knowledge-based economy.
Corporation. Surbana grew out of the Building Department of the

Housing and Development Board. Surbana’s urban planners, archi-
tects, engineers, and project managers honed their skills, planning and
building twenty-eight new towns in Singapore over the last forty-five
years. This pool of knowledge is invaluable in our search for business
overseas.
We believe in and project ourselves as a knowledge-based company.
To date, we have been engaged to plan, design and build three towns
in China: in Chengdu, 8,000 residential units of middle-class housing;
in Wuxi, 6,000 units; and in Xi’an, 30,000 units. The Xi’an project is on
the same scale as Toa Payoh.
Surbana has gone beyond just housing. Our clients in Dubai, Abu
Dhabi, Bahrain, and Oman have asked us to advise them on what they
call strategic city planning. It embraces all the facilities and ameni-
ties needed by a modern city, such as power stations, water reservoirs,
mass rapid transportation system, schools, hospitals, shopping malls,
and recreational attractions. Being wealthy oil countries, they will in-
vest up front in infrastructure. They welcome Singapore companies
to manage and operate the hotels, the schools, the hospitals, and the
transport systems.
The United Arab Emirates and neighboring countries are in the
midst of a paradigm shift from total dependence on oil to more sus-
tainable growth strategies. Singapore as a successful city-state has a
golden opportunity to participate in this ongoing transformation in
the Middle East countries.
Over the last fifty years of rapid economic development, Singapore
has acquired expertise and experience in knowledge domains that will
stand us in good stead for competition in a global knowledge-based
world. The Port of Singapore Authority, the Civil Aviation Authority of
Singapore, and Jurong Town Corporation have used their knowledge
base in industrial parks and seaport and airport development to win
business in new overseas markets.
The knowledge domain that Singapore is most competitive in, from
my perspective, is public administration. While the sine qua non of good
government is incorruptibility and integrity, it’s the follow-through of
good administration that delivers goods and services. Without claiming
that the Singapore Civil Service is perfect—no administration is—over
the years we have accumulated knowledge and experience, quoting a
tag line of Singapore Airlines, that even other countries talk about.
Indeed, Singapore Airlines (SIA) itself is a prime example of a

knowledge enterprise. I was a member of its founding board in 1972,
and saw it grow from a fledging regional airline to be among the top ten
airlines in the world today. We did it all by ourselves, building up our
skills and expertise in marketing, air services negotiations, engineering,
cabin crew, aircraft financing, and, most important of all, developing
the personal knowledge of each individual man and woman. The
chairman, board, CEOs, and senior management were all Singaporeans.
SIA is truly Singapore’s first knowledge-based company.
SIA however, is not the only one. The Housing and Development
Board, the Port of Singapore Authority, the Civil Aviation Author-
ity, and Jurong Town Corporation have become knowledge export-
ers, winning management contracts in overseas markets against stiff
competition.
The Central Provident Fund Board can also be a knowledge expo
rter. Countries like China, India, and Vietnam will find your experi-
ence invaluable as they go about establishing their own social security
programs.
When I was your chairman, I offered your backroom processing ca-
pability in administering 1.5 million members’ accounts to the then Big
Four Singapore banks. With scale, the cost of processing statements
of accounts and other documents can be reduced. Lower production
cost will be a competitive advantage to our banks battling against the
Citibanks or HSBCs of the world.
Bill Gates of Microsoft made a similar proposal to the world’s 150 lead-
ing commercial banks at the annual meeting of the International Bank-
ing Conference in Seattle in the mid-1990s. I attended the conference as
chairman of the Development Bank of Singapore. The conference is the
private sector counterpart of the International Monetary Fund.
The Central Provident Fund Board has the knowledge base to ex-
port services in the domain of social security administration. So do
our schools, polytechnics, universities, hospitals, the Land Transport
Authority, and the National Environment Agency, each in their own
knowledge domain. Even my old ministry, the Ministry of Finance,
can export its expertise to assist other administrations to introduce
consumption taxes, such as the goods and services tax and the certifi-
cate of entitlement, with the least political cost.
Enough of thinking only about possibilities. Remember that knowl-
edge is power only when applied with insight. I have distributed an
article by David Ignatius with The Washington Post on page 12 of the

Wall Street Journal (March 12, 2007), for you to read and reflect upon.
Entitled “Higher-Ed Superpower,” the article begins with the lead:
“When people think about American power in the world, they usually
list the country’s forbidding arsenal of bombers, aircraft carriers, and
troops. Yet America’s greatest strategic asset these days might not be its
guns, but its universities.”
11
Looking within for Solutions:
Building and Exporting Our
Knowledge1
Interview with Inter Se, June 8, 2009
W hen I was at school in the 1950s, I studied Latin as an optional

subject. Latin was the language of the educated elite in the
Middle Ages. Even today, the priests of the Roman Catholic Church
chant in Latin.
Latin is a good foundation for learning English. Many English words
are derived from Latin roots. With strict rules of grammar, Latin is a
subject in legal and political concepts.
“Caveat emptor” is one of them. It is Latin for “buyers beware,” a
legal concept often applied in commercial disputes in courts of law.
Fan Li, a prime minister of China who lived 3,000 years ago, was
featured on the cover of Time Magazine as one of the thirty richest
men in history. Having helped to restore his emperor to power, he told
his close companion that they had better flee the court as the ingrate
emperor was likely to kill them both because they knew too much.
He fled to a faraway province and built up a business empire strad-
dling the whole country. He is revered today by Chinese merchants
1
Published in the Singapore Academy of Law journal Inter Se, July–December,
2009. Reprinted with permission.
all over the world as Tao Zhu-Kong, the patron saint of business. He
wrote an essay on business strategy. Inscribed on stone tablets, it has
pride of place in the main hall of Chinese trade associations.
In about 250 Chinese characters he enunciated his principles of
business. I say this ancient sage taught young merchants more about
business than Harvard Business School can ever hope to teach.
Tao Zhu-Kong advised that, in a business transaction, a buyer has
to examine what he is paying for with great care before he makes pay-
ment. Once payment is made, a buyer will have no recourse to the
seller regarding defects later found in the goods.
On the surface, this principle sounds very much like caveat emp-
tor. However “beware” in “caveat emptor” connotes that the seller has
something to hide. It is up to the buyer to satisfy himself. There is a
tinge of a lack of transparency.
In my view, caveat emptor should apply only when the buyer and the
seller are equally informed. Both the buyer and seller should have the
same access to specifications. The exercise of judgment by both buyer
and seller is to agree on the price. It occurs when there is a willing
buyer and a willing seller.
Another Latin concept that is political is “primus inter pares” or
“first among equals.” It is articulated in Plato’s Republic. In Plato’s
political model, leaders are chosen by their peers. Each cohort chooses
its own leader. At the apex, the leaders of all the cohorts will choose the
“philosopher king” as the ultimate ruler.
As a young philosophy student, I regarded this process for selecting
leaders a perfect model. The selection process is ordered, structured,
and informed, with little room for randomness or freak outcomes. The
selection of the Pope by the College of Cardinals is similar.
There is, however, a fundamental difference between the selection
of the philosopher king and the Pope. As a religious leader, the Pope is
accountable to God. The philosopher king, “first among equals,” once
chosen by his peers, is not accountable to any higher authority.
Some years ago, a retired Chinese Communist Party cadre wrote
a monograph for the East Asian Institute, in which he described the
process of selecting the top 300 cadres who govern China. A cadre be-
gins his career at the grassroots village level. His work performance is
rated by his immediate superior. His character is assessed by his fellow
villagers, polled for their opinion by someone sent incognito from the
central personnel department.
Looking within for Solutions: Building and Exporting Our Knowledge 75
Character flaws are identified early. Even then, some corrupt high-
ranking cadres slip through. By and large, I think, the top ranks of the
Chinese leadership are not only competent but relatively selfless.
As no human organization is perfect, is the western democratic
model of general elections once every five years less imperfect? I put
this question to some cadres from the Beijing Communist Party School
two years ago at a private seminar.
In reply, they quoted the Chinese saying that an emperor has to win
the mandate of heaven to rule and he must rule with the consent of the
people. Consent is obtained by improving the livelihood of the peo-
ple. The Chinese leadership concentrates on lifting their people out of
poverty.
The Chinese leadership nevertheless know that they have to
win the hearts and minds of the people as well. I understand that
there is intense debate within the Chinese Communist Party on
how to achieve what President Hu Jintao articulates as harmonious
development.
Reading between the lines, my guess is that CCP cadres are not per-
suaded that universal franchise to vote at the ballot box is the only way
to choose the leadership. Yet the bottom line remains: Can there ever
be an alternative government to the Chinese Communist Party? In our
own context, can there ever be an alternative to the People’s Action
Party?
These are profound questions for our citizens to answer.
In comparison, the current economic crisis engulfing the world,
however intractable it may appear now, is susceptible to human so-
lutions. Unlike forensic accounting, there is as yet no forensic eco-
nomics. The current crisis can be said to originate from the financial
excesses of subprime housing loans. How a substandard mortgage
can be sold as a subprime loan is in a knowledge domain outside
economics.
Toxic financial products have precipitated a full-blown global eco-
nomic meltdown, threatening to undermine world trade through a
credit crisis. For the first time in recent memory, banks are refusing to
lend to each other. Without the lubricant of finance, trade will grind to
a halt, and with it the real economy.
The 2009–2010 economic crisis threatening the world today is simi-
lar yet different from the Great Depression of 1929. Then, men and
machines were idling. Thrift, a virtue, turned into a millstone around
the neck of the economy. Budget deficits were politically out of bounds.
Pump priming was vigorously opposed.
A contrarian thinker, John Maynard Keynes proposed that
governments incur budget deficits to stimulate demand so that idle men
and machines could be put back to work. Newspaper headlines today
are replete with stimulus programs that seem to change day by day.
In my view, many of the stimulus programs are misconceived. The
Jobs Credit scheme in Singapore is one glaring example.2 How a coun-
try like Singapore, which is a price taker, can sustain wage subsidies is
beyond my comprehension.
The wheels of economic laws may grind slowly but they grind in-
exorably. That is why I believe that mainstream economic thinking on
the economic crisis today is wrong, even dangerous. Unlike the Great
Depression where lack of demand was caused by excessive thrift, the
crisis today is caused by over-leveraging of financial assets fueled by
the US Federal Reserve Bank.
The Fed cut its discount rate again and again, almost to zero, open-
ing full throttle the faucets of money supply. As a regulator, the Fed
should have known that when banks are flush with liquidity, bankers
will be less careful, even careless, in lending.
Subprime mortgage lending was fueled by easy credit. Banks secu-
ritized assets at escalating prices and sold down the risk to millions of
retail investors. Some time, some day, the asset bubble must burst as it
has today.
Today, governments all over the world, including our own, are
scrambling with “stimulus packages” to mitigate the effects of the eco-
nomic meltdown. Stimulus packages sound good on paper but may
turn out to be counterproductive. The American government proposes
2
The Jobs Credit scheme was introduced in the Singapore Budget 2009 to
encourage businesses to preserve jobs during the economic downturn. Busi-
nesses will receive a cash grant based on the CPF contributions they have made
for their existing employees. It provides a significant incentive for businesses
to retain existing workers, and where their business warrants, to employ new
ones. Under the scheme, an employer will receive a 12 percent cash grant on
the first S$2,500 of each month’s wage for each employee on the CPF payroll in
four payments: March, June, September, and December 2009. This scheme was
discontinued in June 2010. See http://www.iras.gov.sg/irashome/jobscredit.aspx
(accessed August 10, 2010).
Looking within for Solutions: Building and Exporting Our Knowledge 77
to spend billions of taxpayer dollars to buy highly leveraged “toxic” fi-

nancial products from investment banks and hedge funds to enable
them to recoup their losses.
On page one of today’s Straits Times (April 4, 2009), the founder and
former chairman of the American International Group (AIG), after
disingenuously declaring he was blameless for the disastrous fall of the
US insurance giant, was reported to have said that “the government’s
US$170 billion bailout had failed and taxpayers would have been better
off letting the company go bankrupt.”
I have no way of knowing what goes on in Mr. Greenberg’s mind,
but if by his statement he means that overleveraged financial assets
should be allowed to decline in value to more realistic levels, I can-
not agree with him more. Only then would there be willing buyers for
these toxic products. Hopefully, the financial markets will sputter into
life again to drive the real economy.
To me, “bailout” means propping up financial assets at highly in-
flated prices. No sensible buyer thinks that such stratospheric prices
are sustainable. What is even more puzzling is how “bailouts” can
“stimulate” an economy.
The way ahead for countries like Singapore is not to attempt stimu-
lating consumption through wage subsidies. By whatever name policy
makers call “job credit schemes,” they are wage subsidies that an open
economy like ours can never sustain.
Instead of soft stimulus packages, Singapore must methodically
restructure its economy. Our government has rightly introduced
schemes for skill upgrading, beefing up our infrastructure, and raising
our knowledge domains through higher education.
While we will still be able to attract some high-end foreign direct in-
vestments because of our technical competence and sound infrastruc-
ture, we have to be aware of our relatively higher costs vis-à-vis the
BRIC (Brazil, Russia, India, China) economies.
The worst predicament we can get into is to slide into becoming a
high cost, low tech economy.
I end with some trepidation. More and more, I hear remarks being
made that Singapore, as the world’s most open economy, not by choice
but by necessity I might add, was the first to go into a recession. Ipso
facto, when recovery comes, we will also be the first off the starting
block. This sounds like wishful thinking to me.
It is said that the 2009 economic crisis is the worst since the Great
Depression. The weaknesses of every economy will be mercilessly
exposed. I need not dwell on our own.
In the aftermath of the current crisis, we will need to reposition our-
selves for the emerging new international economic structure.
Those who are not our friends are already pointing out that our
export-oriented economic model will no longer work in the new post-
crisis global economy. As our costs rise, we will no longer be able to
compete with the BRIC economies in the production of goods and
services. But there is no reason for us to produce goods and services
only in or from Singapore.
Had we just gazed at our own navel, there would be no Singapore
Airlines today. I was one of its founding directors. The taunt that SIA is
an airline that flies between Changi and Seletar still rings in my ears.
As permanent secretary of the Communications Ministry, I negoti-
ated a dozen air services agreements with other governments that gave
SIA access to intercontinental routes. Such routes helped us overcome
our limitations of size.
We need to ask ourselves: What does SIA export? We export our
knowledge of building an international airline from scratch.
As Singapore Airlines has shown, we can develop a dozen more in
other knowledge domains. We have to do it ourselves. No one else will.
We need to wean ourselves from our recently acquired habit of hiring
outside consultants and foreign CEOS to do the job for us.
It is said that the Great Pyramids of Egypt were constructed not by
the Pharaohs but by their Hebrew slaves. Where are the Pharoanic
races now?
To sum up, to survive in the emerging brave new world, we need
to export knowledge and leverage the resources of other coun-
tries to increase our GNP. We have to transform ourselves into an
export-oriented, knowledge-based economy.
12
The Bukit Timah Dialogue1
Seminar delivered at the Lee Kuan Yew School of
Public Policy of the National University of Singapore
on April 10, 2007
T he second-half of Minister Mentor2 Mr. Lee Kuan Yew’s memoirs,3

which chronicle Singapore’s growth from its independence on
August 9, 1965, describes our journey as growing from Third World
to First.
Political shorthand now labels the generation born after indepen-
dence as the 1965 generation. Is 1965 really a watershed? Does it help
us understand the building of the Singapore nation?
As someone born in 1937, perhaps I can categorize myself as some-
one who precedes the pre-1965 generation? Life’s greatest lesson for
me and my childhood friends is that we knew firsthand what a Third
World Singapore was really like.
The National University of Singapore has three campuses: Kent Ridge, Bukit
1
Timah, and Outram. The Lee Kuan Yew School of Public Policy is located at the
Bukit Timah campus.
2
A cabinet position created by the Singapore government in 2004 as part of a
leadership transition.
Lee Kuan Yew, The Singapore Story: Memoirs of Lee Kuan Yew (Singapore:
3
Times Editions, 1998).

My generation grew up during the privations of the Japanese

occupation of Singapore (1942–45). Food was scarce. Malnutrition
and beriberi were common. Yet there was unexpected kindness. By
1944, the Japanese civilian administration was able to provide a seven-
year-old like me primary schooling, teaching us Japanese in a Chinese
language school. We were taught Japanese when the Japanese school
superintendent was around. The moment he turned his back, we pulled
out our Chinese textbooks and learnt Mandarin. Believe it or not, my
one and only year learning Mandarin was in a Japanese-administered
school!
What I remember most of this one year in school during the
occupation was the rock-hard roll of bread made from corn, which
the Japanese superintendent gave to his famished students about once
a week. It was a small act of human kindness shining in the worst of
times.
Fatefully, the war ended with the atomic bombing of Hiroshima and
Nagasaki. With the return of the British Military Administration, my
classmates all enrolled in the English medium schools, which charged
lower school fees than the Chinese medium schools. The immediate
post-war years, from 1946 to about 1952, were years of repair and res-
toration. Electricity and water became available to households only
about five years after the end of the war. Many families bathed and
washed their clothes at public standpipes. The city was largely unsew-
ered. The bucket system of night-soil removal was phased out only in
the mid-1960s. Rent control was imposed to stop avaricious landlords
from raising rentals to exorbitant heights. The flip side is that the city
slowly decayed and crumbled. There was no incentive for a landlord to
rebuild or improve his premises.
The PAP won the first general election in 1959. One of its first
initiatives was to establish the Housing and Development Board
(HDB) in 1961 to provide low-cost housing at rentals pegged at about
20 percent of the average household income, then about S$400 a
month. Flats were small, one, two, or at most three rooms. A three-
room flat had two bedrooms. The features most appreciated were the
flush toilet and bathroom. Some of my generation still shudder when
we recall the communal toilet we had to share with four or five other
families in a crummy tenement building.
In 1959, Singapore was the archetypal Third World city. Thousands
of hawkers plied the streets eking out a meager living, and 300,000
The Bukit Timah Dialogue 81
people had part-time jobs or no jobs. Petty corruption abounded. Taxi

licenses could be bought from middleman for S$10,000 apiece. Secret
societies thrived, extorting protection money from almost everyone.
Policeman could not be depended upon to enforce the law.
This was the Singapore I was thrust into upon my graduation from
the University of Malaya, predecessor of the National University of
Singapore (NUS), in March 1959, with a BA with honors degree in
Economics. There were basically only two employers for university
graduates: the Singapore Administrative Service and the Shell Company.
During the few months after the exams, I worked as a cub reporter
for The Straits Times. I left the adrenalin rush of reporting for the sta-
bility and security of the administrative service. I also like to think that
work in the administrative service was more cerebral, as in helping to
draft policy options for the minister. Lest my younger colleagues in
the civil service become too elitist, I will point out that smooth and
fair execution of the very policies that one has helped draft is often
more critical than the policies themselves. Policies by themselves are
abstract. Manifesting the policies out in the real world requires blood,
sweat, and tears.
Though we were far from being a First World city, we aspired to
be one. What is First World? In contrast, what is Third World? The
term Third World was conceived by the founding fathers of the Non-
Aligned Movement (NAM), namely Nehru of India, Zhou Enlai of
China, Sukarno of Indonesia, and Nkhrumah of Ghana. The inten-
tion was to position NAM politically between the Americans and the
Russians. It was Cold War alignment.
Leaving aside the political rhetoric, Third World countries were cat-
egorized by the UN economists euphemistically as developing coun-
tries. By and large, they were poor and illiterate. The educated elite
was immersed more in ideology and religious doctrine than in science
and technology. Ironically, the two largest NAM countries, China and
India, were the world’s leading nations up to the 16th century. The
European nations came into their own only in the last 400 years.
How did Europe catch up with and overtake India and China? I am
not a professional historian. My guess is that Europe, and later the
United States, were relatively more open and inclusive societies. An
American demographer once told a group of Eisenhower Fellows that
the most precious asset of his country was the Statue of Liberty. The
statue symbolically welcomed the bright and talented from continental
Europe, driven out by Nazi Germany in the 1930s, just before the
Second World War.
The United States is the preeminent nation in the world today.
Arguably, it is the world’s industrial and military superstate. Yet, as
David Ignatius of The Washington Post has pointed out, America’s great-
est strategic asset these days might be its universities, not its guns.
The nadir of China’s decline occurred just a century ago with the
collapse of the Ching Dynasty, the last dynasty. In my view, China col-
lapsed after the Ching because it became, in effect, a closed society.
It considered itself the center of the world, self-sufficient, needing no
one. Modern China’s founder Mao Zedong was leading China down
the same cul-de-sac until Deng Xiaoping opened its economy to the
world.
The questions to ponder today are: Will the Chinese Communist
Party open its doors to greater freedom of thought? How will India cast
off its caste system, so deeply ingrained in the psyche of the p eople?
What must Singapore do to become a First World nation? That will
be the subject of another lecture. In the footsteps of Dean Kishore, I
will be speaking to the Singapore Chinese Chamber of Commerce and
Industry later this year.
13
The Development Economics
of Emergent Countries
Speech to African Policy-Makers at S. Rajaratnam
School of International Studies, Nanyang Technological
University, July 14, 2008
I t is a great privilege to be the guest speaker at this luncheon for

African policy-makers. Our host, Mr. Barry Desker, is a dear col-
league of mine in the Singapore Administrative Service.
Barry’s career was in the world of diplomacy. Mine is in develop-
ment economics, the nitty-gritty of growing the economy by creating
jobs. One has to possess a tough mindset to practice development eco-
nomics in emergent countries. Accept reality as it is—not what you
wish it to be. When you do not like what you see, change the reality.
Singapore in the early 1960s was like any other developing country,
a stagnant port city seething with unrest, 10 percent of its workforce
jobless. Indonesia’s President Sukarno had launched konfrantasi (con-
frontation) against Singapore and Malaya to besiege our economy and
isolate us politically.
The British government stood by us. Sukarno attempted a coup
d’état against his own government by instigating elements of the
Indonesian Communist Party to assassinate his commanding generals.
General Suharto, Commander of KOSTRAD (Army Strategic Reserve
Command), rallied his troops and defeated the leftist forces. He suc-
ceeded Sukarno as president, and brought stability and development
to his country for over two decades by empowering development

economists to govern the country and manage the economy.
Unfortunately, he allowed members of his own family to abuse his
authority for their own private financial gain. Suharto had to relin-
quish power in the aftermath of the 1997 Asian financial crisis.
In Southeast Asia, Indonesia is the only country comparable in size
and geopolitical weight to South Africa. A recent former president of
Indonesia, Dr. Habibie, an aeronautical engineer by training, described
Singapore, by contrast, as “a little red dot on the world map.” How is
it that this little speck of land, at the southernmost tip of the Asian
continent, has grown to be a First World city?
Singapore’s first prime minister, Lee Kuan Yew, on assuming office
in August 1959, declared that the statue of Sir Stamford Raffles, who
founded modern Singapore in 1819, would continue to stand on its
pedestal at Empress Place, seat of the colonial administration. By this
one swift political gesture, Mr. Lee signaled to his people and the world
that Singapore would build on the foundations laid by the colonial
power, not by demolishing them.
What are these foundations? They are the rule of law, religious
tolerance, and meritocracy.
Though the British colonial administration was in maintenance
mode toward the end of their stewardship in 1959, they handed over
their air and naval bases to us with the grass cut and the golf greens
immaculate. Granted self-government, we worked our guts out to
turn the naval base into Sembawang Shipyard, and the airbase into the
Changi International Airport, rated one of the world’s best today.
When I study the economic and political profiles of your countries,
it is not without some envy. Except for possibly Tanzania, the land to
population ratio of all your countries is highly favorable. Singapore’s
current resident population of four million has to make do with only
600 square kilometers, a mere suburb by your scale.
I note that English is a major language in Lesotho, Liberia, Rwanda,
Tanzania, and South Africa. Only Mozambique uses Portuguese.
Though Singapore has four official languages, namely Malay, Tamil,
Mandarin, and English, English is the language of administration, the
common denominator in a multiracial and multiethnic society. English
is acceptable to all the races and ethnic groups. More critically, English
is our window to the world.
English has served Singapore well. It gives us access to western
science and culture, and international trade and commerce. It enables
us to articulate our point of view in world forums. It gives us a voice in

the world press. The statue of Sir Stamford Raffles stands proudly on
the banks of the Singapore River. Countries that attempted to displace
English often live to regret their decision.
Management consultants speak of “low hanging fruits.” Low
hanging fruits are initial economic or financial objectives that are easy
to achieve. Economists (Walt Rostow and Arthur Lewis) speak of the
three stages and four phases of growth. In most countries, sustainable
economic growth begins with agriculture. When agricultural output
rises beyond subsistence to produce an economic surplus, the surplus
creates a demand for the goods of the craftsman. When the craftsman
in turn produces a surplus, he generates a demand for the services of
the teacher, the physician, and the circus juggler.
The first phase of growth can be categorized as the low cost, low tech
phase. For most countries, the first phase of growth is in the agricultural
sector with its abundance of labor. As Singapore is a city-state, we had
an abundance of urban unemployed. In the 1960s, most Singaporeans
were employed in the civil service, in British trading houses, and in
smaller Chinese and Indian firms. The rest of the people eked out a
living as street hawkers, domestic servants, and petty traders. Unem-
ployment and underemployment were high, involving over a quarter
of a million citizens.
When Mr. Lee and his cabinet assumed office in March 1959, their
first order of business was to create employment opportunities for
the young unemployed. Fortunately for Singapore, larger developing
countries, such as Indonesia and India, did not welcome foreign in-
vestments, and China had a communist, centrally planned economy.
Having lost the prospect of a Malaysian common market when we
were ejected from the Federation of Malaysia in 1965, Singapore had
no choice but to embrace the economics of what is now known as the
global economy. We welcomed multinational companies. American,
Japanese, and European MNCs established themselves in Singapore to
assemble TV sets, personal computers, watch movements, and a host
of other industries that require diligent labor with literacy and some
skills. By 1972, just ten years after we started, urban unemployment fell
to below 3 percent, a rate economists consider full employment.
The first low cost, low tech phase of growth is achievable by most
emergent countries. GDP growth rates in this phase are high, averag-
ing 10 percent. China, India, and Vietnam are currently in their first
phase of growth. Countries cannot, however, remain in the first phase
of growth forever. Light manufacturing and service industries will

mop up idle labor. Wages will creep up.
To avoid a wage explosion, the Singapore government in 1972 estab-
lished a tripartite National Wages Council (NWC) with representation
from the government, the National Trades Union Congress (NTUC),
and the Singapore National Employers Federation (SNEF). I was one
of the three members representing the government. As the permanent
secretary of the Ministry of Trade and Industry (MTI), my job was to
provide the economic statistics to enable the council to recommend
orderly wage increases. In the initial years, the recommended wage
increases were modest, averaging 4 percent a year, approximating but
lagging behind productivity growth by one year. We were pleasantly
taken by surprise when, as a result of our steady cautious approach,
job-hopping became rampant. Because of labor shortages, workers
were able to move from one job to another with ease.
By the mid-1970s, job-hopping became so severe that it began to
undermine our productivity. Workers did not stay long enough to
learn their craft or to pick the skills required for higher paying jobs.
The National Wages Council recommended a three-year program
of accelerated wage increases that doubled the average annual rate of
increase. The intention was to raise the wage hurdle so that employers
who could not pay the going rate would disgorge their workers to oth-
er employers who could. Instead, the HR managers of multinational
companies retained their underemployed workforce so that they could
meet demand when the business cycle turned up.
The accelerated program of wage increases (1979–1981) was partial-
ly successful. Some labor-intensive industries relocated to neighboring
countries where unskilled labor was more abundant. Most employ-
ers failed to make the effort to raise the skills and knowledge of their
workforce. Instead, they relied on importing unskilled foreign labor by
paying what is known as a work levy.1
1
The official name for work levy is the Foreign Worker Levy. It is a pricing
mechanism to control the number of foreign workers (including foreign domes-
tic workers) in Singapore. While they are not required to pay CPF contributions
for foreign workers, employers are liable to pay monthly levies to hire employees
who hold Work Permits or S Passes. However, the employer is required to pay
the Skills Development Levy for all employees, including full-time, casual, part-
time, temporary, and foreign workers working in Singapore. See http://www.
mom.gov.sg/foreign-manpower/foreign-worker-levies/Pages/levies-quotas-for-
hiring-foreign-workers.aspx (accessed on August 10, 2010).
In 1985, we suffered Singapore’s first recession. Our international

competiveness was undermined by rising wage costs and a rapidly ap-
preciating currency. Our goods and services priced in US dollars were
higher than what competing developing countries charged.
Now, we have two Asian giants, China and India, who have left be-
hind their centrally planned economies, emerging as low cost, low tech
producers. They are achieving what I like to call “honeymoon” rates of
growth, over 10 percent annually. Their wages will rise as underem-
ployed labor is soaked up by industry.
Though their wage costs will rise, the large size of their population
will enable them to have lower costs than will other smaller countries.
China and India, whose large populations have always revered educa-
tion, have deeper talent pools than most of us. As their costs rise, so
will their skills and technology. These two Asian giants, and the other
two BRIC countries Brazil and Russia, will be the world’s most com-
petitive countries. They are low cost and high tech, as Japan was thirty
years ago. Only the United States is still out there competing.
To compete, the United States, Western Europe, and Japan have
to offer even higher tech. How do countries achieve ever-rising
technology?
Today, we compete in a global, knowledge-based world. African
countries such as yours are blessed with abundant natural resources,
including oil. Will this be enough to sustain your economies? I am
afraid not. Knowledge and technology are required not just for raw
exploitation of resources, but to go upstream into the value chain.
Let me illustrate with a natural resource that all of us have, namely
rain. Water, of course, is for human consumption and irrigation of
crops. Countries with abundant water resources can dam up their riv-
ers and produce hydroelectric power. The Three Gorges Dam in cen-
tral China is an outstanding example of technology and knowledge,
exploiting a common natural resource to produce clean power.
China, however, is not the only country with hydroelectric power.
As crude oil prices skyrocket, hydroelectric power can be generated
not only for domestic consumption, but also for sale to neighboring
countries. I note with pleasure that Lesotho is now selling water from
its hydroelectric dams to South Africa. Water is essentially a raw mate-
rial. Lesotho should also sell the power generated. It is a more valuable
product. The state of Sarawak in Malaysia, now building the Bakun
Hydroelectric Dam, is exploring the export of its power surplus to
neighboring countries.
The central question for Saudi Arabia and other oil rich countries is:
What happens after oil runs out? Instead of stashing their huge pile of
foreign reserves in US treasury bills, they could invest in hydroelectric
dams and other sources of clean energy, such as wind turbines, in host
countries blessed with abundant water and wind resources.
Surplus power can be exported for valuable foreign exchange to fi-
nance the development of other sectors of an economy. I hope that the
energy summits being convened will consider long-term solutions to
the energy crisis.
Despite the best science, oil reserves are finite and will dry up one
day in the future. The world will have to work toward less dependence
on fossil fuels. Severe climate changes will be avoided, and we can all
live on a sustainable planet earth.
While the world’s governments can initiate and provide an interna-
tional framework for such sustainable energy investments, it is best ex-
ecuted through private enterprise. The seven oil sisters and national oil
corporations should join hands and invest in what is truly a sustainable
energy program for the whole world.
Finally, I will address the question: Will the imminent rise of the
BRIC economies lead to the relative decline of other countries in the
world? BRIC countries are formidable, emerging, as they are, as low
cost, high tech economies. The United States, Japan, and Western Eu-
rope are high cost, high tech economies. These established advanced
countries can keep their lead so long as they continue to be innovative
and creative in their science and technology.
Will their societies and education systems be able to identify their
best and brightest talent and nurture them? Or will the best and bright-
est gravitate toward their Wall Streets and bourses managing other
people’s wealth, unable to originate any of their own?
The BRIC countries and societies have large populations with deep
talent bases. Not all the best and brightest can find a perch in their
Wall Streets. Sheer brutal competition will force them into new ar-
eas of enterprise. They will develop a spectrum of knowledge domains
to conquer the world.
How will Singapore find its place in the sun? Our greatest risk is to
fall into the trap of being a high cost, low tech economy. We have to
develop to be a high tech, albeit high cost country? I take encourage-
ment in the success of small countries, such as Finland, Switzerland,
and Israel. Though high cost, they are able to compete head-on with
China and India through sheer knowledge and engineering superior-

ity. The bottom line is that Singapore has to compete on knowledge. It’s
tough, but that’s reality.
Thank you for your patience in listening to this personal exposition
of development economics. Your countries are in the first low cost, low
tech “honeymoon” phase of development. To pluck the low-hanging
fruits, you have to grow the tree first. This is the challenge for all of us.
PART
2
Pillars of the
Knowledge-based
Economy
14
Foreword to Management
of Success: Singapore
Revisited
May 2, 2008
O n a recent visit to Beijing (March 2008) for the Lien Ying Chow
Legacy Fellowship Council, I was privileged to meet up with sev-
eral researchers from three Chinese think tanks, one of which was the
Chinese Communist Party School in China’s capital, Beijing. We were
engaged for three hours on the topic “ruling with the consent of the
people.”
In the Chinese political lexicon, there is a classic Chinese saying that
“an emperor must have the mandate of heaven to rule,” and he rules
only “with the consent of the people.” In today’s political context, the
right to govern goes to the political party winning the most number of
parliamentary seats in a general election. But whether the mandate to
rule is won in a general election, or by force of arms when one dynasty
overthrows another, no emperor or government can rule without the
consent of the people.
In my view, it is too simple for “democrats” to argue that the only
manifestation of consent is through the ballot box. We all know that
the ballot box can be stuffed via fraud and the will of the people per-
verted by bribes and corruption. It is also true that effete, corrupt, and
tyrannical regimes can, and indeed, should be overthrown by force,

when necessary. I am told that a basic tenet of Chinese political phi-
losophy goes so far as to advocate that it is the duty of good men to
overthrow a bad emperor.
In reading through the draft manuscripts of this opus magnum, I get
the feeling that most authors are more concerned with the form rather
than the substance of democracy. Contrary to the perception of arch-
conservatives, the Chinese elite are as passionate about obtaining the
consent of the people as are the “true blue” democrats in the West.
Chinese thinkers through the ages believe that improving the live-
lihood of the people is the foremost duty of the state. So it is with us
in Singapore. Had we not concentrated on creating employment op-
portunities for our people, Singapore today would not be very differ-
ent from countries much larger and better endowed than ourselves,
wracked by unemployment and racial conflicts seeded in poverty. East
Asian countries, such as China, Japan, South Korea, Taiwan, Singapore,
and the city of Hong Kong, all believe that improving the livelihood of
their people is the only way to achieve social harmony. In turn, har-
mony provides choice in selecting leaders. Choice through universal
suffrage is one, but not the only, manifestation of choice.
When I was an undergraduate at the University of Malaya from
1955 to 1959, I read the works of two great development economists,
namely Professor Arthur Lewis of Manchester University and Profes-
sor Walt Rostow of Columbia University. Practicing economists in the
ministries of finance, trade, and industry of developing countries will
find Professor Lewis very engaging as he deals with problems such
as unemployment, subsistence farming, low education standards,
poor health conditions, and the myriad other problems finance and
economic ministries face each working day.
Professor Rostow’s three stages of economic growth serve perfectly
as the theoretical underpinning of thought on how countries develop.
Economic growth in most countries begins with agriculture. The basic
foundation of most economies, it provides a livelihood to the larger
part of the population and occupies the most land.
Only when agriculture produces an economic surplus will there be
demand for the goods produced by skilled tradesmen, creating then a
demand for the services of teachers, doctors, and entertainers. So eco-
nomic development in countries such as China, India, and Indonesia
must begin with the modernization of agriculture.
Professor Rostow’s model of the structure of growth applies to a

closed economy. As all economies are now integrated into the global
economy, international competitiveness depends on where the coun-
try or economy stands in each of the four phases of growth. The first
phase of growth is characterized by low-cost production requiring
simple skills or technology.
On opening up an economy from a command economy as in the
case of China in 1978, or a free enterprise economy behind high tar-
iff walls, as in the case of Singapore in 1965 when we separated from
Malaysia, most developing countries achieve rapid rates of growth.
As production costs of consumer products rise in the advanced
economies of the West and Japan, the countries of Singapore, China,
Korea, Taiwan, and now Vietnam are able to export garments, toys,
TV sets, personal computers, and other consumer products to western
markets.
Even as their economies grow, China, India, Vietnam, Korea, and
Taiwan will be able to offer low-cost production simply because of
their large population bases. Because of their respect for education,
these countries have deep talent pools increasingly schooled in sci-
ence and technology. In my view, these are formidable low cost, high
tech economies. China is such an economy today. Japan was such an
economy thirty years ago. Because of Singapore’s small population
base, our wages rise whenever there is a surge in the demand for labor.
Though our schools and universities are second to none, our talent
pool is miniscule compared to the Asian giants.
Inevitably, wage and other infrastructural costs will rise. Will we
then be in danger of becoming a high cost, medium tech economy?
We have to move up to the league of the high cost, high tech countries
in North America, Russia, Western Europe, and Japan. We must aim to
be a high cost, high tech country like Finland, which overcomes com-
petition in low cost, high tech countries like China and India through
sheer superior engineering. It is telling that, in Finland, the engineer is
more valued than a manager. In fact, engineers decline promotion to
managerial jobs.
In fifty years, Singapore has moved from a Third World city of slums
and unemployment to arguably a First World city. Unlike our starting
point when we plucked the fruits of a low cost, low tech economy, man-
aging success is an infinitely more complex and challenging task today.
How do we remain competitive in a global, knowledge-based world?
Most of the contributors to this publication are better schooled in

political science than I am. It is said that man does not live by bread
alone. True, but it is bread or livelihood that makes informed political
choices possible? The PAP government has governed Singapore since
1959, winning every general election along the way. It can be said that
it has obtained the “mandate of heaven.” After overcoming the ideo-
logues of the Barisan Sosialis in 1963, the PAP has governed with the
consent of the people by delivering on jobs and housing.
The older generation among us still grimaces at the recollection of
slum housing and its bucket toilets. We have come a long way from the
Singapore of the 1950s and 1960s. Our children are better educated than
ourselves. With intellectual skills and savvy, the young Singaporean
can hold his own with his counterpart in New York, London, Beijing,
or Tokyo.
Some Singaporeans have climbed to the top ranks of international
companies. Yet I detect some angst among our elite. It worries me that,
each year, some 1,000 of our best and brightest leave our shores—to
be replaced by Chinese and Indian talents who depart from their own
countries, perhaps for the same reasons our young leave Singapore.
Managing economic success is tough. Managing political success
even tougher. In corporate lingo, it all boils down to succession plan-
ning. In political science, there are two models of succession planning.
In Plato’s Republic, the philosopher king is selected by his peers. He is
the first among equals. I must confess that intellectually I am partial to
this model. Why? Because the head rules more than the heart.
However much the Platonic ideal appeals to us, it is still flawed. Its
very virtue sows the seed of its own destruction. The philosopher king
once chosen by his peers cannot be removed by them except through
God’s intervention. The philosopher king fossilizes into a dictator.
Or, like the emperor, he, and not his peers, chooses his successor. In a
monarchy, he chooses one of his offspring.
On the other hand, succession via the ballot box is also fraught with
danger. In a freak election, the electorate may well elect a government
whose sole aim is to get into power, to loot and plunder the treasury.
Is there a middle way? I leave it to political scientists to ponder this
question.
One possible way is to have the electorate realize that when they
choose a rogue government, they will lose everything they possess,
their livelihoods, their property, even their lives. In each successive
election, the PAP has offered better-educated slates of candidates.

Though education is not foolproof against character flaws, it is better
than picking candidates off the streets.
As no system is perfect, PAP candidates are not as streetwise as their
less-educated opponents. The first generation of PAP candidates were
less educated than their successors. All constituencies were single seat.
They stood and won on their own merit. Are group representation
constituencies a protective cover for young PAP rookies not street-
wise enough to fight their own battles?1 As ministers themselves begin
their political careers in group representation constituencies, is there
the danger that even minister-led group representation constituencies
may one day go over to the opposition?
1
Constituencies of Singapore are electoral divisions represented by single or
multiple seats in the Parliament of Singapore. Constituencies are classified
as single member (single-seat) constituency (SMC) and group representation
(multiple-seat) constituency (GRC). In 1988, the ruling People’s Action Party
amended the Parliamentary Elections Act to create GRCs and to move away
from the single member constituency system. GRCs started out with three
members in 1988 but have steadily grown more numerous in subsequent elec-
tions. See http://en.wikipedia.org/wiki/Constituencies_of_Singapore (accessed
on August 11, 2010).
15
Singapore Elites
for the 21st Century
Speech to the Oxbridge Society, October 27, 2006
I am grateful to Prof. Lim Chong Yah and Dr. Melanie Chew for giving
me this opportunity to “chat” with the young Singapore Oxbridge
elite. Having worked with younger Administrative Service colleagues
from Oxbridge, I have a fair idea of your intellectual prowess. This eve-
ning, I want to get to know your more engaging human side.
I am essentially an NUS alumnus, and proud of it. NUS and its an-
tecedent institutions, like Raffles College, produced the first two prime
ministers of Singapore. The first and second generation cabinets were
largely from NUS. The third generation cabinet, under our Prime
Minister Lee Hsien Loong, himself a Cambridge alumnus, have largely
received their tertiary education abroad. This evening we can ask our-
selves the question: Does it matter where a political office holder re-
ceives his or her university education?
The title of my little talk this evening is “Singapore Elites for the 21st
Century.” The operative word is “for,” not “elites.” I will put forward the
proposition that “the way a society identifies, nurtures, and deploys its
elites determines the success or failure of the nation state.”
Harvard
As a mid-career officer in 1963, the PSC nominated me for the Mas-
ter in Public Administration degree course at Harvard University.
What I remember most of my year at Harvard was the welcoming
tea-cum-pep-talk given by Dean Price. He told my Mason Public Ser-
vice Fellows and me that, while it was easy to pass at Harvard, it was
exceedingly tough to excel.
To excel, “we have to beat the best of the best.” In those few words,
Dean Price conveyed to me the essence of an elite Ivy League univer-
sity. Harvard is numero uno of the world’s best universities. I am glad
to say NUS ranks “18.” In Asia, only Beijing and Todai (University of
Tokyo) are considered elite universities.
Plato’s Republic
I will now attempt to analyze the structure of elite systems in histo-
ry. The first is to be found in Plato’s Republic. In the Republic, young
male children at the age of twelve are taken away from their parents,
schooled, nurtured, and trained by the state. By itself, such a system is
nothing unique. What is extraordinary is that each cohort chooses its
own candidate leaders to progress to the next rung in the hierarchy.
Finally, the philosopher king is chosen by his peers to lead the state. He
is the primus inter pares, the first among equals.
When I read Plato’s Republic as an undergraduate, I was enthralled
by its compelling logic. Contrast this with the system of universal suf-
frage of “one man one vote.” It takes a leap of faith to think that your
fellow citizen is as wise as yourself in casting his vote. Yet, would we
prefer to be ruled by the will of one man, or live under a system of
the will of the people as determined in general elections? Would you
prefer to be governed by a democratically elected prime minister, or
be ruled by a philosopher king? Without any checks and balances, the
philosopher king is in fact a dictator. History is replete with examples
of “philosopher kingdoms” that turned into dictatorships.
As the primus inter pares, Mao Zedong ended a century of humili-
ation to be the founding father of modern China. Yet, the philosopher
king launched a cultural revolution that would have destroyed China,
had not death intervened. Had Gandhi not been assassinated, could he
have transformed India into the modern state that it aspires to be?
The Imperial Examination System

I am told that each Chinese dynasty ruled on average about 300 years.
This is equivalent to winning sixty consecutive general elections. What
is the secret of their longevity? The founding emperor won his empire
on a bloody battlefield. But no force of arms can subjugate a population
forever. Only ideas can win the hearts and minds of the people. In spite
of persecution and repression, the Christian Church has triumphed
through the ages.
Chinese rulers have long recognized the critical role of talent in the
affairs of state. The Romance of the Three Kingdoms recorded that Liu
Bei implored Zhuge Liang, the master strategist, three times before
the latter agreed to be his advisor. With Zhuge on his side, Liu Bei tri-
umphed in the epic struggle for hegemony.
The induction of talent for the service of the state was institution-
alized as the imperial examination system. The best minds of China
competed at county and provincial levels before qualifying to sit for the
final examinations, which were presided over by the emperor himself
in Beijing.
The Zhuang Yuan, the top scholar, was offered the hand of a princess
in marriage. He was inducted into the royal family. Unlike the Egyptian
pharaohs, Chinese emperors certainly knew a thing or two about ge-
netics. Hence, the Chinese would not marry someone with the same
surname. The royal genetic talent pool was expanded through this in-
duction of imperial scholars.
On one of my visits with Minister Mentor Lee Kuan Yew to Beijing,
we visited the imperial examination hall situated in the Forbidden City.
The Chinese kept very good archives. They showed us old examination
scripts. In the early years, scholars were tested on practical subjects.
They were asked, for instance, to write essays on how to alleviate floods
in their home provinces to select elites for the imperial governments.
Later on, they composed poetry and quoted precedents from the
Analects of Confucius. The brightest minds were numbed with rote
learning. Creativity waned and the dynasties collapsed.
In modern management idiom, they were flying on auto-pilot.
However, we need to remember that the imperial examination system
was in essence a meritocratic system. Our President Scholarship sys-
tem is Singapore’s equivalent. In my mind, the question is: How do we
deploy our President Scholars?
The Chinese Communist Party (CCP)

The most rigorous system of elite selection that I have read about is
that of the Chinese Communist Party (CCP). It is akin to that of the
Roman Catholic Church. According to a study done for NUS’s East
Asian Institute, CCP cadres begin their careers at the village grass roots
level “serving the people.” Their performance is reported on by their
superiors, and their character is assessed by fellow villagers through
an anonymous canvassing of opinion by auditors sent incognito by the
central personnel authority.
In this way, the CCP would know whether promising cadres are self-
less or selfish. The able and selfless cadres are promoted to the next
rung until finally the top 300 men and women who govern China
day-to-day emerge. They are men such as President Hu Jintao, Premier
Wen Jiabao, party secretaries, mayors, and the PLA commanders.
In spite of this rational process of elite selection, many of the chosen
will still fall by the wayside because of incompetence or hidden char-
acter flaws. The test is whether such an opaque system of elite selection
can produce a core group of men and women strong enough to govern
China. So far, the evidence is positive. Exceptional men, such as Deng
Xiaoping, have emerged to save China from disaster and lead her on to
the road of modernization.
The CCP system of selecting the paramount leader suffers from the
same inherent weakness as the philosopher king system in Plato’s Republic.
Under both systems, the power of the leader is absolute, even unto death.
It is human nature that a paramount leader would want his successor to
be made in his own image. This is true even of many ordinary mortals.
Is it possible that the CCP will elect its paramount leader in the same
way as the College of Cardinals elects the Pope, through a secret ballot,
and burn the ballot papers thereafter? It has to be said, however, that
God provides divine guidance to the cardinals to select the shepherd
of the Church. More earthly considerations are likely to weigh with
Politburo members in selecting the general secretary of the CCP.
Plato’s Republic, the Roman Catholic Church, and the Chinese Com-
munist Party share a common characteristic in the selection of lead-
ers. The choice of the philosopher king, the Pope, and the paramount
leader is not left to chance. It is a carefully controlled process, where
both intellect and character count. Under all three systems, everyone
starts off at the grass roots level, whether as village priest or cadre.
The second thread, in essence, is that a leader is chosen by his peers to

be “the first among equals.” In a democratic system with universal suf-
frage, every citizen has an inalienable right to choose a leader. Often, it
is a chaotic process with unforeseen results throwing up leaders with no
virtue at all. Yet it must be said that, in a democratic system, the prime
minister governs with the consent of the people expressed through the
ballot box. The rogue prime minister can be thrown out at the next
general election, if one is held. A philosopher king, however able and
virtuous, may turn into a dictator in his dotage, as did Mao Zedong.
As Singapore is a relatively young country, we are still evolving our
systems of selecting elites. I divide elites into three categories. First,
the political and administrative elites. Second, the professional and
business elites. Last, but not least, the social and community elites.
The Political and Administrative Elites

Each elite group has its own distinct identity. The Singapore Admin-
istrative Service is of the first category. Admission into the service is
largely based on scholastic achievement. The basic requirement is a
first or second upper honors degree from NUS, Oxbridge, or other
elite overseas university.
In the earlier years, most of us were from the University of Malaya,
which educated the elite from the Federation of Malaya and Singapore.
The first six heads of civil service were from our own university, NUS.
Mr. Lim Siong Guan was the first overseas-educated head. His ap-
pointment was a milestone. It coincided with the emergence of a
predominantly foreign-educated, third-generation cabinet.
This structure came about because the PAP, on assuming power in
1959, for reasons I am not privy to, sent our best and brightest to be
educated overseas.
A Japanese ambassador just could not understand our policy of edu-
cating our elite overseas. The Japanese elite did not go overseas for their
undergraduate education. They attended Todai or Keio. Do we know
something about the training of administrative and political elites that
the Japanese don’t?
In the tradition of the British civil service, I am political but not
partisan. There is separation between the state and the executive. The
executive, however, has to remember that our duty is to implement the
will of the people manifested through the elected prime minister.
Though I have combined the political and administrative leader-

ship under one group, different skill sets are required of each. In
a democracy, the political leadership has to mobilize the different
segments of society to bring in the votes. Though led by a largely
English-educated leadership, the PAP positioned itself as a mass
movement. Its members of parliament came from a cross-section
of society, embracing all racial and language groups, occupational
and educational levels, and religious affiliations. I recall that in the
first Parliament, among PAP MPs were a Malay postman, a Chinese
carpenter, a Chinese barber, and an Indian trade unionist. PAP MPs
were largely ordinary folks who could relate easily with their differ-
ent electorates.
Over the years, as the children of the first generation of Singaporeans,
“the post-65 generation,” became better educated, one could not be a
PAP MP, much less a minister, without a university degree. The danger
for the PAP is that this intelligentsia may become elitist and lose their
instincts for street fighting.
We need to remember that the PAP came into power in 1959 after
crushing the old English-educated elite in the Progressive Party. It had
on its side the leftist Barisan wing to do the street fighting until they
split to form the opposition. The question to ask is: How should the
PAP select its elite to continue to be in power?
The Business and Professional Talents

Our early business tycoons were men with little formal education who
rose literally from rags to riches. Names like Lee Kong Chian, Tan Lark
Sye, Lien Ying Chow, Ko Teck Kin, Govindasamy Pillai, Gan Eng Seng,
and the Alkaffs, spring to mind. They were men who turned stones
into jewels.
But would these men with the same sterling qualities be as success-
ful in the 21st century as they were in the 19th and 20th? I would
venture to say that to succeed, our future tycoons now have to possess
technological knowledge besides sharp business acumen. They’d have
to be better educated than their fathers.
Education, however, turns most of us into wealth managers. A so-
ciety desperately needs those driven few who are wealth creators. The
question to ponder is: Is wealth creation best institutionalized, or driv-
en individually? Perhaps both. I said in an earlier speech that Singapore
has a surfeit of wealth managers and a paucity of wealth creators. Will

your generation be different?
Deployment of Talent
La creme de la creme of our students are awarded President or Over-
seas Scholarships to study at elite universities abroad. This, to me, is
only half the equation. On their return home, all are deployed in the
public sector. Except for the bond breaker, none is available to the rest
of society. The business or social sector is starved of talent. Except for
the exceptional individual who thrives in whatever the environment,
there is a paucity of leadership outside the government. Is it any won-
der, then, that we have a lopsided state with a strong, some would say
dominant and even domineering public sector that is efficient at regu-
lating but hopeless when it comes to creating wealth?
Deployment of talent is crucial for the survival of the state. My per-
sonal view is that the UK, once a great industrial state, no longer holds
the pole position because most of its Oxbridge elite went into the City
of London, where they manage but do not create wealth.
The Social Elites

The social elites in our temples, churches, mosques, clan associations,
voluntary charitable organizations, and alumni associations, are, by
and large, not driven by money or power. Those who serve are gener-
ally well-balanced altruistic individuals with a higher sense of “doing
good.” Their satisfaction is derived from the felt but often unspoken
appreciation of their fellow members and peers.
These social elites are in my book the bedrock of society. We should
encourage them. There will then be many hands, instead of just those
of the government, to assist the poor and the disadvantaged.
Conclusion
I was born in 1937, on the eve of the Second Sino-Japanese War. I spent
my early childhood during the Japanese occupation, oblivious to the
hardship my parents went through to raise their young family. With
the surrender of Japan to the allies in 1945, Singapore was ruled by the
British Military Administration (BMA). As food was scarce, the BMA
introduced food rationing. A family received ration cards to buy rice,

sugar, and other basic necessities from designated provision shops. If I
recall correctly, rationing stopped around 1950 when enough supplies
enabled the economy to function freely again.
Most of us were enrolled in the government-funded English
medium schools. When I completed my O Level School Certificate in
1953, only about five out of an A class of forty went on to university. By
the grace of God, I was one of the five.
Oxbridge was accessible only to one or two Queen’s Scholars cho-
sen from the best in a cohort. The rest of us were educated at the Uni-
versity of Malaya. The English-educated were considered the elite and
provided the political leadership to win independence for Malaya
and Singapore in 1957 and 1965, respectively. Raffles College was the
alma mater of the founding political leadership on both sides of the
Causeway.1
As someone from the pre-war generation, I am envious of the op-
portunities provided to you all, the post-1965 generation. At the dawn
of the 21st century, it is my fervent prayer that the young elites of today
will lead Singapore into a new age in the new millennium. What do
I see on the horizon? I hope that Singapore will become a truly global
city, open to all talents, and at the cutting edge of science and social
organization.
Traditional resource-based competition is now giving way to com-
petition based on knowledge. What can stop Singapore? This is not a
rhetorical question. Singapore will stop itself if we stop learning from
first principles. Dr. Goh Keng Swee once told me that when we were
poor, we made mistakes on the backs of used envelopes. But when we
become rich, we make mistakes in the bellies of huge computers.
At the risk of sounding sanctimonious, we cannot just throw money
at problems. Singapore cannot succeed just by buying brand names
or hiring trophy scientists. Mr. Evan Eriksson, former president of
Sundstrand Aerospace, told me that when he was a young research
engineer, he could not wait for the sun to rise every morning.
Mr. Eriksson held the patent to a device called the constant speed drive,
a critical mechanism in every jet engine. No amount of post-doctoral
1
The Johor–Singapore Causeway connects the city of Johor Bahru in Malaysia
across the Johor Strait to the town of Woodlands, Singapore.
training can make up for lack of passion. And no amount of sheer

competence can trigger the spark of brilliance.
The Singapore elites of the 21st century have to sweat it out
themselves. It is futile to acquire gourmet tastes when you cannot fry
an omelet. You, the elites of today, are not starting off from ground
zero. Fifty years of rational science-based education have prepared you
well for global competition. But you need to drive the process yourself.
Singapore has no choice but to choose the hard option, not the soft.
16
“Sense of Urgency” Drove
Creative Ideas
Interview with The Strait Times, December 28, 20071
B ureaucrats today are more about maintaining the economy than

taking risks to develop the next big thing to foster growth.
In his candid manner, Mr. Ngiam Tong Dow suggests that today’s
civil servants are “in the maintenance mode.”
“I think they are less inspired,” he says.
“They’re just managerial . . . and are waiting for the ministers to lead,
which should be the right way.”
The 70-year-old former top civil servant was musing on how
Singapore’s civil servants have changed. He was the youngest perma-
nent secretary when appointed in 1972 at age 35. By the time he retired
in 1999, he had served in five ministries and in the Prime Minister’s
Office.
Asked to define what exactly is that “certain cut” of top officials of
his generation, Mr. Ngiam says: “We had a sense of urgency. That’s the
difference.”
The Straits Times, page 30, December 28, 2007. Reprinted with permission.
1
“I think now times are more stable, so they can take their time to plan
this and plan that. But we had no time. Unemployment was 10 percent
plus. Housing was crummy. We simply had to create a new reality.”
He believes this sense of urgency should be re-inculcated in the mod-
ern civil servant. Singapore, he says, cannot afford to stop moving—and
moving fast.
“Singapore being such a small economy, we should always work on
the basis of insecurity,” he says.
The present generation, better educated and trained, “should do
much better than we did.”
“We must grow as an economy, as a social system, as a political
democracy. Growth is very important. If it’s just what you call ‘in a
maintenance mode,’ we are finished.
“How many new enterprises have we started in Singapore? Have we
started any great Singapore companies in the last twenty years? I can’t
think of any. So Temasek and GIC have just become fund managers.
They are just investing our reserves . . . .
“When you really think about it, we have expanded, but we have not
grown. In economic terms, there’s a great difference.
“So, for Singapore, how do you achieve self-sustainable growth? Can
you grow just on receiving dividends from your overseas investments?
Ask yourself this question: Where are the new sources of growth, new
enterprises, new activities?”
There is bio-technology.
“Okay, that’s one,” he concedes, but adds that the much-touted in-
tegrated resorts are “a low road that we have taken. . . . It’s the service
industry.”
But is this the responsibility of the civil servants?
Yes, he replies: “They should come up with the ideas for political
leadership.”
So what would he recommend as a civil servant today?
“Take some risk in the same way we did when we went all out
for the petrochemical industry. You can take risk, for the sake of
argument, in solar energy. . . . We should not be satisfied just being a
shareholder.”
Since retiring, Mr. Ngiam has acquired a reputation for his frank
critique of the establishment—the more surprising since he worked
within the system.
“Sense of Urgency” Drove Creative Ideas 111
Casting his mind to those days, he says, of the relationship between

civil servants and political leaders, “They made the political decisions,
we did the implementation. But we contributed to the policy-making.
That’s very important.”
Speaking from his office at Surbana Corporation, of which he is
chairman, he smiles when asked to share his proudest achievement.
“It was in the 1970s when Singapore wanted to get the petrochemical
industry going and got Sumitomo to establish a project here.”
Mr. Ngiam traveled to Tokyo and was given ten minutes to make his
case to Sumitomo. He did it, and Singapore won the project.
“The Sumitomo Petrochemical Project is the nucleus of Jurong
Island today. Without that project, there would be no Jurong Island
and Singapore would not be a petrochemical center,” he says.
The sense of urgency driving the mandarins then also impacted the
way they worked.
He recalls receiving instructions, back then, from Prime Minister
Lee Kuan Yew and Deputy Prime Minister Goh Keng Swee that
cabinet papers should not be more than two-and-a-half pages long,
double-spaced, and stated in plain language.
“They’d say, don’t give us three options or four options, just state
what is your opinion, recommending action. Whereas today, at least
until the time I retired, the papers became too scholarly, with too many
options . . .” he says with a laugh.
This, he believes, is also a result of a different breed of ministers who
want several options at hand.
So what can be done to replicate that urgency in today’s civil
servants?
They should spend time at para-governmental bodies, such as deal-
ing with tenants at HDB and hustling for business at EDB, he says.
“So at least they can get some experience, get down to the nuts and
bolts, before they come up to be the policy maker.”
17
Reporting: Then and Now
Speech at the Singapore Press Holdings Lecture,
March 3, 2008
F riends and colleagues, thank you for having me speak this

afternoon. As this is a Singapore Press Holdings family gathering,
I will speak on the topic “Reporting: Then and Now.” Alan’s invitation
to me to address the younger generation brings back a flood of memo-
ries of a time when I was one of you. Believe it or not, I was a Straits
Times cub reporter in the 1950s.
After my O levels at St Andrew’s School, I was recommended by
my principal, Reverend Canon Adams, to Mr. Leslie Hoffman, the
editor-in-chief of The Straits Times, for a cub reporter’s job.
All the professional training I had to be a reporter was a correspon-
dence course in writing English from a private distance learning school,
the Regent Institute in London. They specialized in coaching students
from the Commonwealth whose mother tongue was not English to
write English. My literature teacher at Serangoon English School paid
my tuition fees. I learnt how to write standard English from the many
red ink corrections of the Regent tutor on my exercise script. Years
later, another tutor, Dr. Goh Keng Swee, corrected the rough drafts
of his administrative cadet, namely me, in his distinctive green ink,
improving them beyond recognition.
The organization chart of The Straits Times in the 1950s was stark
and simple. The entrepreneurial boss was clearly Mr. A. C. Simmons,
proprietor and publisher. He could hire and fire the editor-in-chief,
Mr. Leslie Hoffman, who in turn could hire and fire any mere reporter.
All that was required to be a reporter was a pass in O Level English, an
ability to type, and speed in shorthand. The only trouble was that there
were hundreds of O levels like myself.
You may consider yourself a Norman Mailer, but you can never, ever,
throw a tantrum. If you lose your cool, there will be another eager bea-
ver rushing in to take your place on the news desk. The cub reporter’s
salary was S$250, with another S$75 as transport allowance. If there is
a breaking story, you get there pronto: walk, run, or swim. You do not
wait for office transport. You miss a scoop at your own peril.
As you know, I am chairman of the Board’s Remuneration Committee.
The ground rules have certainly changed. HR drums into me that unless
we pay competitive salaries, our star writers will leave us for the com-
petition. The early Straits Times I grew up in had star reporters without
having to pay superlative salaries. When Francis Wong reported a crime
story, you could hear the heavy footsteps of the policeman walking
down the street. When Geoffrey Abishegenaden reported a Malaysia
Cup final, you could hear the roar of the crowd piercing the sky over
Jalan Besar Stadium. They were masters at creating atmosphere.
To my generation of Singaporeans, Jalan Besar Stadium is the origi-
nal home of Singapore football. How many of us will recall the great
football games of Awang Bakar, Chia Boon Leong, Abdul Rahman,
Choo Seng Quee, Quah Kim Song, and an even earlier great Dolfattah,
played at Jalan Besar?
Soft-focus reporting was the forte of our news editor Sit Yin Fong.
With impeccable taste, he selected the delectable pin-up models for
the centerfold of the Weekender, which made the day for us young
bloods.
Reporting is both a skill and an art. Reporting to Mr. Hoffman that
first morning, he told me he was employing me as a reporter, not as
a journalist. As a reporter, I was only to report the who, what, when,
where, and how of events or situations. The sine qua non of reporting
is to get your facts right and your quotes complete. It is not as easy as
it sounds.
In the days before the tape recorder and the TV camera, being accurate
and timely was hard work. Speed in writing shorthand was de rigueur.
Accuracy was best tested in parliamentary reporting. Chia Poteik, our

best parliamentary reporter, was our anchor in the courts, reporting all
sensational murder and complex commercial litigation cases without
missing a beat. His speed in writing shorthand is legendary. I recall no
occasion when he was faulted for an inaccurate quote.
I spent quite a bit of time as a cub reporter in the subordinate courts
in South Bridge Road. One morning, Justice Choor Singh, then a dis-
trict judge, threatened to cite me for contempt of court for a report
I had filed the previous day, which he considered inaccurate. His stern
warning is forever seared in my memory. As a result, I also came to have
zero tolerance for inaccurate and slipshod work by my subordinates.
At the risk of offending some of my best friends in journalism, opin-
ion pieces, in my opinion, are not quite journalism. I prefer straight
reporting. Joseph Yeo and Peter D’Cruz, who cover the union and
general beats, excelled in straight reporting.
Straight reporting allows the facts to stand on their own. Straight
reporting allows the story to tell its tale. There is no attempt by the
sub-editor to juxtapose words and pictures to create misleading im-
pressions. The straight reporter does not crusade. He has no personal
agenda.
The ogre in our nightmares is said to be the imperial censor. Yet are
we being honest with ourselves? You may hang and quarter me for say-
ing this. If we look deep into our hearts, we may find that our enemy is
within us. Our ego may be our greatest stumbling block.
As human beings, we all have our own convictions—religious,
political, moral. When we allow our own beliefs to creep into our jour-
nalism, we should not be surprised when our neighbors and, indeed,
the state, respond and challenge us frontally.
I am not suggesting that as citizens and journalists we should be
simply unquestioning, uncritical, sycophantic admirers of the state
and the power it wields. When you feel irked by guidelines put out by
the Ministry of Information, Communications, and the Arts (MICA),
then let me tell you of the unremitting routine of North Korean
diplomats.
In the 1960s, out of diplomatic courtesy, I had to receive the North
Koreans when they called to hand over trade literature. Every pre-
sentation began with a litany of praise for their great leader. The se-
nior diplomat would read out word for word the preamble, while the
other would record what he declaimed. The script had to be followed
to the letter. It was an Orwellian nightmare for me, and I suspect for
them too.
Yet, on reflection, I wondered how different were the North Koreans
from the Spanish Inquisitors. Indeed, how different were they from
the millions of Chinese who had to drop everything they were doing
at noon to listen to the songs of praise for Chairman Mao, blaring from
loudspeakers all over China.
Minister Mentor once told me that to govern, you must have your
hands on three levers of power, namely the treasury, the army, and the
voice. When you manage the economy well, the treasury would be full
and abundant. When you train the army well, you need not fear your
foes. When you want to win the hearts and minds of the people, you
need to have a free press.
Unlike Western-educated liberals, I see a free press as other than the
Tower of Babel. In extremis, censorship is necessary. While newspa-
pers can report the number of people killed in racial riots, it would be
totally irresponsible for the media to break down fatalities by race in
the highly charged emotional tensions of the first days. Fatality figures
by race can be released later, when the police and armed forces have
regained control.
The power to censor has to be used wisely and sparingly. History
records that the death of Qin Shi Huang on one of his trips to eastern
China was kept from his troops until the imperial war carriage arrived
back in Xianyang, the capital, now known as Xian. A premature leak of
his death could have demoralized his troops and aided his enemies.
On the other hand, the complete news blackout imposed on the
Tangshan earthquake, which killed a million people in 1976 just be-
fore the death of Chairman Mao, did untold damage to the credibility
of the Chinese government. It was a bad, if not futile, exercise of cen-
sorship. In fact, with the advent of the Internet and phone cameras,
censorship is virtually impossible.
As reporters, our craft is writing. We are wordsmiths. To keep in
top form, a writer has to exercise his vocabulary and command of lan-
guage in the same way a single handicapper in golf hits 200 balls on
the practice range every day. Dr. Goh taught me how to exercise my
vocabulary. He told me to pick a word, any word, and write out its five
synonyms. Turn it over, and write out its five antonyms. Start with hot
and cold.
Skill in writing does not make you a good writer per se. You need
knowledge and content. You have to research the facts and the back-
ground of topics before you set out to write a political, scientific, eco-
nomic, or even simply a human-interest story. For instance, the straight
reporting and the reflective articles on the passing away of President
Suharto in the Wall Street Journal and the International Herald Tribune
made for more compelling reading than our own. To improve, I sug-
gest we benchmark ourselves against what we consider to be good
writing in the pages of our competitors.
The role, the value added, of the journalist is to make a complex sub-
ject or a profound topic simple to grasp. If the average reader with an
O level cannot fully understand what you want to say to him, it is your
failure, not his ignorance. I asked many of my more erudite friends in
finance and economics to explain what exactly carbon credits are. I am
afraid I have yet to receive a crystal clear exposition of carbon credits
in the literature on climate control. In my more skeptical moments, I
wonder whether or not highly paid risk managers in banking ever re-
ally understood derivatives, collateralized debt instruments, and sub-
prime loans.
To end, I’ll quote one of my mentors who said that if you do not
think straight, you cannot write straight. If you yourself cannot under-
stand a topic well, how can you have the temerity to write an opinion
piece on it?
If I sound overly critical, it is because I believe passionately in the
sacred mission of the press, which is to uphold truth, and to protect
the integrity of our nation in clear, simple, inspiring writing. Our role
is to read the verdict of the people correctly, so that the government
can continue to retain the mandate of heaven to rule.
18
Economics and Economists
in the Public Administration
of Singapore
Speech Delivered at the NUS Economics Alumni First
Annual Dinner Held on December 8, 2007
W hen I joined the Singapore Administrative Service in 1959, all

of us had studied the humanities at university. George Bogaars,
Head of the Civil Service, studied history. The two who came after him,
Howe Yoon Chong and Sim Kee Boon, studied economics. Pang Tee
Pow, who succeeded Bogaars as the permanent secretary of defense,
also studied economics. Then, three out of the four heavyweights in
the Singapore Civil Service were from the Economics department.
Our most outstanding alumni are Singapore’s first two prime min-
isters: Minister Mentor Lee Kuan Yew and Senior Minister Goh Chok
Tong; and Singapore’s first finance minister, Deputy Prime Minister
Goh Keng Swee. Across the causeway, Tun Abdul Razak, Malaysia’s
second prime minister, also studied economics. Mr. Tan Siew Sin,
Malaysia’s second finance minister, was also from the department.
As economics alumni, we can say with some pride that the found-
ing political and administrative leadership of Singapore and Malaysia
came largely from our department. It can be said that they received
what can be considered a modern classical education, a PPE education
in philosophy, politics, and economics. The question to ask is: Will
such an education equip us to lead and develop our countries?
First, let me disavow any claim that economists are professionals

in the traditional sense that doctors, lawyers, accountants, and archi-
tects are professionals. Professional colleagues in the medical, legal,
accounting, and architectural services of Singapore have to be regis-
tered to practice their professions. Registration gives the public some
assurance that they have a threshold level of competency to practice
their disciplines, dealing as they do, with “life and death” respon-
sibilities. This exclusive right carries with it personal liability. They
can be sued personally for negligence and deregistered for serious
breaches.
Economists, on the other hand, cannot be sued for negligence. There
is no threshold level of competence to practice economics. A BSc is
as good as a PhD. Indeed, some of the best stock analysts have never
heard of Adam Smith, nor The Wealth of Nations, nor abstract ideas
such as the “invisible hand.”
A non-economist friend of mine, who has made a small fortune in
penny stocks, told me that his investment strategy was simple. When
the tide is out, even jewels sink to the ocean floor. When the tide rises,
even the rubbish will float. Money is to be made in the rising and the
falling of the tides.
Though economists cannot be sued, they can be sacked. Even then,
it depends on where one works. In the mid-1960s, I attended an eco-
nomics seminar sponsored by IBM in Baguio in the Philippines. The
chief economist of IBM, Dr. Grove, had worked in the Federal Reserve
Bank. He was asked the difference between the accountability of the
Fed chairman and that of the IBM chief economist.
As IBM’s chief economist, he would be invited to lunch once a
quarter by Mr. Tom Watson, founder of IBM. Mr. Watson would ask
Dr. Grove to brief him on the state of the economy. Dr. Grove had
to make a forecast of the number of mainframes that IBM could ex-
pect to sell in the next quarter. At each quarterly lunch, actual sales
would be matched against forecasts. Dr. Grove told us that whatever
ego he had as an economist was completely dissipated by the actual
sales n umbers.
At the Fed, highly paid central bank economists would draw deeply
on their pipes and pronounce with gravitas their interest rate predic-
tion. They would even forecast the GDP growth rate for the calendar
year. Unlike IBM economists, Fed economists are not held accountable
for the central forecasts they made. Central bank forecasts of interest,
Economics and Economists in the Public Administration of Singapore 121
exchange, and GDP growth rates are soon forgotten. They make for
good headlines in the morning newspaper only the day after.
IBM’s Watson had no time for Fed economics or economists. Woe
betides his chief economist if the sales forecasts are way off the mark.
As a policy outsider, it is interesting to note that our Monetary Au-
thority of Singapore (MAS) eschews interest rate as a policy instrument.
Instead, the MAS focus is on the exchange rate as the key instrument
of monetary policy. The MAS intervenes directly in the foreign ex-
change markets, buying or selling the Singapore dollar against a basket
of currencies, predominantly the US dollar. While such a policy may
be effective against disruptive short-term inflows of foreign currencies,
I question whether it is adequate as a long-term policy instrument.
All of us learn in Economics 101 that the underlying bedrock for
growth is total factor productivity. In comparing GDP growth rates,
we need to differentiate between expansion and growth. The economy
expands when the labor force increases. Singapore’s GDP has expanded
largely on infusions of foreign labor. Secular long-term growth can only
be sustained if Singapore’s productivity increases. Our productivity
performance has been mediocre.
The Monetary Authority’s catchphrase in its half-yearly review is
that it will allow a modest appreciation of the Singapore dollar over
time. Such a policy stance is realistic only when there is steady in-
crease in our productivity growth. The central economic challenge for
Singapore is raising productivity. At its core, productivity is a mix of
efficiency and effectiveness. The key ministry in the present phase of
our economic growth is the Ministry of Education, not the Economic
Development Board or the Ministry of Finance.
As a tribe, economists, unlike poets, are not given to daydream-
ing. This afternoon, let me pose two philosophical questions. First, let
me ask you: Can the world exist without economics? The answer in
modern jargon is that’s “a no brainer.” It is like asking whether mother
Earth, Gaia, can go without knowledge of medicine, engineering, or
law. My second question is: Can Singapore live without economists?
The answer is not so clear-cut. It all depends.
Under the strong intellectual leadership of our first finance minister,
Dr. Goh Keng Swee, the Ministry of Finance practiced what became
known as a robust brand of economics. Dr. Goh established Singapore’s
Bird Park at Jurong before the Zoo at Mandai because, as he points out,
birdseed costs considerably less than meat for tigers and lions.
The Ministry of Finance also rejected flood alleviation works at the

Bukit Timah Canal. As it flooded only three or four times a year, it was
too costly to build flood control works to enable motorists to arrive
home in time for dinner. And we would rather give a schoolboy fifty
cents bus fare to go to the beach to swim rather than have a swimming
pool built at Tanjong Pagar. The cost per swim would have exceeded
the bus fare.
Such a robust approach could also turn out myopic. In the ear-
ly years, the lift at some Housing Board blocks stopped on alter-
nate floors. As the lift shaft went through all floors, the savings, if
any, was marginal. Retrofitting of such lifts under the Housing and
Development Board’s current lift upgrading program is costing much
more.
In the great MRT debate of the mid-1970s, the Ministry of Finance
assembled a powerful team led by Harvard economists to argue for
an all-bus rather than a bus-rail mass rapid transit system. Our own
young transport planners demonstrated through system studies that
an all-bus system would tie up the whole of Singapore in gridlock.
I was then permanent secretary of communications. Not being a
transport planner, I argued as a general economist that a rail-based
mass rapid transit system would provide access to the whole of
Singapore. Property values would rise. The increase in the collection of
property taxes would likely pay for the total cost of S$5 billion needed
to build the initial system. As it turned out, those of us in favor of the
MRT won the public argument. Nothing succeeds like success. Today,
the Land Transport Authority is building a rail network to connect the
whole of Singapore.
In public administration, the economic tool I found most useful is
cost-benefit analysis. Its simplicity is disarming. In evaluating the host
of projects submitted by operating ministries in the annual budget ex-
ercise, the Ministry of Finance simply totes up the capital and operat-
ing costs of the project and compares the costs with the benefits on the
other side of the ledger. The devil is in the details.
For instance, should we add indirect cost, such as damage to the
environment, on the cost side? An environmental project that reduces
pollution is clearly of benefit to the community. The problem is: How
do we value clean air? Does its value lie in protecting the population
against a high incidence of asthma? Should not the asthma sufferer pay
for clean air?
Very quickly we get into the realm of welfare economics, which

I found difficult to grasp as an undergraduate. Worse, the textbook
prescribed was Professor Little’s classic critique of welfare economics.
What I did learn from his book is that the demand curve is actually
a derivative of indifference curves. Simply put, an indifference curve
plots your choice of having, from two baskets, either more oranges and
fewer apples, or more apples and fewer oranges, until you reach the
point that you are indifferent to both.
In the very public debate on the proposed MRT in the mid-1970s,
Dr. Goh agreed that a mass rapid transit system would add to the
employment capacity of the central business district. Assuming that
the MRT can bring an additional 250,000 workers into the city dur-
ing each morning’s peak, the capital cost alone to have each additional
worker arrive on time for work would be S$200,000, as the whole sys-
tem would cost S$5 billion to build.
Dr. Goh asked whether an all-bus system would be cheaper and less
risky to undertake as bus fleets can expand incrementally, bus by bus.
It was a disruptive piece of reasoning. Those in the opposing camp
argued that a rail-based system would open up almost every corner
of Singapore. With access to rapid rail transport, new towns could be
developed in every region of Singapore: north, southeast, west. The
development potential would increase and land values would rise,
yielding more property taxes, which could finance the capital cost of
the rail system. Economists call such benefits external economies. Ex-
ternal economies generated by a less land-intensive, rail-based mass
rapid transit system far outweigh its high capital cost.
The alternative would have been an all-bus mass transit system.
There is simply no land to build or expand roads to accommodate
thousands of buses on the road each day during the morning and
evening peaks. The outcome would have been severe congestion and
gridlock. Congestion pricing would reach heights that would provoke
a political backlash. There would also be the external diseconomy of
petrol fumes and pollution. Finally, a rail-based transit system pro-
vides a strong physical backbone for integration of all transport modes,
whether p rivate cars, taxis, buses, vans, or lorries.
The great MRT debate of the 1970s is an outstanding example of
cost-benefit analysis in public decision-making. But not all public poli-
cies are amenable to straight cost-benefit analysis. For instance, can we
apply cost-benefit analysis in the great marriage debate of the 1980s to
produce the desired outcome of more intellectually compatible mar-

riages and birth of intelligent babies? It was a piece of social engineer-
ing that did not succeed. My guess is that it failed because there was
too much cost-benefit analysis. The government targeted the purse
more than the heart. Winning hearts is not for cost-benefit analysis.
Cost-benefit analysis can be done either on the back of a used en-
velope or in the bowels of supercomputers. When I was appointed
permanent secretary of the budget in 1987, Dr. Goh asked to see me.
I thought that he wanted a bigger budget allocation for his minis-
try. I was dead wrong. He told me, simply, that I would continue to
make mistakes. Only this time, I’d be making them in the bowels of
supercomputers instead of on the backs of used envelopes, which was
what I did when I was his young adjutant. This is the best piece of
financial advice I believe a minister can give to a newly minted perma-
nent secretary.
In the early days, a one million-dollar project proposal would be
put through the meat grinder by the finance ministry, using paper and
pencil. In fact, Dr. Goh told us, the young finance “aristocrats,” that
we should simply reject out of hand any and every spending proposal
received the first time. Then, if the supplicant ministry persisted, and
only on the third try, were we to give them half of what they wanted.
These days, any project proposal less than S$100 million is not con-
sidered respectable. Worse, we need to have supercomputers to crunch
the numbers. But I just wonder, are decisions made in the bowels of
supercomputers any sounder than those made the old fashioned way,
with pen and pencil on the back of used envelopes? If our basic think-
ing is unsound, no supercomputer can help us.
Supercomputers effortlessly produce reams of statistics. Though sta-
tistics help to buttress our conclusions, Dr. Goh, an outstanding statis-
tician himself, told me that all statistics have to be subjected to reality
checks. In the early 1960s, I accompanied the minister to attend an
UN Economic Commission for Asia and the Far East (ECAFE) meeting
in Bangkok. After dinner, the minister insisted on an evening walk.
After sweating up and down the hot and dusty pavements of the
street in front of our hotel, I plucked up enough courage to ask Dr. Goh
what was the purpose of the exercise. He told me that he wanted to see
whether the shops were well stocked. As they were, he was satisfied
that the economic statistics put up by the Bank of Thailand, headed
then by Dr. Puey Umpakorn, his London School of Economics college
mate, were credible. By Dr. Goh’s compass, all statistics have to be

checked against reality. Particularly gross domestic product estimates.
Even more so in Singapore, as civil service annual bonuses are tied to
GDP growth rates.
Another lesson I learnt in statistics was from Dr. Albert Winsemius,
our economic advisor in the 1960s and 1970s. One figure he watched
like a hawk was our unemployment rate. In the early days, we did not
have the resources to do labor force surveys on a regular basis. Instead,
he asked us to subscribe to The Straits Times to be delivered to him by
airmail in The Hague where he lived.
When I asked him what he found so interesting in The Straits Times,
which was, after all, a parochial Singapore newspaper, he said that he
did not read The Straits Times for world news. As our economic advi-
sor, he was more interested in the density of the job vacancy columns.
He got his young grandson to plot the changes. He told me that the
chart his grandson produced told him far more about the state of the
Singapore economy than all the economic statistics I dutifully sent him
each month. So, back-of-the-envelope calculations can sometimes be
more useful than a supercomputer.
In the mid-1950s, when my generation was at university, we were
taught the neoclassical economics of Marshall and Keynes, with
Adam Smith as the foundational anchor of the “dismal science.” Cur-
rently, there is an intellectual debate between mainstream neoclassical
economists and dissidents who are “heterodox”, whatever that
means.
An article by Patricia Cohen in the July 13 Business Times had this
headline: “Economists ready to critique basic models.” The subtext was
that the discipline is being taken to task now, in 2007, for relying on
abstract theories instead of analysis. The debate is still raging, and it is
not very clear to me where the dividing or defining lines are.
To me, it sounds very much like what my Permanent Secretary and
Minister Mr. Hon Sui Sen told me when I asked him to define bank-
ing. Mr. Hon was the founding chairman of DBS Bank. Being him-
self a first class graduate in physics from Raffles College, he said that
banking was both a science and an art.
I like to think that economics falls in the same genre. Instinctively,
we can accept Adam Smith’s “invisible hand.” Even more abstract is
the holy grail of economics, namely equilibrium. A French statistician
and mathematician was awarded the Nobel Prize in Economics for
what he himself acknowledged was only a partial mathematical proof

of equilibrium.
So where do I stand as a bureaucratic practitioner of economics?
Philosophically, I take the same stance as Deng Xiaoping, who advised
his doctrinaire CCP party comrades to “seek truth from facts” and “not
fit facts to truth.” Or, as Dr. Goh would tell us when he sends down his
draft budget speech for us to check, “If the facts are wrong, we can
change the conclusion.”
Looking at the facts has enabled us to practice what Professor Schein
called strategic pragmatism in his book on Singapore. Singapore’s
growth has not been circumscribed by doctrine or dogma.
Yet, looking at the facts alone may not be enough. By 1972, after sev-
en years of an export-led economic policy spearheaded by American,
European, and Japanese multinational manufacturing companies,
Singapore achieved virtually full employment, with an unemployment
rate of under 3 percent, which holds true today.
Yet, we pressed on with the juggernaut of the “stop at two” family
planning policy.1 Our policy-makers failed to draw the right conclu-
sion from the falling birth rates. Some of us who had doubts about the
prevailing policy surmised that as more and more housewives went
out to work, they would have less time to have children.
I fear that the tipping point of procreation has been reached. Fall-
ing birth rates cannot be easily reversed. Today, we may be in danger
of being wrong in the opposite direction. The Urban Redevelopment
Authority, for purely physical planning purposes, has set an ultimate
population target of 6.5 million people.
It is true that in the late 1960s, those of us in EDB did some
back-of-the-envelope calculations and concluded that the opti-
mum population size should be around 5 to 6 million people, simi-
lar to the population of successful medium-size developed countries,
such as Switzerland, Sweden, Norway, and Israel. But such optimum
1
Singapore’s population was growing fast after Independence in 1965. Thus,
the Singapore government introduced the “stop at two” policy in 1969 to help
slow down the rapid growth of the population as it might threaten the success of
Singapore. The policy was successful in controlling population growth. In fact,
it was so successful that the Singapore population started to decline. Hence in
1986, the Singapore government introduced “three or more, if you can afford it”
policy to encourage Singaporeans to have larger families.
opulation sizes were based on the technology to labor ratios of those

p
years. To put it another way, we now need fewer workers to produce
S$1 million of GDP than before. But these workers have to be better
educated and better trained. They have to be technology savvy.
The civil service is more adept at achieving quantitative than quali-
tative targets. Topping up our population en masse with immigrants
may well create a population base larger than what our economy can
sustain. Paradoxically, we may yet regress to unemployment. Unlike
our earlier policy of admitting more work permit workers to meet the
cyclical demand for labor, immigrants, once given permanent resi-
dence, are here to stay. I confess that I am not clued in enough to have
a complete understanding of what our current population policy is.
To me, population is the most pressing social, economic, and politi-
cal policy issue. Our best brains should be mobilized to think through
its many facets. The best administrators should be tasked to coordinate
and implement what has to be a coherent multidimensional long-range
policy.
Lord Keynes, who many of us would regard as the father of mod-
ern economics, wrote in the preface to his epochal work, The General
Theory, a sentence that intrigued me as a student. He said that even the
greatest of statesmen were often slaves to some defunct philosopher.
The equivalent of worldly philosophers by which name economists
were known during the days of Adam Smith would be the governors
of the world’s central banks. The governor of the Bank of England was
primus inter pares among central bank governors when Britannia
ruled the waves. Today, the chairman of the US Federal Board of Gov-
ernors acts as the world’s central banker.
The aim of every central bank is to achieve growth without inflation.
The main policy tool used is the interest rate at which central banks
would lend to commercial banks when liquidity is scarce. Currently,
because of the subprime loans catastrophe, banks find it difficult to
refinance their commercial papers, particularly collateralized debt
obligations.
At first glance, this may appear no different from Keynes prescrip-
tion of running a budget deficit to kick-start an idle economy. In the
1930s’ Great Depression, there were real assets—men and machines—
lying idle. Whether or not Keynesian pump-priming kick-started an
idling economy is a moot point, as the onset of the Second World
War brought about inflationary demand, the opposite of recession.
The immediate problem was solved. The outcome was the Second
World War.
Today, the world faces a more insidious problem: stagflation, which
is stagnation mixed with inflation in one deadly cocktail. Credit is
scarce, so interest rates will rise. Individual entrepreneurs and corpo-
rations will hesitate to borrow to increase their production capacity.
With fewer borrowers, interest rates will decline, and, in time, the pro-
duction process leading to creation of real wealth will start all over
again.
Meanwhile, property values will nosedive and stocks and other fi-
nancial assets will take what hardened bankers call “hair cuts.” But the
real world of production and trade will continue to function intact
with new technology and knowledge, coming onstream out of our re-
search laboratories and human ingenuity. So I ask myself: Is there a
new “General Theory” for recovery from financial excesses? In fact,
Dr. Goh does not consider Keynes’ work as a “General Theory.” He
thinks that, at best, it is a specific policy to overcome a general lack of
consumer confidence.
Unfortunately, profligate governments have abused Keynes’ pre-
scription of deficit budgeting to ruin their economies, starting with
the depreciation of their currencies.
At the risk of being condemned as a heretic, or even a lunatic,
I suggest that corrupt governments be put on a strict health regime
starting with suspension of World Bank loans and other internation-
al credit. Similarly, big banks and investment houses that misbehave
should be allowed to go to the wall. My only regret is that honest savers
will, as in all of history, carry the main burden of ineptitude by banks
and other institutions.
Should central banks provide some protection for the innocent by
scrutinizing all financial products and commercial papers before they
are sold to an unsuspecting and gullible public? In saying this, I have
moved away from pure economics. While my faith in the invisible hand
remains unshaken, I believe that when the rules of the marketplace are
tilted against the weak and the innocent, there is a case for regulatory
intervention. I believe Adam Smith would not disagree.
In the late 19th and early 20th centuries, thousands of hungry, able-
bodied young men from China and India arrived on the shores of
Nanyang, namely Malaya, Singapore, Java, and Sumatra. Hardly with
a shirt on their back and little education, they toiled in the heat of the
tropical sun. A few made good and became the legends of their time.
My question is: Can these young men succeed today on sheer grit and
native cunning?
The 21st century is a knowledge-based globalized world of competi-
tion. The question to ask is: What sort of education should today’s co-
hort of young men and women have to succeed in life? Should it be in
the hard sciences or the liberal arts? Or music and dance? And so on.
Traditionally, educated middle-class parents want their children to
study medicine, law, engineering, or accounting, simply because these
disciplines allow those qualified to practice their professions, which
provide a comfortable living in most societies. But can you become
spectacularly rich? To be truly rich, you will have to compete in the
world of business in free enterprise economies, such as Singapore’s.
So, I go back to the nub of my prognostication. What sort of edu-
cation best prepares one for business? My personal answer is to do a
double E degree, that is, engineering and economics. Why economics?
At the risk of being dismissed as a super egotist, I say that while en-
gineering teaches you how to count and measure, economics teaches
you how to calculate risks and rewards.
Engineering is a quantitative science founded on the laws of phys-
ics. Economics has a body of theory, more abstract and ambiguous. I
believe that engineering and economics, while they best prepare one
for a business career, do not guarantee success.
I will end with a “parable” told to me by one of my mentors, Dr. Albert
Winsemius, Singapore’s first and, to me, only economic advisor. He
said that General Bullmoose of Li’l Abner cartoon fame, woke up one
morning and decided that he should hire a bright young man to be his
aide-de-camp in business. In real life, General Bullmoose is the car-
toon caricature of mighty General Motors.
Three young men were selected by the HR department for inter-
views by the man himself. The first was an engineer. When he was
asked what 1 and 1 adds up to, it was a no-brainer for the quantitative
engineer. The answer was obviously 2. When the accountant was asked
the same question, being more creative, he said that 1 and 1 looks like
11. When it came to the economist’s turn, the young man was at a loss
to give a numerical answer. So he plucked up his courage and asked
General Bullmoose, “Sir, what answer do you want?”
So when the American President asked the Fed chairman for finan-
cial advice, such as what to do about the current subprime mortgage
loans crisis, he can do no better than to heed Keynes’ swipe that even
the greatest of statesman may find himself the slave of some defunct
philosopher. Or worse, the quick wit of the young economist, “Sir,
what answer do you want?” The nimbleness of mind of the economist
combined with the structured logic of the engineer will, I believe, give
one better odds for success in business.
19
On Thinking in an Enlightened
Society
Speech at the Welcome Tea of Academy of Principals,
January 22, 2009
F our years ago (October 26, 2004), I was privileged to deliver the
Inaugural Alumni Lecture of the Faculty of Arts and Social Sci-
ences at the National University of Singapore. Today, I am delighted to
speak to the Singapore Academy of Principals. Then, I spoke on “Edu-
cation and Growth.” Today, I shall speak on thinking in an enlightened
society.
In my 2004 speech, I said there were three imperatives in education:
economic, cultural, and political. Education has to serve society’s
economic, cultural, and political needs. In the first forty years of
Singapore’s nationhood, from 1960 to 2000, the overriding imperative
was economic growth.
Faced with a young and rapidly growing population, our schools,
polytechnics, and universities were geared to teach literacy in English
and in our respective mother tongues, and to teach science and tech-
nology. The arts, music, history, and geography were derided as soft
options. This single-minded pursuit of the hard sciences enabled us to
rapidly develop into a knowledge-based economy, undergirding the
growth of our manufacturing, logistics, transportation, banking, and
financial industries.
As global economic competition intensifies, hard science alone

will not suffice for us to stay ahead. Soft knowledge, the obverse of
hard, is equally critical. At the risk of being completely off tangent,
I now postulate that whether a society excels in hard or soft knowledge
depends on whether its people are better at deductive or inductive
reasoning.
In my philosophy course at university, I learnt that there are two
ways of reasoning, namely deductive and inductive. Deductive reason-
ing is thinking from the general to the particular, from the outside
in. Inductive reasoning is thinking from the particular to the general,
from the inside out. Hence, we now speak of thinking in the box and
outside the box.
As an approximation, we can say that deductive reasoning is
thinking inside the box, within the parameters of a given theorem.
Inductive reasoning is thinking outside the box, from the known to
the unknown. There is a flash of enlightenment when deductive and
inductive reasoning converge.
Archimedes discovered the law of buoyancy when he was taking
a bath. He noticed that when he placed his legs into the water, it
spilled over the edge. I found the caricature of Archimedes exclaim-
ing “Eureka! I have found it!” hilarious. What did he find? According
to Archimedes’ principle, “Any object wholly or partly immersed in
a fluid is buoyed up by a force equal to the weight of the fluid dis-
placed by the object.” Archimedes’ principle explains why ships float
in water.
Though we all reason deductively and inductively, some of us are
more creative than others. There are more Nobel Prize winners of
Jewish descent than other races. Is it because they are better at induc-
tive reasoning, thinking from the particular to the general, from the
inside out?
I am told that when a Jewish boy returns home from school each day,
his mother asks, “Son, how many questions did you ask your teacher
today?” In contrast, a Chinese mother asks, “Son, what did you learn
from your teacher today?” The difference in approach is cultural. In
the Bible, Moses and the other prophets plead and argue with God. On
the other hand, candidates in the Chinese imperial examinations are
required to quote the Analects of Confucius as precedents.
As you know, I was the first chairman of the Surbana Corpora-
tion. Surbana was spun out of the Housing and Development Board’s
evelopment Division. HDB architects were scoffed at by their private

D
sector contemporaries as dull and unimaginative.
When I led them out of HDB to Surbana, I told them that, as I am
not an architect, I can make no useful comment on the design of flats
or the layout of estates. All that I required of them was to win enough
fees to pay our wages. To my utter surprise, the architects, previously
derided by their peers, began to win lucrative design commissions not
only in Singapore, but even more gratifying, abroad in the Middle East,
India, and China.
How did this happen? Essentially, they were given the freedom
to think in their knowledge domain. There were no institutional
constraints.
In public administration, I found that the best ideas emerge in free
ranging discussions with my younger colleagues over lunch in hawk-
er centers.1 Outside the formal office structure, we were intellectual
equals. I told my younger colleagues that when they know more about
a subject than I do, they are my teachers. When I know more than
they do, they are my students. A learning society is one where all are
both teachers and students. We learn from one another. It is a mutually
reinforcing, two-way process. It is more than interactive.
Two great ideas were born during lunch.
The first idea came from Dr. Tan Wee Kiat, then CEO of Nation-
al Parks Board. He told me, his permanent secretary, that Singapore
should not be conceived as just a garden city, or a city with parks and
gardens. Rather we should see Singapore as a city within a garden.
How do we achieve this totally different perspective?
Dr. Tan proposed that we connect our parks one to another, to make
the whole island one vast nature reserve. The parks will be linked by
jogging tracks, hiking trails, underpasses, and tree-top bridges from
where we can view the majesty of nature. This vision is slowly but
surely being realized to make Singapore a city within a park.
Similarly, Mr. Lim Hng Khiang, my deputy secretary in the Ministry
of National Development, suggested that, instead of micro planning
the streetscape block by block, we should create development guide
plans for the six or eight geographical regions of Singapore. We should
canvass ideas from town planners, architects, nature lovers, citizens,
1
Hawker centers are large groupings of informal food stalls (many are open-air)
in Singapore. They are popular eating places.
and property developers. Property developers are risk takers, people

who put their money where their mouth is.
Singaporeans are good at deductive reasoning, thinking within
the box. Our students score highly in what I would call set-piece
examinations. We make competent professionals and managers. But
very few of us are creative or entrepreneurial.
I had suggested to the National University of Singapore that we ask
external examiners to set two out of ten examination questions from
topics outside the core syllabus to identify the brilliant from the merely
competent. We need to differentiate the firsts from the upper twos.
They told me that I had misunderstood the external examiner system.
In fact, our own professors set all the questions. The external examiner
marks the questions set by us. He is there to assure that our students
are up to the mark in competence. They do not test originality.
When I was chairman of DBS Bank, I attended a business award
ceremony. Besides the entrepreneur who was being honored, there
were the rest of us, bankers, accountants, lawyers, PR image advisors,
journalists—all vying to provide professional services to one award
winner.
I went home depressed. Over the years I have thought about this
gulf between competence and creativity. We are managerial but not
entrepreneurial. I have come to the conclusion that we have taught
our young to think. But only within the box. Singaporeans excel in
deductive thinking.
As a society, we need to foster and cultivate inductive reasoning,
thinking outside the box. But this is easier said than done. The prob-
lem is not lack of intelligence. The greatest impediment is cultural. As
an Asian society, we tend to be paternalistic. Father knows best. The
teacher knows best. The government knows best.
Dr. Goh Keng Swee told me that my duty as a permanent secretary
was to raise the competence of the ministry to the next higher plateau.
And then he added wryly “When you yourself plateau, you should
leave.”
Dr. Goh’s acerbic comment set me thinking. What is the greatest
contribution a CEO can make? I came to the startling conclusion that
the most valuable contribution a CEO can make for his company is to
know when to quit.
History is replete with great leaders who did not know when to
quit. Mao Zedong, the founding father of modern China, is a classic
e xample. When the Singapore delegation paid a courtesy call on him

at his residence in Beijing in 1976, we felt sorry for the infirm old man
who had to be propped up by his nurses to shake hands with our prime
minister. I personally wondered what his state of mind was when he
launched the Cultural Revolution barely a decade earlier.
By all accounts, the Cultural Revolution almost destroyed China.
An old cadre told me the greatest loss was the loss of a whole genera-
tion of students. Fortunately for China, his successor Deng Xiaoping
was of a different temperament. His great contribution was to shield
his younger colleagues from the pervasive power exercised by veterans
of the Long March, known in Chinese politics as the Eight Immortals.
He allowed them freedom to think, to seek truth from facts.
The Chinese Communist Party learnt from the Cultural Revolution
that no leader should be a leader for life. They have now instituted a
system of succession where the head of state, the president, and the
head of government, the premier, will serve no more than two five-
year terms. Transition of power from Jiang Zemin and Zhu Rongji to
Hu Jintao and Wen Jiabao was achieved without the bruising struggle
of a Cultural Revolution.
Whether you are a parent, CEO, or the prime minister, letting go
is the most difficult decision you are ever going to make. I will quote
Lord Nelson, the admiral of the fleet who defeated the French Navy
in the famous Battle of Waterloo. He said, “When I leave command of
the fleet, I will not look back over my shoulders nor will I spit on the
deck.” I wonder how many of us can sincerely say that when we vacate
office.
Yet, if we fail to do so, we would be leaving behind a structure that
will not survive us. In my opinion, a control freak is the worst type of
CEO an organization can saddle itself with. Because he is insecure, he
works himself into a frenzy delving in minutiae, missing the wood for
the trees. What is even more insidious is that he makes sure no subor-
dinate can surpass him. Because his glass ceiling is low, the organiza-
tion can never grow. He abuses the weaknesses of his management to
divide and rule rather than leverage on their strengths.
Were I an investment analyst, I’d spend time assessing the
temperament and character of the CEO before looking at the business
numbers. About fifteen years ago, the East Asian Institute of NUS pub-
lished a study on how the Chinese Communist Party identifies, tests,
and selects the 300 cadres who govern China.
A CCP cadre begins his career at the grassroots village level. His
direct supervisor rates his work performance. His character is assessed
by someone from the central personnel department who canvasses
opinion incognito from the grassroots. Character flaws are identified
early. Even then, some do slip through.
No human system is perfect. Nevertheless, we can say that the lead-
ership that finally emerges at the Politburo level of the CCP is honest
and able. Without selfless leadership, China could not have made the
progress it has in the last four decades. Deng Xiaoping was truly a self-
less leader.
I will end this evening with this thought. As I said in an earlier
speech, the greatest gift that teachers and mentors can give their stu-
dents is the gift of freedom to think. Do not constrain their minds
nor constrict their hearts. Remember that we are students and teach-
ers at the same time. Asking questions is harder than giving answers.
When we think within the box, we demonstrate competence. When
we think outside the box, we explore the unknown. It requires cour-
age to do so.
I prefer Singapore to be an Athens rather than a Sparta. Freedom to
speak, freedom to act, freedom of association—all are subsets of the
freedom to think, which is the most precious freedom of all.
To me, the story of Adam and Eve is about the freedom to think.
Though God warned Adam and Eve against eating the fruits of the tree
of knowledge, he did not forbid them.
When they did, they found themselves naked, and hid from God.
They were ashamed. They endured a lifetime of suffering. They were
accountable for their own actions. Accountability is the other side of
the coin of freedom.
It is better to think than not to think at all. The state that allows free-
dom to think is more likely to prosper than a state that curbs freedom.
In my view, the greatest tyranny is the tyranny of the mind.
I will end this talk with a question: Why is teaching considered a
noble profession? In my view, a great teacher is selfless. He gives all of
himself to his pupils. He is glad when his innocent, mischievous young
charges grow up to be outstanding young men and women. Your stu-
dents’ achievements may surpass yours. But their success is your
success because you assisted them to open their minds.
20
Of Government, Innovation, and
the Social Sector: An Interview
with Ngiam Tong Dow
Published in Social Space, January 12, 20091
A t a time when newly independent and resource-shy Singapore was

bludgeoned with unemployment and homelessness, the pioneer
public service team turned the situation around within a span of ten
years. Veteran civil servant Ngiam Tong Dow (hereinafter referred to
as NTD) shares his insights from the days of coming nose to nose with
social breakdown—a time when creative resourcefulness was the only
option. Retired and with the benefit of hindsight, he shares with Social
Space (SS) his thoughts on innovation and government and the way
forward for the social sector.
SS: Would you consider the Singapore government a creative one?
NTD: I have seen creativity in government. I can give you two examples.
Decades ago, Dr. Goh Keng Swee faced the challenge of raising reve-
nue. How did the man do it? He decided to put a tax on public utilities.
It was brilliant. These were services that people could not do without,
Reprinted with permission.

1
yet the tax was small enough for people not to feel the pinch. It was in-
novative revenue generation, and it continues to this day.
Another example is the Certificate of Entitlement.2 This was then
Prime Minister Lee Kuan Yew’s idea. It is quite a feat to create money out
of nothing. It is only a piece of paper, but the revenues are substantial. At
the same time, we solve the problem of the number of cars on the road.
So the government can be very innovative when faced with challenges.
On the social front, the idea of partnering with the private sector to
run child care centers is an example of social innovation, indeed social
entrepreneurship. There was a pressing need to provide affordable child
care centers for working parents. The finance ministry was expected to
provide the resources to make this happen. But the government simply
could not set up and run more than a few child care centers on its own.
We had to be innovative. We realized that we didn’t have to do it all by
ourselves. If we involved the private sector, there would be many takers
for the subsidies we were providing to set up private child care centers.
Program subsidy is not a dirty word; it can create the multiplier effect
that a social initiative needs. We were creative about the whole process
and were not limited to regulatory constraints. We worked our way
around the limitations to achieve the desired outcome.
At the end of the day, the government should be honest, identify a
problem, and explore the best way to make a solution work. It should
not try to do everything by itself, when either the private sector or the
civil sector can help to do it. Nowadays, I see a trend of government of-
ficials depending excessively on external “consultants” whenever they
face an issue. I am sure it’s not wise to excessively outsource this task
to consultants. Innovation has always been in our government, and
government officials should continue to innovate. I hope this ability
won’t be lost over time.
2
The Certificate of Entitlement (COE), introduced by the Singapore govern-
ment in May 1990, is a program designed to limit car ownership, and hence, the
number of vehicles on the country’s roads. This system, in effect, requires resi-
dents of Singapore to bid for the right to buy a motor vehicle, with the number
of certificates deliberately restricted. The COE allows holders to own a car for a
period of ten years, after which they must either scrap or export their car with
financial incentives, or bid for another COE at the prevailing rate if they wish to
continue using their car for a further five or ten years. See http://en.wikipedia.
org/wiki/Certificate_of_Entitlement (accessed on August 12, 2010).
Of Government, Innovation, and the Social Sector 139
SS: Do you foresee this creative spirit continuing to exist, especially

so in uncertain social circumstances, where roots of the problems are
multiple and interconnected?
NTD: Yes, as long as the leadership realizes that where the current is
swift, it is wise to use the spontaneity that exists in society rather than
attempt to do everything itself, or over-regulate what other people are
doing. The government should identify needs in society and facilitate
the emergence of solutions from many sources.
SS: Are you referring to the spontaneity in civil society?
NTD: The social sector is spontaneous and flexible. When the social
sector does what it does well, the state should not interfere. Of course,
there should not be fraud, but beyond that, the sector should be left
alone.
Let me illustrate with an example. In the past, a Tiong Bahru cof-
fee shop used to be abuzz with singing birds in cages, brought there
by their owners, old men who came for their morning coffee. It was
a nice, lively scene. In 1997, the Singapore Tourist Promotion Board
and Tiong Bahru residents wrote to the town council about the space
looking crowded and run down. In response, well-meaning members
of parliament came in, built structures, and renovated the area under
a S$60,000 spruce-up plan. After this major redevelopment of the area
in 2002, you know what happened? The old men stopped going there
because the atmosphere just wasn’t the same anymore. The slick new
surroundings and the new structure built for men to hang the bird
cages just did not resonate with them. My point is, when something
spontaneous is doing well, leave it alone and don’t interfere, even with
good intentions.
SS: You are saying we need less management and more “chaos” for
innovation to happen?
NTD: The social sector is in a unique position to embrace chaos. The
only thing they should not commit is fraud. If I have one message for
the government, it is this: Do not take that spontaneity away. The so-
cial sector is by nature a chaotic sector, but it can be harnessed. Over-
regulation need not be the modus operandi. In line with their role, the
government tends to sanitize, organize, and streamline sector activities.
Each ministry regulates according to their key performance indicators.
I can share with you an example during my time in the Ministry

of Finance (MOF). It was decided by the Land Office, now Singapore
Land Authority, that the price of state land be pegged at its potential
market value and that charities occupying public buildings should be
paying the market rate in rent. Why should this be so when the govern-
ment is in a position to facilitate the good work done by the charities?
To get around this issue, the Ministry of Finance paid out subsidies
to the Ministry of Community Development and Sports, which were
then returned to MOF as rental revenue—out of one pocket and back
into another. It was, in effect, a bookkeeping exercise used to work
around the rigidity of the system.
Recently, I got to know some of the charities that now need to pay
market-rate rentals for public buildings. They should not be spending
time and resources just raising funds to pay rent to the Singapore Land
Authority. Yet, because of this unflinching principle that one cannot
subsidize land use, charities are distracted from their true mission—
assisting and caring for the poor and disadvantaged.
SS: But you can’t have your cake and eat it too. How can the govern-
ment provide support and still let civil society do things its way with-
out regulation? Surely with government support comes the obligation
to allow the government some control?
NTD: And this is where I am reminded of my late mentor, Mr. Hon
Sui Sen. I learnt a lot from him. Back then, I was an overzealous civil
servant, scrutinizing numbers and questioning programs. Mr. Hon’s
advice to me was simple, “Please leave well enough alone.” When
something is working well, don’t muck around with it. When a clock is
ticking, don’t dismantle it and see if you can make it tick better.
SS: It has been quoted of a senior civil servant who once said: “What
the government does not choose to support and fund, nobody in soci-
ety should even be doing.” Do you agree with this sentiment?
NTD: I totally disagree with this. I don’t know who might have said
this, but it sounds very defensive, as if the person were afraid of facing
the criticism that the government didn’t think of everything, and lo
and behold, someone else had a valuable idea. My advice for the social
sector is to take no notice of this. Even as a public officer, I would never
advocate this. If I as a public sector actor have not addressed an issue,
and another sector actor does it and does it well, I should jolly well
leave him to do it. I should neither discourage it nor come in with reg-
ulations to control something I didn’t even think of in the first place.
Let me share a story told to me by a friend in the hotel industry.
He was comparing Singapore and Hong Kong in their approach to
town planning. When we look at the political-legal context of these
two, there is little difference—both ride on a legacy of British laws and
regulations. Yet there is a difference in approach. In Hong Kong, when
the government has a land use plan and has an idea of what building
it wants in a space, if a developer says he has a different proposal, the
civil servants will say, let’s sit down and talk. Let’s see how we can make
this work for both of us. In Singapore, the answer would be a simple
“no.” In analogical terms, when the plan is a circle and you want to
implement a square, it is less work to turn down the proposal than
create a way to make it work. In Hong Kong, the regulator will seek to
“square the circle.” We should learn from these positive examples.
SS: So what is the ideal relationship between the government and civil
society?
NTD: The government facilitates and mobilizes the altruistic intentions
of people into action. Let me start with my own positioning of the so-
cial sector: First, the social sector should do what the government and
the private sector cannot do. The social sector is in a unique position
and it should find a niche that the government or private sector is not
addressing. Second, during the discussions called “The Next Lap” some
years ago, the late Dr. Tay Eng Soon wrote a paper on the social sec-
tor, and he mentioned the need for more than one helping hand. That
is how the concept of “many helping hands” arose. Third, the social
sector should help people at the point where they need help the most.
As the pro-chancellor of NUS, I am involved in the university’s An-
nual Giving Program, part of which funds bursaries for poor students.
In this capacity, I hear stories of students from poor families who go
to school without breakfast and without money for tuck shop food. I
am amazed that in contemporary times, this is still happening. Cases
of dysfunctional families do exist and they do not provide a good en-
vironment for the young to develop. We need to address this issue
as a pressing need for the future. Both the government and the civic
sector can do something about it. We can set up boarding schools for
these poor kids where dormitories, proper food, and supervision can
be provided for this, possibly, bottom 10 percent of the population.
Their future contribution to society will far outweigh the investment

we put into them.
While government revenue is available for this, we need people with
the empathy and dedication to see it through. This is where volunteers
come in. Their time is far too valuable to spend on fund raising alone.
Of course, altruism can be expressed through sharing some of our
wealth with the poor. In this area of need, I suggest that a charitable
mission set up dormitories for children from dysfunctional families
with full funding support from the government.
SS: Can’t the social sector do it on its own, including not depending on
government money?
NTD: Yes it can, but the volunteer’s time should not be spent solely
on raising funds. The state can and should help. I refer back to the
example of the Ministry of Finance and the Ministry of Social Affairs
during my time when there was a need for child care. The government
invited the private sector to partner with the Ministry of Community
Development and Sports, and it has worked. The government can and
should use funding in an intelligent way.
SS: Thus far, we have seen government innovation being motivated
by the need to survive and by sheer economic pragmatism. Could the
government have unwittingly imparted a sense of calculation in the
social sector and in turn muted the heart element that is so necessary
in social innovation?
NTD: I am particularly concerned about finding this balance between
the head and the heart. I recall Deputy Prime Minister S. Rajaratnam
saying, “Singaporeans know the price of everything and the value of
nothing.” It rings true today. But I must say that doing things from the
heart does not mean merely giving money to charity. I firmly believe
in the wise saying, “Give a man a fish and you feed him for a day. Give
him a fishing rod and you feed him for life.” I particularly recall a time
when I was walking around the streets of Bangkok with Dr. Goh Keng
Swee. I saw a beggar by the roadside and wanted to give him a coin,
but the minister stopped me. “Why not?” I asked. Dr. Goh told me
that the beggar should have thought more about the choices he’d made
that led to his current predicament. If the outcome of my giving was
to encourage more begging, then I would have to rethink my notion
of compassion.
Coming from this reasoned understanding of compassion, I am

still concerned about our perceived philosophy of heartless hard-
headedness and its effect on our citizens. The decision-making prin-
ciple of whether it is economic or uneconomic to help does not sit
comfortably with me. Take, for instance, the issue of kidney dialysis—
why can’t we have government funds to support the running of dialysis
centers? The government said that because kidney failure is a terminal
disease, except in a few cases where it is a bridge to kidney transplant,
there was no prospect of patients ever becoming fully active again, so
we shouldn’t have to pay for their dialysis. Have we become so rational
and efficient that we have lost our humanity?
Another example is the F1 race. I expressed my disagreement that
we should spend so many millions on what is essentially a sports event,
when at the same time, we are so parsimonious when it comes to giv-
ing a higher living allowance to the destitute. The minister in charge
was angry with me for saying this. To be fair, I think his rationale is
that we mustn’t encourage a dependency syndrome. While economic
prudence is definitely needed in government budget management, I
am concerned about the sense of proportion in meting out this harsh
economic rationale.
SS: Any last observations to share?
NTD: The solution to a social problem can come from various sources.
It need not start from any particular sector or individual. The most
important thing is initiative, honesty, and a sense of ownership over
the issue. When and where this happens, it is best for our government
to facilitate and support these efforts to allow them to achieve their
full potential. As our country develops and more of our young become
highly educated, my wish is for the leadership to stay grounded and be
in touch with our roots.
21
Individual Rights and Public
Interest in Development:
Singapore’s Experience
Speech to the Law Academy, January 31, 2007
I am privileged this afternoon to address a learned gathering of young

lawyers. Some of the not so young in the pre-1965 generation may
have heard me before, expounding on the differences in mindsets
between the engineer, the accountant, and the economist.
The story goes that General Bullmoose of Li’l Abner cartoon fame
was looking for a bright young man to be his aide-de-camp. Three
young men were selected by the HR department for interviews by the
man himself. The first was an engineer, the second an accountant, and
the third an economist. The crusty old man interviewed the engineer
first. He asked the young man standing in front of him what 1 and 1
adds up to. It was a breeze for the quantitative engineer. Without hesi-
tation, he answered “2.” The old man cleared his throat and called for
the accountant. Asked the same question, the young man replied: “Sir,
it looks like 11 to me.” The old man was impressed with his creativity.
His secretary, however, rushed in to announce the third candidate,
the economist. When the old man asked him what 1 + 1 was, the econ-
omist, unlike the two professionals before him, instead addressed the
old man: “Sir, what answer do you want?” He would have gotten the
job, but for the reserve candidate, a young lawyer—whose advice was
client confidential.
Besides economics, I also studied philosophy as an undergraduate
in university. There is a Greek school of philosophy called the Soph-
ists. The distinguishing mark of the Sophists is that, for a fee, they will
argue that black is white, or white is black, depending on which side
they were arguing for. The two derivatives of the word are sophisti-
cated flattering for your ego; and sophistry, with a less than shining
connotation.
I don’t know whether your professors at law school have told you
the origins of your profession. You can choose to follow either path or
mix and match. Needless to say, General Bullmoose of the Li’l Abner
cartoon strip chose the young lawyer as his assistant district attorney.
The disappointed young economist had his saving grace. Not pro-
fessionally trained, he was nonetheless blessed with a flexible frame
of mind. Remember that he asked General Bullmoose, “Sir, what an-
swer do you want?” This young man joined the Singapore Admin-
istrative Service, where there are no black or white answers to any
problem.
In my forty years of service, I conclude that what works is what
counts. The embedded rhetorical question is, works for whom? And,
counts for whom? Looking back, one of the most satisfying pieces of
work I did for Dr. Goh Keng Swee, my first minister of finance, was
helping to draft the cabinet paper setting out the economic and social
rationale for the introduction of the Land Acquisition Act.
The case study that follows is the essence of my talk today. I will dis-
cuss the issue of individual rights and public interest.
The Wall Street Journal (Asia) carried this headline on page 2 of its
November 10–12, 2006 edition: “In China, land seizures fuel unrest
in rural areas.” Hundreds of enraged farmers in Guangdong Prov-
ince’s Sanzhou village surrounded a granary during its inauguration
ceremony, and for almost twenty-four hours refused to allow the de-
parture of dozens of officials and investors trapped inside the build-
ing. Riot police had to force their way into the granary to rescue the
hostages.
Many of the farmers remained outside, complaining that the granary
had been built on seized farmland for which they received inadequate
compensation. Villagers said the granary was built with money invested
by local businessmen and overseas Chinese.
Individual Rights and Public Interest in Development 147
The farmers complained that the money paid by the investors for
the land was significantly higher than the compensation paid to them.
They alleged that corrupt local officials pocketed at least part of the
difference. Local officials have often used profits on such transactions
to bolster village, county, and township budgets, a practice denounced
by Premier Wen Jiabao.
I will now dissect this Chinese episode from the viewpoint of a
Singapore administrator. At the outset, I would state that, in principle,
the larger interest of the community must take precedence over the
rights of the individual. As lawyers, you may be aghast at such a stand.
Though it is said that a man’s home is his castle, his right to privacy,
though sacrosanct, is not sacred.
If property rights are absolute, then Housing and Development
Board (HDB) towns could not have been built to house 85 percent of
our population. The modern gleaming city of Singapore that we now
call home would have remained a stagnant city of slums and swamps.
The Land Acquisition Act is the legal bedrock for the acquisition of
private land for development of public infrastructure. The core principle
of the act is that private land can only be acquired for a clear public pur-
pose. In the Singapore context, private land is compulsorily acquired for
infrastructure, such as roads and expressways, low-cost HDB housing,
the Jurong industrial estate, schools, hospitals, and public parks.
The process is open and transparent. The minister of law has to
satisfy himself that requests for compulsory acquisition by executive
ministries, such as the Ministry of National Development, are indeed
for a public purpose. He has to state clearly in the draft cabinet memo-
randum that the proposed acquisition is for a stated public purpose.
The cabinet secretary will not submit any proposal for compulso-
ry acquisition without the support of the law minister. No Singapore
cabinet would have approved the acquisition of the granary in
the press report I cited above. The reason is that a granary built by
private investors is clearly for commercial gain and not for a public
purpose, as is commonly understood.
The Land Acquisition Act is a very powerful tool, and in the wrong
hands, it can be easily abused. Acquisition can easily degenerate into
expropriation, where corrupt officials in the name of the state turf out
peasants with little or no compensation and resell the land to hun-
gry developers for a huge premium, pocketing, as alleged in the press
report, the difference for themselves.
Indeed, when Mao Zedong and his “eight immortals” drove the
corrupt and effete Kuomintang out of mainland China to Taiwan in 1949,
the ideologues in the Chinese Communist Party immediately set about
collectivizing the whole of China into communes. They expropriated
all private land and property. All land belongs to the state.
Leases of up to 60 or 70 years are now given to developers for the
use of the land, not dissimilar to leasehold land in Singapore. Private
possession of land in perpetuity, that is, freehold land, is in fact the
exception rather than the rule in most societies. In Singapore, state
land is leased up to a maximum of 99 years. When we started our in-
dustrialization program in 1960, we leased out industrial land only on
30 + 30-year leases. The extension of the second 30 years depends on
EDB’s evaluation of the economic value added by the particular manu-
facturing industry.
This is to prevent speculation in industrial land, which is a scarce
commodity. The intention is that the use of the land should be opti-
mized. The number and skill level of manufacturing jobs created was
the criterion for extending the lease for the subsequent 30 years.
Landlords who wish to change the use of the land from manufactur-
ing to residential or commercial uses have to pay development charg-
es. In this way, public revenue benefits from the general appreciation
of land in Singapore.
Land that is acquired by the state has to be paid for from public
revenue. When the Singapore government acquires private land for
public purposes, it pays compensation to the landlord. Land is priced
at its market value in its original undeveloped state.
The chief valuer does not take into account the potential commer-
cial value of the land. The economic rationale is that it is the state that
builds the infrastructure, such as roads, utilities, sewerage, and rail
transit systems. The community pays for public infrastructure out of
tax revenue. Hence, any increase in value of the land from public in-
vestment should rightly accrue to the state. The individual landlord is
entitled to the value of the raw land, not the incremental value created
by public investments.
However, the price of undeveloped land is reviewed once every five
years. I am glad to say that the large landlords in Singapore accepted
the economic rationale of land acquisition. They appreciate that it is in
their larger long-term interest for the government to invest in public
housing and infrastructure. As Singapore grows economically, all land
in Singapore appreciates in value, sustaining the value of homes and

offices, including their own.
A more difficult problem in land administration is the resettlement
of tenants and squatters. They do not own the land. They may be farm-
ing on short tenancies of one to three years. They are on temporary
occupation licenses, without security of tenure. However, it would be
foolhardy for any democratically-elected government to simply throw
these people out on to the streets.
The Singapore government pays what is called ex-gratia compensa-
tion. Unlike the landlord, the squatter is not entitled to any legal com-
pensation. The state, out of the goodness of its heart, compensates on
the basis of fixed assets, such as his hut, pig-pens, fruit trees, and other
immovables.
The farmer is also offered priority in the allocation of rental or pur-
chase flats by the HDB. Sometimes, the government offers taxi licens-
es, or market stalls, so that the displaced farmer and his family can
find alternative means of livelihood. It is a source of great satisfaction
that some of the more enterprising families became successful orchid
growers and breeders of ornamental fish for export.
By being fair in giving resettled families housing and a little capital
to start new small businesses, new towns, expressways, and other pub-
lic infrastructure have been built for the good of the larger community
without public discontent.
Patience and persuasion work better than police batons. Singapore’s
experience in resettlement may be useful for China to achieve what
President Hu Jintao called “harmonious development.”
The Business Times (November 28, 2006) ran this article with the
headline: “The economic fallacy of the invisible hand.” The article is
a review of Duncan K. Foley’s recent book, Adam’s Fallacy: A Guide
to Economic Theology. According to the reviewer, Peter Steinfels, the
book is simultaneously an introduction to economic theory and a
critique of it. According to the reviewer, Foley’s contention is that,
all along, economists have been writing theology. Historically, eco-
nomics has not only shed light on how a capitalist system works. It
has suggested what attitudes people should take about those work-
ings and about the moral conflicts accompanying them. Foley asserts
that, above all, these are discussions of faith and belief, not of fact,
and hence are theological. Economics serves a theological role in our
society, even today.
To me, having cut my milk teeth in Economics 101 on The Wealth

of Nations by Adam Smith, such an editorial statement amounts al-
most to heresy. The Wealth of Nations, written in a dry, turgid style,
laid the foundation of modern economic theory. Economics’ founding
father Adam Smith had a theory that “the pursuit of self-interest will
be led by the market’s invisible hand to a socially beneficial outcome.”
When everyman pursues his own interest, profits are maximized, and
the wealth of the nation grows. The French call this approach laissez
faire.
Yet when we think more deeply about it, the first part of his statement
that “everyman pursues his own best interest” is a statement of belief,
not fact. Foley is right in this sense that economics plays a theological
role. The Nobel laureate Milton Friedman, in answer to a question at
the Singapore Lecture in 1992, said that in economic theory, the free-
dom to choose is an absolute right. When pressed, Friedman affirmed
that this absolute right to choose includes the right to consume drugs.
Without free choice, markets will not function efficiently as individu-
als are unable to pursue their own best interest. Purist economists are
therefore against any form of state intervention in the functioning of
the economy.
As a former practicing administrator, I think the second part of the
equation is just as important. The question to ask is: Does freedom
for the individual to pursue his own best interest lead to a social-
ly beneficial outcome? If not, the invisible hand, the article of faith
of classical and neoclassical economists, will have led us down the
wrong path.
It took another great economist, John Maynard Keynes, some two
centuries later, to balance the scale. During the Great Depression of
the 1930s, Keynes observed that real assets, machinery, and factories
lay idle, while hundreds of thousands of people remained unemployed.
People were not buying anything, not because they were poor. In fact,
they were rich with substantial savings. The government, like the peo-
ple, eschewed spending. The government and the people chose to not
spend. Were they right?
Keynes argued that to get the wheels of the economy turning again,
the state should intervene by spending on public works. Wages paid to
workers would stimulate consumer demand, and the rest of the econ-
omy would roar back to life again. Soon the Great Depression reached
its nadir. By the late 1930s, war clouds appeared with the incipient
nset of the Second World War. Deficit budgeting to pay for defense
o
saw inflation rear its ugly head once again.
Most of us who studied economics as undergraduates are inclined
toward belief in the efficacy of free markets. Adam Smith’s invisible
hand has a compelling logic. The belief that when every individual
pursues his best self-interest, he helps to advance the interest of soci-
ety as a whole, can be understood instinctively. Does this mean that an
individual has an unfettered right to choose his own course of action
without regard for the possible harm he can inflict on society? Nobel
laureate Milton Friedman argues that, in the absolute, an individual
can choose to indulge in addictive drugs without regard for the harm
that he inflicts on himself, and on society. Should the state intervene
to stop him?
My own belief is that the state can and should intervene in the
working of the marketplace when it is manifestly clear that public in-
terest will be better served. The Land Acquisition Act enables the gov-
ernment to acquire huge tracts of private land for the construction of
low-cost, affordable housing. The modern HDB new towns could not
have been built without state intervention. Individual rights were vio-
lated, but not trampled upon. Compensation for land was paid, but not
at its full commercial potential.
Were mistakes made? Yes, but they paled into insignificance
compared to the larger national achievement of building a modern
metropolis. When the MRT system was being built, the government
adopted a policy of acquiring all private land and properties within a
certain radius so that small lots could be consolidated and tendered
publicly for comprehensive redevelopment.
The intention was benign, but did such acquisitions pass the test
of manifestly being in the public interest? Could the free markets in-
stead have been used to achieve comprehensive redevelopment with-
out state intervention? If the argument was to cream off the potential
value of infrastructural investments by the state, the device of impos-
ing development charges was already available.
Private capital and expertise could have been used to develop such
strategic sites to reap better economic value for the community. Instead,
the Singapore Land Authority (SLA) was thrust into the unfamiliar
role of developer. The redevelopment of Boat Quay by the private sec-
tor into a happening place contrasts sharply with the sterile atmos
phere of the SLA-renovated Chinatown shophouses. Of course, private
e nterprise is no guarantee of commercial success. The old Lau Pa Sat

redevelopment is an example of private sector failure.
The rules governing en bloc redevelopment sales of private property
is another innovative piece of legislation introduced in land-scarce
Singapore. Initially, the law required virtually every owner in an apart-
ment block to agree before a collective sale could proceed. There could
be one or two individual owners who, for very good reasons of their
own, are not willing to sell their properties. Should a minority of one
be allowed to stop all their neighbors from unlocking the value of their
aging condominiums in a buoyant market? At a higher level of calcula-
tion, should the economy miss out on the economic value added of a
public infrastructural investment such as the MRT?
As a Singapore citizen, I am glad to see that the invisible hand of
pricing has often worked its wonders. When en bloc redevelopment
succeeds, the public revenue benefits from development charges paid
for higher development intensity. The happy outcome is that both
individual and public interest are served.
In the economic domain, there is no need for conflict of interest
between the majority and the minority. Fair and transparent pricing
serves the interest of both parties. More often than not, win-win sit-
uations are achievable. This is, however, not true of matters of race,
language, and religion.
Singapore is a multiracial, multilingual, and multireligious society.
When we see racial and religious riots tear apart the fabric of societies
in older and larger countries, we acknowledge the wisdom of our gov-
ernment in introducing legislation very early in the day to establish a
Presidential Council for the Protection of Minority Rights. The coun-
cil, chaired by the chief justice, scrutinizes every parliamentary bill to
assure itself that there is no discrimination against any minority group,
before it recommends it to the president.
Parliament enacted the Religious Harmony Bill in 1990, following
the arrest of Marxist conspirators, to ensure that whatever our own
religious convictions are, we do not commit any act that may offend
the religious conviction of others. Majorities and minorities have to
respect one another’s religious beliefs. As race, language, and religion
are matters of the heart and emotion, I’m glad that our state has laid
down the ground rules for daily conduct. Political stability is the sine
qua non of development and growth. Without peace and harmony,
societies disintegrate.
John Maynard Keynes in the frontispiece to his great work warned

his readers that even the wisest of statesmen are often the slaves of
some defunct worldly philosopher. Worldly philosopher is the pre-
ferred term of economists to describe themselves. The best introduc-
tion to the dismal science is the book, The Wordly Philosophers by
Professor Heilbroner. His masterful storytelling of the thoughts of the
great economists from Adam Smith, Ricardo, and Malthus, to Marx,
Marshall, and Keynes will captivate and absorb the reader. I commend
this book to you. My lecture will soon be forgotten, while Heilbroner
will continue to ring in your ears.
My conclusion on this topic of individual rights is simply this. What’s
in the best public interest will ultimately have to prevail. Society will
have to decide what this is. Is this circular reasoning? It is not, provid-
ed that the state does not allow the majority to oppress the minority. In
a multiracial country such as Singapore, the burden of leadership must
fall on the majority.
22
HDB Should Also Build
Condos
Interview with Ms. Hong Yijing from Lianhe Zaobao,
September 23, 2007
T he Housing and Development Board (HDB) should abolish the

limit that only families with a monthly household income of less
than S$8,000 can buy new HDB flats, and instead, use their years of
experience and expertise to build luxurious flats.
Ngiam was chairman of HDB from 1998 to 2003. He thinks that the
initial aim of the HDB was to provide mass housing at the lowest pos-
sible cost so that everyone could have his or her own home. However,
he says, with the passing of time, the role of HDB should change.
The recently deceased former minister, Mr. Howe Yoon Chong, was
the first chairman of HDB. In the 1980s, he became a minister and
suggested, much to his colleagues’ astonishment, to close down HDB
and leave it to private developers to solve the housing problems of the
remaining 20 percent, since more than 80 percent of Singaporeans
have their own flats.
Ngiam agreed that the HDB has accomplished its initial mission.
But he thinks the HDB still has an important role to play. Besides pro-
viding cheap housing for the 10 percent of Singaporeans in the lowest
income group, HDB should utilize its wealth of experience and move
into the property market for mid- and high-price housing.
“HDB usually gets very good sites. Why can’t it build condos with
recreational facilities such as swimming pools? Why can’t it utilize to
the max, the value of the land?”
Mr. Lim Kim San had once commented that, after spending so much
money on reclaiming the land at Marine Parade, why were we so stu-
pid as to build normal HDB flats on it? In the 1960s, Dr. Goh Keng
Swee’s viewpoint was that a normal family has a household income of
only about S$400 a month. Therefore, the monthly rent could not be
more than S$40. Lim Kim San had argued with him then and asked,
“Isn’t that like asking me to build slums?”
“Property Tycoon Kwek Hong Png’s Secret

Is to Buy Land Surrounding that Bought
by the HDB”
Ngiam Tong Dow, in his new book,1 disclosed that the secret of the de-
ceased Mr. Kwek Hong Png, known as the Property Tycoon, who started
his business from a hardware store, was to “follow closely the HDB.”
Whenever the HDB bought land from the government to build
housing estates, Mr. Png would buy all the land in the surrounding
area. He knew that whenever the government bought a large piece of
suburban land, it meant there was less and less private land, making
it, therefore, more and more valuable. This is what the government of-
ficials failed to recognize.
When he was HDB chairman, Ngiam had wanted HDB to be rid of
“socialist thinking” and differentiate their product, but he met with
ideological obstacles. “The thinking then was, since it is public housing,
we must make sure everyone can afford it.”
To break through, Ngiam thinks a price should not be set, but rath-
er, be determined by market forces. He had commissioned projects to
external architects, but their designs ended up similar to those of HDB
architects, as all had to adhere closely to a budget.
Ngiam is currently the chairman of the construction consultant
company, Surbana Corporation, which originated from HDB. The
office that the reporter interviewed him in was coincidentally the same
office he had when he was HDB chairman.
1
Growing Pains of Economic Development: the Singapore Experience (in Chinese)
published by Cengage Learning in 2007.
“HDB Will Not Interfere with Private

Housing Prices”
Ngiam thinks that HDB has changed its direction. For example, now
under the Design, Build, and Sell scheme, private developers can bid
for government land in an open tender, design and build the flats di-
rectly, and sell at their own prices. HDB will not interfere with the
prices.
Looking at the private property market, he thinks that some
Singaporeans can afford more luxurious public housing and have such
demands. However, the key is to abolish the limit that only families
with monthly household incomes of less than S$8,000 can buy new
HDB flats. On the other hand, prices of luxurious flats should be com-
parable to the market price, and the government, to deter speculators,
should not subsidize such housing.
Singaporeans are smart. They know an ordinary durian costs only
three to five dollars, but to have Sultan durians, they need to pay more
than ten. If there is value for money, and the property will become
more valuable, they will still buy.
“Ministry of Finance ‘Stingy’ Is to Cater

to Different Needs at Different Times”
In his book, Ngiam Tong Dow said that the people in the Budget
Department in the Ministry of Finance (MOF) are often described as
“bean-counting misers.” But he doesn’t think he was a miserly permanent
secretary. Singapore, he said, has different needs in different time peri-
ods, so we had to count the beans to make sure everyone had a share.
The Esplanade was almost axed because its cost exceeded its budget.
The Ministry of Finance believed, at the time, that a concert hall was
secondary to and not as important as a hospital or a school.
However, in Ngiam’s eyes, George Yeo, the then Minister for Infor-
mation and the Arts, is “from the Renaissance time, a man who can
weave a dream with words.” In “an environment where people know
the price but not the value,” like Singapore, it is rare to find someone
like him. Therefore, the Ministry of Finance was very willing to con-
sider his a pplication for the budget.
However, Minister Yeo’s budget of S$600 million requested for
the Esplanade landed like a “bomb” on the MOF, for the Ministry of
I nformation and the Arts had never presented a budget application

that exceeded S$50 million.
After some calculations, the Ministry of Finance found that the
Esplanade would need operation costs of S$50 million per year, which
meant all seats must sell for S$300 each. From MOF’s point of view,
this reason alone was enough to close the case.
“When we informed the Ministry of Information and the Arts, they
were exceptionally quiet and we thought the case was closed, but we
were wrong.”
Minister George Yeo appealed to then Prime Minister Goh, who de-
cided to get funds from Singapore Pools. “The funds to build the Es-
planade were outside the budget. They came from future funds to the
Ministry of Finance. The MOF had no right to decide how these funds
should be used as they had not yet been generated. We were beaten by
a genius.”
Ngiam was in fact happy that the Ministry of Finance had been
defeated. He thinks that it is not that Singapore is unwilling to spend
money to develop the arts. Instead, due to different needs of different
eras, the funding was more concentrated in different areas. In the be-
ginning, for example, it was to create jobs. Then, in the 1970s, it was to
beef up defense capabilities.
Now that we are in the knowledge economy era, Singapore needs
to develop education, the humanities, and the arts as they not only
promote economic growth, but also can raise national consciousness.
“Civil Servants Splurge When Facing

Problems”
Ngiam criticized the civil servants, who now tend to just spend money
when facing problems. All they care about is getting money from the
government to solve the problem, but not to solve its root cause.
“Cannot identify with Singapore Tourism Board’s

sponsorship of F1”
“We should not look at the problems in an abstract way. Thinking is im-
portant, but so is acting. Last time, we had to do everything ourselves
so we learned very fast. Now, the civil servants can write very good
intellectual reports, but they have to get consultants to do the work.”
As for new business projects, Ngiam thinks that the government

can give tax-free incentives, but should not put money into them di-
rectly. When a business needs an influx of funds for it to even survive,
there’s a problem with the business model. Therefore, he cannot iden-
tify with the Singapore Tourism Board’s sponsorship of 60 percent of
the funds needed by F1. This is because the company organizing the
F1 Race, GP,2 is a private company, and F1 needs a budget of up to
S$150 m illion.
“Ministers becoming like CEOs”

In the past, the relationship between ministers and permanent secre-
taries were like that between the chairman and the CEO in a corpora-
tion. The minister set the direction of the policies and the permanent
secretary executed them. However, nowadays, ministers are becoming
more like CEOs.
“If ministers are CEOs, then what should the CEO do? Be the chief
operating officer? Of course, when the need arises, the ministers should
do the execution, but the main responsibility of the minister is to set
the policy and to convey the message behind the policy, and leave ad-
ministration to the executives.”
Mr. Ngiam Tong Dow was permanent secretary for twenty-nine years
and had worked with previous ministers, such as Dr. Goh Keng Swee
and Mr. Hon Sui Sen. He thanked them for teaching him about life.
He described Dr. Goh as a strict teacher and always used a green
marker to point out the mistakes of his subordinates. Once, he
even threw a pencil toward Ngiam in anger. Although feared by his
subordinates, they learnt much from Dr. Goh.
Ngiam remembered Mr. Hon Sui Sen as very even-tempered and
someone who remained silent even when he was angry. He never
lost his temper and corrected mistakes softly. He was also good at us-
ing talents and could distinguish the positive and negative traits of
2
The full name of GP is Singapore GP Pte. Ltd. It is the race promoter for the
Formula 1 SingTel Singapore Grand Prix and holds five-year renewable rights to
stage it, beginning with the 2008 season. The company is a partnership between
Komoco Motors and regional events company Lushington Entertainments, via
its parent company Reef Enterprises. See http://www.singaporegp.sg/about/
contact.php (accessed on August 10, 2010).
his subordinates. When he thought someone had the capability, he

would give him free rein to do the job.
These two ministers were much older than Mr. Ngiam, and he
respected them as his elders. However, these days, many ministers are
younger than the permanent secretaries and the relationship becomes
more complicated.
“Promotion system in ministries mechanical”

Ngiam also criticized the fact that the promotion system in the min-
istries is too mechanical. One can be a deputy secretary in five years
and a permanent secretary in ten. This is a passive, mechanical way
of grooming talents. Maybe it works in the army, but not in the other
ministries. We should not worry about having too many talents and
not knowing what to do with them. We should instead be focused on
finding needed talents.
He suggested having a team of permanent secretaries who each have
their own forte, to be consultants. Whenever a minister needs advice,
he could get it from a related specialist.
“The Central Provident Fund Structure

Should Be Revised Accordingly”
In the past, many workers worked their whole lives for one employ-
er, but since things are different now, so are the retirement funds of
Singaporeans, and the Central Provident Fund structure should be
changed accordingly.
Ngiam was the chairman of CPF Board from 1998 to 2001. He
pointed out that the CPF system originated from colonial times. The
British government started the Central Provident Fund to avoid pay-
ing pensions to the people. They created a system for the workers and
the employers to save for their own pensions.
Since it was long-term employment then, the CPF system adopted
the model of the employer and the employee each paying a certain
percentage, but the employment market has changed, so the CPF sys-
tem also presents a structural problem. “The Ministry of Manpower
should study the changes to the employment model. Nowadays, every-
one is his or her own boss, everyone is either a consultant or a contract
worker.”
“Allowing the Buying of Shares with

CPF Is Like ‘Sending the Sheep to the
Slaughterhouse’ ”
He implored the CPF Board to allow the people to put more money
into their CPF accounts while they are still young or working. In 2003,
the government lowered the maximum cap of monthly income valid
for CPF contribution from S$6,000 to S$4,500 to reduce the labor costs
for employers. This means that even when a person’s income exceeds
S$4,500, he only needs to contribute a percentage up to S$4,500.
However, for someone who is a consultant or contract worker, in-
come is not regular; therefore the amount of money in his CPF accounts
would be less too.
Ngiam also criticized the permission for using CPF funds to buy
shares, remarking that it is like “sending sheep to the slaughterhouse.”
It was a pity no one paid any attention to his objections then.
He recalled that the government had wanted to develop Singapore
as a finance center, so they needed to attract many investors. As a re-
sult, they allowed people to invest with their CPF money. However,
many lost all their money, as they were unfamiliar with the market.
CPF members know the risks but they took the gamble because CPF
rates were too low.
“As CPF chairman then, I had tried to persuade the minister of labor
to consult with the Ministry of Finance, to directly give 4 percent in-
terest to CPF members, the equivalent of long-term bonds, so they
need not worry about investing or buying unit trusts.3 All they had to
do was deposit their money in CPF and they could get interest similar
to that of long-term bonds.”
He deems CPF to be a long-term savings arrangement that people
placed under government management. If the investment can get
more than a 4 percent return, it is only natural to pass it along to the
people.
Therefore, though he thinks the current change in direction of the
CPF system is correct, especially the increase of interest rate for the
CPF funds, he also thinks more can be done. This is because, under
the new system, only the first S$20,000 in an ordinary account has
A unit trust is a form of collective investment constituted under a trust deed.

3
an interest rate of 3.5 percent, while the rest of the money still has a
2.5 percent interest rate.4
He also suggests that the government establish two or three long-
term bonds that have low management fees for CPF members to in-
vest in. One main reason members are unable to earn money, or incur
losses investing in shares or unit trusts, is the high management fee.
Ngiam also pointed out that to help the elderly people prepare for their
later years, people should be allowed to buy interest-free annuities when
they are young. Longevity insurance should allow members to withdraw
money on a yearly basis, right after retirement, and to not spend the
minimum sum, then draw the money out only when they reach 85.
To ensure that the insurance companies that provide longevity in-
surance do not close down before the people age, he suggested that the
government permit only local insurance companies to sell longevity
insurance.
“Not Knowing Chinese Is His Regret”

Although Mr. Ngiam cannot read and write in Chinese, he thinks he
has more “Chinese DNA” than the younger generation. He disclosed
that, had his father not passed away when he was nine, he would have
been sent to a Chinese school. His mother sent him to English schools
set up by the colonial government as they were less expensive. Not hav-
ing the chance to master his mother tongue has always been a regret.
He said that his generation missed the chance to study Chinese be-
cause of objective factors, but now the learning environment is dif-
ferent. Therefore, he’s been actively encouraging his grandchildren to
learn Chinese.
“Knowing Only English Is Like Having Only

One Eye”
“Lianhe Zaobao has a different way of presenting events and issues
from The Straits Times. If I knew Chinese, I would have access to
4
The CPF contributions of working Singaporeans go to three accounts: Or-
dinary (mainly for housing), Special (mainly for retirement), and Medisave
(mainly for hospitalization).
different viewpoints. I often tell my grandchildren, ‘Knowing only

English is like having only one eye’. ”
Ngiam is only a director with Singapore Press Holdings.5 He thinks
Zaobao should target readers who are thinkers and discuss more inter-
national issues and publish more intellectual content.
He tried learning Chinese three times but did not have the perse-
verance. Now, he often travels to China on business. He can handle
normal day-to-day conversations, but when interviewed by reporters,
he is embarrassed.
“I lack the will that Minister Mentor Lee had. To master Chinese,
you need to devote at least one hour to it every day. I lack this kind of
perseverance.”
“He Says His Chinese DNA Originates

from His Dialect”
Ngiam’s ancestry originates from Hainan. He thinks his Chinese DNA
originates from his dialect, and thinks it is a pity that the younger gen-
erations cannot speak the dialects.
Dialects have folk wisdom and multiple meanings. When translated
to English or Chinese, they lose their flavor. He always returns to a
salon in the Shangri-La Hotel as he feels an affinity with the Hainanese
barbers there.
He is also one of the founders of the Yelin Society, where profes-
sionals of the Hainan dialect group and those interested in its culture
gather. One of the rules of the society is for the first ten minutes of the
meeting to be conducted in Hainanese.
The society raises funds to buy books for Hainan University’s librar-
ies, and they sponsor the living expenses and education fees of needy
students from Hainan. While Mr. Ngiam feels an affinity with Hainan,
he is glad he grew up in Singapore.
“When my father passed away, my uncles wanted to send us back
to Hainan, but my mother thought we’d be better off in Singapore.
5
Singapore Press Holdings (SPH), incorporated in 1984, is Southeast Asia’s
leading media organization. It publishes seventeen newspapers in four languag-
es. SPH also has shares in broadcasting, advertising, and property. See http://
www.sph.com.sg (accessed August 10, 2010).
My siblings and I all benefited from the meritocracy system in Singa-

pore. One brother became a chemical engineer, one an associate pro-
fessor in pharmacology, and one is the previous head of Agri-Food and
Veterinary Authority. My sister was never schooled and is the mother
of three engineers.”
23
A Winning Formula, “But We
Overdid It”
Interview with Sunita Sue Leng, The Edge Singapore,
February 1, 2004
I
“ ’m not saying I’m right all the time. But neither am I wrong all the
time. I just want to raise the level of informed debate,” says Ngiam
Tong Dow.
Had he wanted to spark a debate, Ngiam’s speech to the Econom-
ic Society of Singapore on January 15 did just that. And if letters to
the newspapers and the follow-up commentaries are an indication, it
shows his views continue to generate debate among Singaporeans.
From as far away as India, where Deputy Prime Minister Lee Hsien
Loong was wrapping up a major business trip, the DPM responded
by saying, “He feels he has the latitude to express his views with less
restraint than he’s been accustomed to earlier, so good for him.”
The ex-civil servant jolted the city-state by taking to task every ma-
jor policy move over the last four decades—from land to transport,
taxes, monetary and fiscal policy, housing, education, immigration,
and the Central Provident Fund.
In an interview with The Edge Singapore last Monday, the genial
Ngiam spoke passionately, and in greater depth, on two issues closest
to his heart—population and education.
When we met, Ngiam had read the reactions to his speech. His ini-
tial response? “On the whole, the reactions have been quite good.” He
adds: “People should speak up. And serious debate should be done in
a reasoned manner.”
However, he stands firm by his suggestions that the CPF should be
cut to 30 percent and that it should be fixed at that rate for the long
term. The way he sees it, the CPF is a silver bullet adjustment to be
used in extreme situations. A fluctuating rate is bad for employers and
also for government entities and planners.
Still, he says he likes DPM Lee’s response in affirming that there
will be a range in CPF rates. “It is cordial and informed. Public debate
should be at that level,” he adds.
The Edge Singapore: “What are the burning policy

issues for you? And why?”
Ngiam: The most important issues for me are population and
education. Those are the basis for any country’s growth. In the 1960s,
Singapore had high unemployment. Every time we passed a school at
one o’clock, then Finance Minister Goh Keng Swee felt very depressed.
He said, “How am I going to find jobs for all these young people?” At
the time, our population growth rate was very high, about 4 percent.
So we i ntroduced family planning, which was very successful.
And, by the mid-1970s, we had reached full employment. But like
all bureaucracies, we continued to penalize the third birth. What we
didn’t recognize was that, as soon as women went to work, the birth
rate would fall naturally.
Is population size critical? The Scandinavian countries, for example,
have small populations and yet are very successful within the global
economy.
When I was a young officer, we did studies on optimal population
size. We looked at countries like Sweden, Norway, Switzerland, and
Israel. All those countries had about three, four, five million people. So
we thought that was the magical figure. But what we didn’t realize was
that it’s the quality of the population that matters. Yes, these countries
have small populations, but their education levels are very high.
So, when we talk about immigration in Singapore, we should not
go for the numbers game. We have to go for quality. When we allow
people into Singapore, we must make sure that the average level of
education is higher than our average. It must add to the quality of our
population, not just its numbers. That means a selective immigration
policy.
Today, knowledge is the great multiplier. Potential GDP is limited by
land, labor, and capital, but in today’s world, with knowledge you can
multiply the land, labor, and capital that you have. To do that, you need
to educate your people. Every Singaporean should be educated up to A
levels. Forty years ago, people didn’t even have primary education. It is
difficult to retrain them now.
“Some would say Singapore has achieved

a high level of education”
I don’t agree. I think we are too focused on producing scholars. We’re
very proud of our scholars, of course, but realistically, the country
cannot move forward unless we have a large base of well-educated
people. As a former president of Matsushita of Japan said to me, “it’s
better to have a high plateau of people with a high average level of
education than a few high peaks.” In Japan, the aim was to increase
the average level of education to senior high, which is equivalent to
our A levels.
“We produce lots of people with good grades but not

many creative or entrepreneurial types. Why is that?”
It’s the focus on and leftover baggage from imperial scholars. The for-
mer Public Service Commission chairman, Tan Teck Chwee, used to
say to me, if you want to be creative, you have to be immersed in one
discipline, whether it is math or music. You have to excel in that one
subject, to have a real foundation in one discipline. When you’re to-
tally immersed in that subject, you can be very creative. For example,
if you want to read philosophy, go ahead. But be very good in philoso-
phy. In fact, you would study logic in philosophy and if you’re good
at it, I think you will be good at writing software programs. Today, we
are swinging from what was a very formatted education system to one
that has more freedom. But my message to our educationists is, please
remember, content is also very important.
“You also feel strongly about the CPF”

The CPF started off its contributions at 3 percent plus 3 percent in
1955 and it was meant for old age. But along the way, the economy
grew and real income went up very fast. I would say we were too pa-
ternalistic as a government. We said to our people, instead of spending
on consumer products and holidays, why don’t you set aside more for
housing and your old age?
Unfortunately, we overdid the housing part. We allocated more
and more to housing. At one stage, our rate was 45 percent. That was
the peak. It was way too high. Housing could take as much as 25 to
30 percent. I say one should not spend more than 20 percent of income
on rent.
In the early years, Singapore was very poor. Dr. Goh Keng Swee
told the HDB chairman, “Look, our household income is only S$400
a month. Even if you set aside 10 percent for housing, it’s only S$40.”
He said, “I don’t care what you do, but I’ll contribute S$20. So build
something people can rent for S$40.” So that’s how we ended up with
the one-room flats in the early days. They were dim, poorly ventilated,
and smelly.
But we succeeded in housing the nation. However, as incomes rose
and CPF contributions rose, the HDB built more than what was nec-
essary. When you look at the population structure, there’s no need to
build public housing larger than three-room flats. There was also no
need for a second bite of the cherry and a third bite. If you want to up-
grade, you should pay for it out of other income. We thought we had a
winning formula. But really, we overdid it.
“Now that most of the population lives in their own

homes, isn’t it time to refocus the CPF on retirement
needs?”
Yes. My proposal is 20 percent from the employee and 10 percent from
the employer. Twenty percent for housing is not unreasonable. So the
10 percent is for old age. But if you want more for old age, which is the
original purpose, something has got to give. Maybe the part allocated
for housing should be cut to 15 percent. Then HDB should build flats
to sell or rent for 15 percent of income. Why must you continue to
build flats that take up 25 percent? When I became chairman of CPF,
I immediately saw that we were asset-rich and cash-poor. The balances

in the accounts are miserable.
“Is it too late to reverse the policy?”

No, it’s not too late. We have to be quite tough. I say reduce the amount
for housing and that for Medisave. So, both the HDB and the Ministry
of Health will not be tempted to add to their services beyond what
people can pay. Whenever the CPF contribution rates went up, both
these bodies rushed in to get their share of the pie.
We strayed from the straight and narrow path. CPF was started for
old age. We should have stuck to that. But in all things, when you’re
successful, you just carry on. We were great optimists. We thought the
GDP growth rate would go up in a straight line, 8 percent for the next
twenty years. The 1997 financial crisis taught us a severe lesson. In
fact, we should have learnt from the first crisis in 1986. We cut CPF to
30 percent and we should have remained there. But we raised it back.
We did not learn the real lesson.
So the real challenge for the government today is how to reduce the
amount for housing and Medisave and set aside more for old age.
The old-age problem is already coming on. People of my generation
are already retiring.
24
Singapore in the New World
Fireside Chat with the World Presidents’ Organization
Singapore Chapter, September 11, 2009
T hank you for inviting me to participate in this fireside chat. Most

of your members belong to the post-independence generation.
Born in 1937, I am of the pre-war generation. I grew up during the
Japanese occupation of Singapore, which lasted from 1942 to 1945,
and the immediate post-war years.
In a speech delivered to the Chicago Business School Alumni in
Singapore on August 3, I said: “In the 1950s, Singapore was like any
other city in the Third World, teetering on the verge of social and
economic collapse. No risk manager would have bet on our surviv-
al. Chronic unemployment, racial strife, and religious intolerance
could have easily torn apart the fragile social and political fabric of
Singapore. Mr. Lee Kuan Yew and his first cabinet colleagues could not
have i nherited a more unpromising state to govern.”1
Though our economic and political prospects were dim, the Cold
War then silently raging between the democracies led by the United
States and the socialist bloc led by the USSR provided us with the
proverbial straw to cling on to.
“From Third World to First?” Dynamics of the Singapore Success Story, 21–22.
1
The Malayan Insurgency led by the Chinese-based Malayan Com-

munist Party broke out in 1948 to wrest power from the British colo-
nial government. Their Achilles’ heel was that they did not have the
support of the Malay population, who were loyal to their traditional
rulers, the sultans.
The British government in Whitehall was wise enough to recognize
that the way to fight a communist insurrection was not brute force
alone. The majority of the population has to be won over and mobilized
to fight for themselves.
The Federation of Malaya was granted independence on August 31,
1957, with a multiracial cabinet led by Malay Prime Minister Tengku
Abdul Rahman. The Federation of Malaya was a government dominated
by the majority race, the Malays.
Though Singapore’s population was 75 percent Chinese, the Malayan
Communist Party’s Singapore Town Committee could only count on
the Chinese-educated Chinese for support. In my view, the political
genius of Mr. Lee Kuan Yew and his colleagues was their ability to
mobilize the support of the English-educated Chinese, Malays, and
Indians to isolate and finally exclude the leftist Chinese-educated wing
of the People’s Action Party (PAP).
The anticolonial tide of history was running strongly in the aftermath
of the Second World War. It was only a matter of time before Whitehall
had to let all its colonies go free, including Singapore. As Singapore
was leftist-leaning, a way had to be found to co-opt Singapore into
“safe” hands.
The Malayan Prime Minister, Tengku Abdul Rahman, was persuaded
to agree to a merger with Singapore, Sarawak, and Sabah to form the
new Federation of Malaysia.
Singapore became an independent state within Malaysia. The
Tengku agreed to include Singapore with a Chinese majority only if
Sarawak and Sabah were also merged to maintain the racial balance
that ensured Malay political dominance.
After barely two years in Malaysia, the Tengku agreed to the
separation of Singapore from Malaysia because of irreconcilable polit-
ical differences. The United Malays National Organization-led Malaya
wanted a Malayan Malaysia. The PAP-led Singapore wanted a Malay-
sian Malaysia.
Singapore achieved independence as a separate sovereign state on
August 9, 1965.
Though it was fortuitous, I believe a case could be made that

Singapore’s transition from a British colony to an independent state was
a by-product of the Cold War. It took us by way of Malaysia because of
the fear of revolutionary Chinese communism.
The end of the Cold War brought about seismic geopolitical changes.
For Singapore and other Asian countries, the most critical was China’s
decision to stop exporting revolution. Instead, Deng Xiaoping, in the
words of his successor Hu Jintao, adopted the strategy of the “peaceful
rise of China.”
China opened its centrally planned economy to international trade
in 1978 and is today well on its way to becoming one of the world’s
three largest global economies.
Singapore’s economic relationship with China grows by the day.
Yet barely forty years ago, states like Singapore, with sizeable ethnic
Chinese populations, were wary if not fearful of trading with the PRC
lest cheap Chinese products seduce our people politically.
Our national trading arm, Intraco Ltd.,2 was instructed by the
finance ministry to diversify our sources of rice imports. In the late
1960s, China was the most competitive supplier of rice. We were afraid
that sales of Chinese rice could be used to subsidize Chinese
revolution.
Singapore and China were mutually suspicious of each other. In
the late 1970s, China placed an order with a Singapore shipbuilder
to supply two oil drilling rigs. Six Chinese engineers led by a political
commissar were dispatched to Singapore to supervise their building.
As a standard operating procedure, we placed the Chinese under
surveillance. Our intelligence officers followed them everywhere. One
day, the leader of the Chinese team, in exasperation, told our liaison
officer that there was no need to tail his people. He was, in fact, more
worried that his people would defect to our side.
2
Incorporated on November 5, 1968, Intraco’s initial corporate roles were to
source for competitively priced raw materials, commodities, and manufactured
goods for the domestic market to support Singapore’s early industrialization
program, create export markets for locally manufactured products, and promote
external trade. The company was listed on the Singapore Exchange in December
1972 and has since undergone significant changes in business focus and leader-
ship. Today, Intraco is closer to its vision of being a leading integrated solutions
trading company through global partnerships. See http://www.intraco.com.sg/
(accessed August 12, 2010).
In the 1960s, the world was fragmented into political blocs. Na-
tional economies produced behind high tariff walls. The term global
economy was not yet coined. Though the world has changed geopoliti-
cally, the fundamentals of our economic and trade policies steadfastly
remain. Singapore has to be useful and relevant to the needs of both
regional neighbors and international trading partners, as we have been
since the 15th century. So long as we add to our knowledge base and
remain nimble, we can earn a living.
Our fundamental challenge is political. How do we become one
people despite our varying and diverse ancestry?
As we are unlikely to ever restore our natural birth rates to replace-
ment levels, we have no choice but to add to our population through
immigration. How do we assimilate the newcomers without placing
an unbearable strain on our resources? With a small population, will
we ever be in a position to assimilate anyone? Or, will we instead be
absorbed by them as they come from stronger cultures?
At what pace should we bring in new immigrants? I read from the
statistics that we increased our resident population from three to four
million in just one decade. Even far larger countries with vast open
spaces will not be able to achieve such a feat.
At this rate of inflow, are we in danger of changing our body poli-
tic? Beyond recognition? These changes will in turn change the face of
politics in Singapore.
I do not want to sound alarmist. A recurring nightmare for me as
a Singaporean is that someday we will find ourselves strangers in our
own land.
Sir Stamford Raffles and the British Colonial Office essentially
followed a policy of laissez faire. Let people come and go. The colonial
administration had no responsibility to the people they governed. Our
forefathers, who migrated to Malaya and the rest of Southeast Asia in
the late 1800s and early 1900s, fended for themselves. They built their
own businesses and social organizations. They established schools to
teach their children in their own mother tongue.
Some of them went back to their ancestral homelands to die. Most
stayed, raising their families in their adopted country. We are their
children and grandchildren.
Today, migration is driven by economics. The best and brightest
move around the world, seeking higher paying jobs. As they are highly
mobile, we risk having them use us as a stepping-stone.
In scenario planning, we discussed the risk of these highly skilled

and talented people quitting Singapore at the first whiff of trouble. For-
eign fathers, for example, could advise their Singapore-born sons to
leave when they reach the national service age of 18. We could be left
with the second tier of very average people who educationally, hardly
measure up to the Singapore average. When they are given citizen-
ship and the right to vote, these new citizens could use their newfound
electoral power to demand the same access to social services as other
Singaporeans. The difference is that we saved for our social security
through the Central Provident Fund. The new citizens have not.
Our population planners need to remember that international eco-
nomic competitiveness is now knowledge-based. It is no longer a sheer
numbers game. Why the haste in adding to our numbers? Do we have
the absorptive capacity to accommodate a million new people in one
decade?
I think we should make haste slowly. We should avoid repeating the
1960s mistake of “stop at two” population policy, this time in reverse.
When I think about our future, the most searing image that crosses
my mind is that of the last American helicopter leaving Saigon with
the South Vietnamese elite. In real life, the smart money will not wait
for the last helicopter.
25
The World’s First Venture
Capitalist
Speech at the Singapore Venture Capital and Private
Equity Association’s annual gala dinner,
September 27, 2006
T he world’s first venture capitalist was definitely neither Singapor-

ean nor a male. In my history book, the world’s first venture capi-
talist was Queen Elizabeth I of England. A single woman, she devoted
herself totally to the affairs of the realm. But few knew that in her spare
time, Elizabeth joined her courtiers in business ventures. They formed
syndicates to finance, build, and arm men-of-war, ships commanded
by men with a buccaneering temperament, like Sir Francis Drake.
These warships would lie in ambush at the entrance to the English
Channel. When they sighted Spanish galleons on the horizon, they
would close in and train their guns on these foreign vessels sailing
home with their plunder of Inca gold.
When successful in looting the hapless Spanish ships of their trea-
sure, buccaneers like Francis Drake were knighted. When they failed,
they were beheaded as pirates. The Spanish were so incensed, they as-
sembled a large armada to teach little England a lesson they would
never forget. Alas for the Spanish, a giant storm at sea blew the armada
off course.
I have taken some liberties in the interpretation of the facts. I believe,

however, that this event in history is a fair representation of the ori-
gins of the venture capital industry. All the essential ingredients are
present—risking life and fortune for that pot of gold at the end of the
rainbow.
So it was with a great deal of trepidation that I accepted Doris’s
invitation to speak at the Singapore Venture Capital and Private Eq-
uity Association (SVCA)’s annual gala dinner tonight. I also warned
her that SVCA might regret inviting me.
Fast-forward 400 years from the 16th to the 20th centuries. I was
from 1975 to 1981 the chairman of the Economic Development Board
in addition to my principal job as the permanent secretary of the
Ministry of Trade and Industry. As Singapore’s front man to attract
investments to the nation, I received Mr. Hussein Najadi, a suave, well-
spoken I ranian who lived and had schooled in Switzerland.
Mr. Nahadi had flown in a planeload of his Arab private banking
clients on a chartered private jet. He wanted us to grant him a banking
license. I’m not sure whether it was foresight or sheer cussedness that
led us to decline his offer to set up a bank in Singapore. He proceed-
ed to Kuala Lumpur and was able to persuade Bank Negara to grant
him a license to establish the Arab-Malaysian investment bank with
Malaysian partners.
My recollection of Mr. Najadi is not centered on his attempt to get
a banking license from Singapore. Rather, it is on the importance of
creating perceptions for success in business in the Middle East. He
told me that the best person to send to the Middle East to explore
business opportunities is a tall, white, Texan American. In lieu of the
Texan, the next best candidate may be a Chinese Singaporean, prefer-
ably American-educated. This person, however, must dress elegantly
in French Lanvin shirts.
He said the secret of success in business in his part of the world is
perception, perception, and perception. He brought home to me in
a vivid way the importance of being bi-cultural, even tri-cultural, in
engaging with the world. The Development Bank of Singapore, the
Oversea-Chinese Banking Corporation, and the United Overseas
Bank will need to bear this in mind when they compete in the arena of
wealth management banking.
In 1985, I was privileged to have been nominated by Mr. Tan
Teck Chwee, chairman of the Public Service Commission, to be the
Singapore Eisenhower Exchange Fellow for the year. This fellowship,

given by the Eisenhower Foundation, brought all fellows to its head-
quarters in Philadelphia for a week of lectures and briefings on
American politics, economics, and society. We then traveled through-
out the United States for eight weeks, calling on persons and institu-
tions we wanted to explore to learn what makes America tick and what
makes America great.
As the Rockefeller Foundation had sponsored my fellowship, I asked
to call on them to meet the person who runs VanRock, the Foundation’s
private equity/venture capital arm.
I was received by the gentle patrician gentleman who ran VanRock.
I asked him to share the modus operandi of his company. He told me
VanRock was staffed by himself and a secretary.
When I expressed surprise, he told me he was assisted by two or
three young men who, in his own words, he gave only “bus fare” to
scour the country for young start-up companies they considered
to have potential for growth. They brought these prospects back to
New York to persuade VanRock to invest in them. When convinced,
VanRock would take a substantial, but not a controlling stake in the
chosen company. He would also lend money to these young men to
take up a small stake themselves—to make sure they risked their own
money in the companies they championed, to make sure these start-
ups succeeded, and to share in their prosperity. One such start-up
company was Apple Computer.
So, when I visit our own venture capital companies in their elegant of-
fices with beautiful deep carpets, I wonder whether we are going about
business the right way. Are we lean and hungry enough to succeed?
Sometime in 1992, I attended a business function honoring the
achievements of Mr. Patrick Ngiam, founder and CEO of the IPC
Corporation, Singapore’s first indigenous personal computer compa-
ny. There was only one entrepreneur, namely this Patrick Ngiam (no
relative of mine as he is Teochew and I am Hainanese). I was there
in my capacity as chairman of the Development Bank of Singapore,
and probably 120 other guests, such as investment bankers, accoun-
tants, lawyers, brokers, advertising agents, and other consultants—all
highly qualified professionals, all hoping to be of service to this one
entrepreneurial s tart-up company.
I went home thoroughly depressed that night, wondering why there
was such a paucity of wealth creators and a surfeit of wealth managers.
Unlike larger countries, to jump-start our economic development pro-

cess, we had no choice but to welcome foreign multinational compa-
nies to establish their factories and logistic companies in Singapore.
In the 1970s, Hong Kong and Singapore were the only developing
countries that opened their doors to direct foreign investment. Now
every country in the world, China and India included, compete vigor-
ously for foreign investment. As the MNCs brought with them their
technology, and more critically their markets, Singapore and Singapor-
eans concentrated on serving the businesses of these c ompanies.
In the process, we neglected our own homegrown companies. We
chose to rapidly expand, not grow, on the wings of the MNCs, offer-
ing them abundant, low-cost semi-skilled labor. By the mid-1970s, we
achieved full employment. The flip side of full employment was job-
hopping. Wages rose rapidly. When marginal wages exceeded margin-
al increases in productivity, the MNCs relocated their plants to more
competitive locations. The MNCs are objective and unsentimental or-
ganizations, moving from location to location as circumstances dic-
tate. Though Singapore today enjoys full employment once again, our
older workforce is trapped in stubborn structural unemployment.
Unlike Singapore, our competitors Taiwan and South Korea fol-
lowed a different track. Their governments supported their own com-
panies all the way, protecting their indigenous companies from foreign
competition. More critically, they supported them in the acquisition of
technology.
I was the chairman of the Singapore Telephone Board in 1972 when
we invited leading telephone manufacturing companies to tender for
the supply of new generation exchange equipment. In the Singapore
tender, not unexpectedly, the top three were all Japanese. In the South
Korean tender, to my great surprise, there were no Japanese names.
When I asked the general manager of the Japanese Shojikaisha trad-
ing company that won our tender how this came about, he explained
that the Korean tender required the successful company to transfer
technology to the Korean purchaser. As it was not Japan’s policy to
transfer technology to buyers, no Japanese company participated,
leaving the field clear for the winning American company, which was
prepared to transfer technology. Today, the Korean company Samsung
is a f ormidable competitor in cordless telephones.
In Singapore, our procurement policy was to award the tender to the
lowest bid. We were not prepared to pay a premium for the transfer
of technology. We took a short-term view, unlike Taiwan and South

Korea. In the 1960s, the Taiwan government established the Indus-
trial Technology Research Institute, an advanced research institute in
electronics, staffed by PhDs trained in the United States. The research
results were available free of charge to the researchers, who then went
on to start their own companies for commercial production. Today,
Taiwan is the world’s leading wafer fabrication producer for making
microchips—which drive every electronic product and control system.
A*Star today is concentrating on the bio-medical domain, particu-
larly stem cell research. I sincerely hope we succeed. The question to
ask is: Do we have a comparative advantage in stem cell research, short
as we are of advanced-level scientists in this field? Should we consider
other fields in engineering where we already have expertise, such as
building oil rigs for deep water? I am not expert enough to answer the
specifics. My point is that we should pursue research in areas where
we already have expertise. Can we ever catch up in the glamorous,
esoteric areas?
It is almost high noon. Is it too late for us to grow our own tim-
ber? In plain English, this means establishing, nurturing, developing,
and growing our Singapore-owned and Singapore-managed compa-
nies. Most critical, we need to develop the confidence and the skills to
drive these companies ourselves. We can. Singapore Airlines, SingTel,
our three banks, Singapore Technologies Engineering, Hyflux, Osim,
Venture Manufacturing, and Creative Technology are outstanding ex-
amples of Singapore-driven companies. These companies, however,
are few in a landscape dominated by MNCs. It’s time to have more
homegrown companies led by Singapore CEOs.
However talented and able our foreign CEOs, they can never be to-
tally committed to Singapore, their hearts are with the country of their
birth. As such, we can hire them only for their technical skills, to be
our CFOs, CTOs, and so on. They should never be in the driver’s seat.
For better or for worse, Singaporeans have to run their own businesses.
Those who cannot should not be in the business.
Which brings me to the core of my angst this evening. Some of you
may know that the original Small Industries Finance Scheme (SIFS)
was conceived in the late 1970s between myself as chairman of the EDB
and Dr. Tony Tan, then with the Oversea-Chinese Banking Corporation
(OCBC) and chairman of the Association of Banks in Singapore (ABS).
The EDB had a Light Industry Service Unit (LISU) whose mission
was to nurture light industries, including via loan financing. In spite of

missionary zeal and herculean efforts, the unit, with its tiny staff, could
not give out more than ten loans a year, a drop in the ocean. So I invited
the ABS banks to join EDB to finance light industries.
The Economic Development Board would share the risk dollar for
dollar. To reduce the burden on the banks’ liquidity ratio requirement,
the participating banks could draw on a line of credit extended by the
Ministry of Finance, even for their half of the loans.
Requests for loans from their customers were evaluated by the banks
themselves, with EDB the passive lender. By decentralizing loan pro-
cessing, small industry loans grew to about 3,000 when I left EDB in
1981. It gave me great satisfaction later to learn that the default rate on
these SME loans was about 3 percent, much lower than banks’ overall
non-performing loans ratio of around 6 percent.
The Small Industries Finance Scheme (SIFS) and its later deriva-
tives by the EDB and International Enterprise Singapore (IE) are all
just lending schemes. Banks and government statutory boards do not
have the mandate to participate in the equity of these start-up compa-
nies, bearing the risks directly. The Monetary Authority of Singapore
(MAS) allows banks to lend only with collateral. Under the proposed
Basel II,1 loans to small and medium enterprises (SMEs) carry higher
capital provisions than rated companies.
In effect, the large listed companies can borrow at lower interest
rates than the small and medium enterprises. Is there a case for the
Monetary Authority of Singapore to be more flexible on SME loans?
I am, however, of the view that we cannot really grow our own tim-
ber through lending alone. Like Queen Elizabeth I, venture capital
and private equity companies have a crucial role to play if Singapore
is to grow its own timber. More than do banks, the venture capital and
private equity companies have the knowledge and the experience to
evaluate start-up companies for direct equity participation. To really
be of use to Singapore, venture capital and private equity companies
1
Basel II is the second of the Basel Accords, which are recommendations on
banking laws and regulations issued by the Basel Committee on Banking Su-
pervision. The purpose of Basel II, initially published in June 2004, is to create
an international standard that banking regulators can use when creating regu-
lations about how much capital they need to put aside to guard against finan-
cial and operational risks. See http://en.wikipedia.org/wiki/Basel_II/ (accessed
August 10, 2010).
operating here should not just wait for a structure to reach the mezza-
nine floor, or, worse, swoop down like vultures on the carcass of an old
established company that has lost its way. How about talking to EDB,
MAS, and ABS to establish today’s equivalent of the Small Industries
Finance Scheme, which has fulfilled its mission? Today, banks make a
selling point of their SME loan portfolio.
SVCA, I call upon your members to be the modern Queen Elizabeth I.
The founding fathers of many illustrious names in Asian business to-
day were also venture capitalists, risking their own and extended fam-
ily savings and resources to start their businesses. Today, some of them
have become household names.
Will the Singapore Venture Capital and Private Equity Association
take up the challenge?
26
Singapore Banking
in the 21st Century
Keynote speech delivered at the UOB Luncheon,
November 14, 2006
T hey say that confessions are good for the soul, so let me start by first
confessing that I am not a practicing banker. I started my working
life in the Singapore Civil Service. Banking was thrust on me when
I was asked to chair the board of the Development Bank of Singapore
(DBS) in 1990.
On the merger of Overseas Union Bank (OUB) and the United
Overseas Bank (UOB), I was invited to serve on the enlarged UOB
Board. I gladly accepted Mr. Wee Cho Yaw’s invitation. I’ve known
Mr. Wee since the late 1960s. Mr. Wee, then in his mid-thirties, was the
youngest ever chief executive officer of a bank in Singapore.
Mr. Wee had honed his skills running his family’s trading company.
Dr. Goh Keng Swee, the minister of finance, had asked Mr. Sim Kee
Boon, my permanent secretary, to consult Mr. Wee on how to overcome
the obstacles that had gotten in the way of Singapore’s trade with
Indonesia. President Sukarno had launched a policy of Konfrontasi in
an attempt to derail the formation of Malaysia. Direct trade through
Singapore was prohibited by Indonesia.
Singapore banks, including UOB, had to learn to finance “third

country” trade. Incidentally, the bank’s name was changed from its old
United Chinese Bank to its present United Overseas Bank in 1965 be-
cause of this. There was already a United Chinese Bank operating in
Hong Kong, and the pragmatic Mr. Wee Cho Yaw decided to change
his bank’s name to obtain the Hong Kong license.
Financing round-about-trade between Singapore and Indonesia
honed the skills of bankers in what is known as structured trade
finance. Structured trade finance requires a nimble and disciplined
mind. It remains Mr. Wee’s passion in banking to this day.
Because I am not a practicing banker, I have often asked myself
this question: What is banking? Early textbooks defined banking as
financial intermediation. Conceptually, it was easy to start a bank. You
need two tables. On one you place the sign “deposits.” On the other,
“loans.” A queue of people will form in front of the first table to deposit
their savings. A longer queue of people will form up at the other table
to borrow. All the banker needs to do is to accept the deposits and
lend them to those seeking loans. The only problem is that depositors
always come back for their money. Some of the borrowers may not
return with theirs. That, in a nutshell, is banking.
What, then, is the role of the banker? In my book, the basic roles
of the banker are to mobilize the savings of the community and to
manage their wealth. Savings are lent out to finance trade, develop
industries, fund property development, and sparingly to invest
in the equity of young start-up companies. The banker also helps
to manage the wealth of individuals by providing advice on asset
diversification.
Wealth management has become the buzzword of the 21st century
banking community. To be private bankers and venture capitalists is
the dream of every young banker aspiring to earn enough to retire at
forty-five! As you are more involved in the latter, let me first touch on
venture capitalists.
The world’s first venture capitalist, in my history book, was Queen
Elizabeth I of England. Single, unfettered by household chores, she
devoted herself totally to the affairs of the realm. But in her spare time,
Elizabeth joined her courtiers in business ventures, forming syndicates
to finance, build, and arm men-of-war.
Lying in ambush at the entrance to the English Channel, they robbed
Spanish vessels sailing home with Inca gold. When successful in looting
the Spanish ships, buccaneers like Francis Drake were knighted, and
those who failed were beheaded.
I have taken some liberties in the interpretation of facts. I believe,
however, that this event in history is a fair representation of the ori-
gin of the venture capital industry: risking all for a pot of gold. Today,
successful venture capitalists receive stupendous bonuses, and those
who fail see their heads roll, but in a more figurative manner.
In my mind, the fine line that distinguishes the successful and the
failed is risk management. In an earlier era, it was known as financial
intermediation. Today, the banker’s role is more complex and demand-
ing. The creation of derivatives and hedge funds has made life almost
unbearable for the banker.
The risk manager today has to monitor, all at the same time, changes
in interest and exchange rates, commodity prices, stock market indices,
technology, and the climate.
In the language of theoretical economics, it is like knowing that equi-
librium exists but not being able to pin it down. The modern banker,
if I may say so, is expected to be a super economist with 20/20 vision.
The perfect risk manager does not exist. And that is a reality all bank
customers must understand. A risk manager with 20/20 vision will
work for himself!
Now, let me move on to wealth management in Asia. The tradi-
tional centers of wealth management have been Zurich, London, and
New York. Arab sheiks, Asian tycoons, and the old-world European
rich have placed their confidence in American and Swiss bankers
simply because they are immersed in the financial markets of the
largest economies of the world. Such markets are highly liquid and
competitive. Politically too, they are safe havens.
After 9/11, the landscape changed. Arab sheiks fear unilateral
interventions by the US government in its war on terror. Asian econo-
mies, like China and India, are growing rapidly. The Japanese economy
is expanding once again. Wealth management is rapidly becoming a
new growth area for banks, embracing the whole spectrum, from ex-
clusive private banking to middle market preferred banking.
In this brave new world of wealth management, how does a Singapore
bank like UOB compete?
My take is that it will take too long to be private bankers to tycoons.
It is better to concentrate our efforts to be private bankers to the ris-
ing middle class of ASEAN countries, India, and China. The rising
iddle-income segment is fueling the demand for cars, housing,

m
education, and health care in our part of the world.
I always point out that even if 0.1 percent of the Chinese population
joins the ranks of the middle-income earners, there will be 1.3 million
new Chinese consumers with purchasing power each year.
As some of the guests today are from overseas, I will conclude by
making some remarks about Singapore banking in the 21st century.
The 21st century began with a “Big Bang” for our regulatory au-
thority. The Monetary Authority of Singapore or MAS told the share-
holders and boards of the five banks that we had to prepare for global
competition in banking when Singapore joined the World Trade Or-
ganization. While this was a reality that banks had to come to terms
with, our regulatory authority went a step further and told us that size
mattered. The MAS encouraged the five Singapore banks to merge.
Being bankers, we looked up the figures and found that even if all five
banks merged to become one, this one Singapore bank would not rank
in the first 100 of world banking.
DBS ignited the Big Bang with a hostile bid for OUB. In the after-
math, DBS was left standing alone. OUB merged with UOB to be what
our bank1 is today. OCBC acquired Keppel TatLee. The five banks paid
Goldman Sachs, JP Morgan, Morgan Stanley, and other Wall Street
firms handsomely for merger and acquisition advice.
As size matters, all three Singapore banks have been expanding
through acquisitions. UOB itself has acquired retail banks in Indonesia
(Bank Buana) and Thailand (first Radanasin Bank, then Bank of Asia).
Regrettably, we had to retreat in our acquisition of a retail bank in
the Philippines. UOB has also merged its two former subsidiaries
(Lee Wah and Chung Khiaw) to become the foreign bank with the
largest branch network in Malaysia. In China, we have upgraded our
Chengdu Representative Office to a full branch and will be opening a
new branch in Shenyang later in the year.
The Business Times, reporting the recent IMF/World Bank Group
Meeting in Singapore, had this headline in its September 15, 2006 edi-
tion: “Asia looks robust, thanks to China and India.” Globally, emerg-
ing Asia is the “most dynamic” region. The emerging economies in
Asia are expected to grow at 8.3 percent in 2006.
1
United Overseas Bank (UOB). Mr. Ngiam is a director and member of UOB’s
executive committee.
I would, therefore, say that UOB is in the right place at the right
time. As a Singapore bank with a strong regional presence, we know
and understand the culture and politics of these emerging countries
and the different skill sets needed to operate in these different markets.
As Asia powers ahead, I am confident that all the Singapore banks,
including UOB, will ride the crest of the wave.
Finally, I hope you will allow me, a non-practicing banker, to peer
over the horizon to speculate on the form and shape of banking by 2050.
With the liberalization of trade in services, including banking, brought
about by the WTO, central banks throughout the world pushed and
cajoled their domestic banks to merge because size matters.
The MAS was no exception. Looking only at scale was to peer at the
wrong end of the periscope. What mattered more were skills. There
are three Singapore banks today, namely DBS, OCBC, and UOB. In
my view, all three have similar skill sets. They also have about the same
geographical reach. So, if bank A merges with bank B, or bank B merg-
es with bank C, the optimum outcome of 1+1 is 2, simply because their
skill sets and geographical reach are similar.
The whole can only be greater than the sum of the parts when their
respective skill sets and geographical reach are different. Bankers can
take a leaf out of the book of world-scale automotive companies, such
as Toyota and Nissan of Japan, Daimler-Benz, Renault, and Volvo of
Europe, and now even GM and Ford of the United States, who are en-
tering into joint ventures with Chinese, Indian, and Brazilian compa-
nies to produce cars and trucks for global sales. Note that they do not
team up with their own compatriots. To be taken seriously, each part-
ner has to bring to the table their own unique technology or market.
In my crystal ball, international banking will go the same way as
the automotive industry. Singapore banks will have to skill up rapidly
and enter into joint ventures, even mergers, with foreign banks. That
day will come, sooner rather than later. The challenge for Singapore
banking in the 21st century is to skill up. Scale will follow naturally.
Regulation and supervision of banks will increasingly be bench-
marked to Basel II. The mission of MAS as a regulatory authority will
involve every bank that wishes to engage in international banking: they
have to be Basel II-certified. Banks from countries known to be lax will
be severely handicapped.
In sum, banking and finance will have to be on a global scale,
operating in an internationally certified operating regime. Any
c ountry that does not adhere to or respect internationally acceptable

standards in banking will not be part of the global economy. Singapore
and Singapore banks will have to prepare now to operate in a global
banking world.
I am confident that our three Singapore banks will be able to hold
their own in this brave new world. And MAS will be a good midwife.
Thank you for listening to a non-practicing banker.
PART
3
Implications of the
Singapore Success Story
to China
27
Is China’s Growth Sustainable?
University, published in The Straits Times, October 13,
2006
W hen the economy of a country as large as China grows at 9 to 10

percent a year, it may appear unduly pessimistic or even churlish
on my part to pose the question: Is China’s growth sustainable?
Economic commentator Professor Carsten A. Holz at the Hong
Kong University of Science and Technology, in his excellent article,
“Why China’s Rise is Sustainable” in the April 2006 issue of the monthly
Far Eastern Economic Review, pointed out that China’s spurt in growth
rates in its first decade after opening up in 1978 came about after the
economy shed the inefficiencies of the command economy. As China
transited into an enterprise economy, economic managers quickly
learned to use and optimize the productivity of underemployed labor
and other economic resources.
Wage costs were low. Return on capital was high in proportion to
labor, thus attracting a strong surge of foreign direct investment, bring-
ing with it not only technology and management but also international
markets. This was exactly the experience of Singapore in our first de-
cade of industrialization, when Singapore too achieved double-digit
rates of GDP growth.
However, a huge population and vast territory with natural resourc-

es, including hydropower, are no guarantee that China’s growth will
sustain itself in the long run. Classical economics has taught us that
land, labor, and capital are the three factors of production. To these we
must now add science, technology, and entrepreneurship. In today’s
idiom, competition is knowledge-based. Knowledge, however, must
embrace more than just science and technology. Knowledge is also
about connections, connectivity, culture, and the arts. Manipulated or
integrated creatively, knowledge provides the building blocks of sus-
tainable growth.
In this respect, China, with its 1.3 billion people, is blessed with
deep talent pools. So is India. These two countries, with their unbro-
ken, 3,000-year-old civilizations, are well placed to compete in a global
knowledge-based world.
The key is equal opportunity in education. I am convinced that in
this new century, more and more Nobel laureates will be of Chinese
or Indian origin. The sustainability of China’s and India’s economic
growth and social progress will have to be founded on knowledge.
China’s progress is, however, not a straight-line projection. Her
growth can still be derailed by internal instability caused by lack of
social equity, or the ancient curses of corruption and nepotism.
With high savings and low interest rates, state-owned banks take
the easy way out by lending to high-end property developers. There is
a pent-up demand for international quality housing after decades of
socialist austerity. Lending for property development creates get-rich-
quick speculative mindsets with no long-term benefits. Such a pattern
of development will not generate sustainable growth.
Sustainable growth can only be generated by increasing domestic
demand for consumer goods, including basic housing. For China, the
process of generating sustainable growth has to begin with increasing
productivity in agriculture.
Banks will need to lend to small and medium-sized enterprises in
the rural economy to facilitate the amalgamation of small individual
farms into large-scale enterprises like agriculture in the United States,
Australia, Brazil, and even India. Farms should no longer be viewed
as subsistence entities. Instead, they should be viewed as commercial
enterprises producing for profit, incentivizing the i ndividual w
orker.
As farming productivity increases, labor will be released initially into
small and medium rural enterprises, and finally into producers and
Is China’s Growth Sustainable? 195
suppliers of components for the advanced manufacturing industries of

Chinese and foreign MNCs. A diversified rural industrial sector is the
best shock absorber for the ups and downs of international trade.
Study the development experience of Japan, Korea, and Taiwan; they
have the characteristics of being small, resilient, and flexible. The in-
dustrial prowess of these Asian dragons is in their small and medium
manufacturing enterprises. Some have grown to be world-beaters.
China is entering international trade at the best possible time. In a
WTO, knowledge-based global economy, China has the potential to be
an engine of growth, peace, and prosperity for the world. To achieve
this position of global leadership, China must have political stability
and be open and helpful to the world.
With its immense population and deep talent pools, China can
help develop the economies, even the societies, of the myriad of small
or under-developed countries of the world, some of whom may be
endowed with oil reserves, which China can help to develop.
These oil-rich, talent-poor countries need sustainable growth even
more acutely than China or Singapore. They know that when the oil
reserves run out, their countries will revert to deserts or jungles.
Finally, this optimistic scenario will come about only if China can
avoid being trapped into a war over Taiwan. China needs to employ
soft rather than hard power in its competition with the United States,
or even Japan.
Externally, China will have to display extreme patience to not be
provoked into a confrontation with the United States and Japan over
Taiwan. It is a reality that only the Americans have the technology and
the wealth to develop “weapons of mass destruction.” It was foolish for
the former USSR to enter into a “Star Wars” contest with the United
States. They lost.
I believe that China can win this contest for the world’s friendship
and allegiance not through war, but with peace brought about by eco-
nomic growth. So it is a matter of survival for China to achieve the
sustainable growth of its economy, society, and nation. You have to
work out the politics yourself.
I hope that the rest of the world will help in the creation of a pros-
perous and stable China. Such a China will be a force for good, for the
whole world.
28
The Selection of China’s
Top Leaders
University, October 17, 2007
D aily press reports suggest that the focus of the 17th Chinese Com-
munist Party Congress is on who will succeed President Hu Jintao
when his term ends in 2012. Not being a Chinese citizen, I haven’t the
faintest idea who will be the next president of China. As someone with
an abiding interest in the progress and prosperity of China, I hope you
will allow me some latitude in answering the question: If I were a Polit-
buro Standing Committee member, how should I and fellow members
go about selecting our successors, one of whom will be the primus in-
ter pares to succeed President Hu as head of the Chinese Communist
Party and head of state in 2012?
I will begin by asking: What is the most strategic challenge for China
to achieve what President Hu calls harmonious development? The ob-
vious starting point is the vast Chinese countryside where two-thirds
of the population live. As Mr. Deng Xiaoping told a Singapore delega-
tion in 1980, his dream was for China to achieve a per capita GDP of
US$1,000 by the year 2000. With a population of 1.3 billion people,
China today is easily a trillion dollar economy.
The relative prosperity China enjoys today is not evenly spread.
Coastal regions and major cities have per capita income of US$5,000,
propelling a growing number of Chinese into the middle class, fueling

demand for housing, cars, higher education, and even annual overseas
vacations.
The Chinese countryside is still dotted by fragmented, postage-sized
farms with millions of farmers eking out a living, as it has been for a
thousand years. Were I a Politburo Standing Committee member, my
vote for the successor to President Hu would go to the cadre with the
best political and administrative skills to raise the incomes of China’s
rural people. In essence, how does one transform the postage-sized
farms into modern agricultural enterprises, as in Australia, Argentina,
and Brazil? Only when the Chinese agriculture transcends subsistence
farming will there be a surplus for economic restructuring. Chinese
economic growth today is very much dependent on exports, making
China vulnerable to international business cycles.
For agriculture to rise beyond subsistence levels, it has to have scale.
Farming has to be organized as a business enterprise, which enjoys
economies of scale. A 100-hectare farm has more bargaining and
purchasing power than a one-hectare farm.
Large-scale commercial farming will raise rural incomes manyfold.
However, at the enterprise level, there is the danger of a disconnect
between effort and reward. Where previously the farmer worked for
himself, a farmhand may just see himself to be a small cog in the wheel.
He may not put in his best effort. It is more difficult to measure per-
formance in farming than in a factory with piece rates. Nevertheless,
farming has to be scaled up to produce an economic surplus.
Self-sustainable growth has to be generated from within. Only small
economies like Singapore are totally dependent on exports of goods
and services for growth, a very vulnerable position.
When productivity in agriculture rises, the surplus labor could
be employed in construction or light manufacturing, industries capa-
ble of employing millions of workers. Is it any wonder that China is the
world’s workshop today?
Only strong, capable, and knowledgeable leadership can bring about
the transformation of the Chinese economy from its present largely
rural structure to one based on industry.
In my view, the selection of a successor to President Hu should be all
about this compelling need for leadership in the vast rural heartlands
of China.
29
Land Reform and Sustainable
Growth
University, July 14, 2010
L and reform is a potent slogan often used by insurgents to oust

incumbent governments. Landless peasants and slum dwellers
readily rally around populist calls to dispossess the ruling landowners
of their vast landholdings for redistribution. Yet time and again, land
reform has left peasants worse off.
Zimbabwe
A contemporary example is Zimbabwe. President Robert Mugabe, after
ousting the white Rhodesian regime, is now attempting to break up
their vast farm holdings for redistribution to his black party supporters
and institutions.
In one stroke of the pen, he is dismantling highly efficient white
farms. As economies of scale diminish, rural unemployment will
rise. Low rural incomes will fall. Domestic demand will shrivel. The
economy will collapse.
Zimbabwe may have to go to the IMF, cap in hand. A once thriving
African country will verge on starvation and financial bankruptcy.
President Mugabe perches on the edge of a political precipice. It

will require great courage and wisdom on his part to desist from
confiscation and expropriation of private farms in the name of land
reform.
Singapore
Singapore gained self-government from the British colonial admin-
istration in 1959. Led by Mr. Lee Kuan Yew, the new Singapore gov-
ernment faced daunting challenges—high urban unemployment and
a crumbling slum city. The Economic Development Board was estab-
lished in 1961 to spearhead the creation of jobs, while the Housing and
Development Board aimed to build affordable low-cost housing.
The Land Acquisition Act enabled the government to acquire private
land, but only for clearly defined public purposes such as low-cost
housing and infrastructure.
The minister for national development submitted the HDB’s request
for land acquisition to the cabinet for approval, with the concurrence
of the minister for law, a “check and balance” to the Ministry of Na-
tional Development.
No acquisition can proceed until the law minister satisfied himself
that it was for a public purpose. He guarded against the abuse of power
by the state to acquire private property.
The government paid for acquired land at market prices for raw
land. The chief valuer was not required to take into account the higher
potential value of land after development. Appreciation of land val-
ues thus accrued to the state, not the individual landowner. Land
speculation was discouraged.
China
In the 1950s and early 1960s, China embarked on a massive program
of land reform. Hundreds of thousands of peasant farms were expro-
priated by the state and consolidated into vast communes. Though
these could yield higher output because of their greater economies
of scale, the outcome was the opposite of what Chairman Mao
expected.
Establishment of communes was in essence a political stratagem
by Chairman Mao to create the “selfless socialist man.” It goes against
Land Reform and Sustainable Growth 201
uman nature to expect an individual to work hard to benefit his

h
neighbors as well as himself. As the Chinese leadership soon found
out, when everyone can eat from the same iron rice pot regardless of
individual effort, few will put out their best effort.
Communes work only to a degree, even in the Israeli kibbutz, where
the community was held together by deeply entrenched religious
beliefs in the early days of struggle to establish the state of Israel.
In the 1960s, China tried to transform itself from an agrarian to an
industrialized economy via the Great Leap Forward campaigns. Peas-
ants were exhorted to make steel by melting cooking pots and pans.
Trees were felled to fuel crude furnaces. Coupled with the formation
of communes, these heroic methods brought the economy to its knees,
and the rural countryside to the verge of starvation.
In my view, China in the 1960s was not much different from what
North Korea is perceived to be by the outside world today. Fortunately,
from the deep pool of a talented population, one man emerged to lead
the country in 1978.
His predecessor, Mao Zedong, though a great political leader, was
a dreamy visionary. Deng Xiaoping was a more down-to-earth prag-
matic leader. He urged his countrymen to seek truth from facts, not
doctrine.
After touring Southeast Asia soon after he took over the leadership
of China, Deng Xiaoping opened the economy to global competition,
restructuring it from central planning to an enterprise mode.
The economy of China has not looked back. China today is the
third largest economy in the world. Since its opening up in 1978,
the economy has achieved annual GDP growth rates averaging
10 percent.
Yet the question has to be asked: Can China sustain these high rates
of growth? China’s high rates of growth in the first twenty years of
opening up are not unique to China. In Asia, two other countries—
Japan and the city-state of Singapore—also achieved high growth rates
in their nascent early years.
Growth is largely export driven. In a free global economy, it is not
possible for any country to remain the most competitive for long. Other
countries with lower labor and capital costs will invariably emerge to
compete for their share of international trade.
It is therefore not possible to sustain high growth rates on exports
alone.
Sustainable Growth
In my view, China can achieve sustainable growth only by industrial-
izing agriculture. The most competitive agricultural exporters today
are developed countries such as the United States, Canada, Australia,
Brazil, and Punjab in India with their vast industrialized farms. These
countries have industrialized agriculture through mechanization and
application of science.
To achieve sustainable growth, China has to begin by raising the
productivity of its agricultural sector. Millions of small peasant farms
dotting the rural heartlands have to be consolidated into large-scale
farming enterprises. Persuading the peasant farmers to give up
individual ownership of their land is a herculean task.
One way is to offer shares in the corporate entity to farmers in
exchange for their land. The individual farmer can continue to till his
former piece of land and sell his output to the corporation at market
prices. Though ownership of land is delinked, personal incentive to
produce as much as possible is retained.
Mechanization of farming can be progressively introduced.
Productivity will increase and the need for manpower will be reduced.
Will this not lead to unemployment of the surplus labor? Yes and no.
There will be a group of enterprising farmers who may want to
quit backbreaking agriculture altogether. These individuals can sell
their shares to the corporation and use the capital released for other
economic activities, such as light manufacturing.
Few people know that leading Japanese automotive companies have
been built through such a process. The world-beating Toyotas, Nissans,
and Hondas are the apex of a pyramid supplied by thousands of com-
ponents and parts suppliers whose origins have been in agriculture.
To me, the industrialization of agriculture is not a bane but a boon
to growth. As Chinese agriculture industrializes, the surplus labor
released is an opportunity for Chinese manufacturing to become more
competitive. So too will Chinese construction and civil engineering
companies.
Leading Japanese and Korean world-scale contracting companies
have become the fearsome competitors they are today through this
very process.
30
Singapore–China Collaboration
and Partnership in Science and
Technology: Possibilities?
Speech at the Singapore–China Association
for Advancement of Science and Technology,
January 15, 2010
M ay I first congratulate the Singapore–China Association for the

Advancement of Science and Technology (SCAAST) on its inau-
guration. Thank you for your invitation to speak on this auspicious oc-
casion. You have suggested that I explore the topic “Singapore–China
Collaboration and Partnerships in Science and Technology.” What are
the possibilities?
I am flattered, even flabbergasted, that you should ask someone like
myself, whose education is in the humanities, to speak on science and
technology.
In the 1970s, I was the permanent secretary of the newly established
Ministry of Trade and Industry. We had spun off from our parent, the
Ministry of Finance, to focus on economic development. Though we
had achieved full employment, we were at an impasse.
We could expand but not develop our economy. We could increase
output only by importing more foreign labor. We remain in this bind
today. Unable to raise our labor productivity, we cannot scale up with-
out skilling up. No developing country, including China and India, can
raise their capability as distinct from capacity, without adding to their
scientific and technological knowledge.
Developing countries increase their production capacity on the

backs of more labor. Until very recently, generations of undergradu-
ates learnt in Economics 101 that the three factors of production were
land, labor, and capital.
The corollary was that the optimum potential GDP of an econo-
my is capped by its endowment in these three. So the more richly en-
dowed a country is, the greater its GDP. However, this holds true only
if all countries have equal access to the world’s pool of scientific and
technological knowledge.
Global competition today is knowledge-based. In the mid-1970s,
Singapore achieved full employment on a low-skill, low-cost base.
In the 1980s, the economy expanded at annual GDP growth rates
between 6 and 8 percent. However, half the increase in output came
from importing more and more foreign labor on work permits. Labor
productivity stagnated and in some years even declined.
Labor productivity, however, is only one component of total fac-
tor productivity, which rises only when management is able to work
smarter. It’s not just a matter of working labor harder.
The burden of stagnating total factor productivity falls on labor.
In good years or bad, our managers and administrators enjoy pay in-
creases designed by pay consultants. Our top people should realize that
pay increases can be sustained only when they can raise the total fac-
tor productivity of their companies or organizations, our government
included.
In the 1980s, we invited Dr. Pannenborg, the R&D head of Philips,
the Dutch electronics multinational giant, to be our first advisor on
science and technology. Dr. Pannenborg told us that to attract mul-
tinational companies to establish advanced manufacturing plants in
Singapore, we needed to educate and train more of our young people
in science.
The Nanyang Technological University was established to be the
Qinghua of Singapore to focus on science and engineering.1 The
National University of Singapore remains our Beida.2 Next, we
established the Singapore Management University to concentrate on
1
Qinghua is Tsinghua University, a prominent university in China with domi-
nant focuses on engineering and technology.
Beida is Peking University, a renowned comprehensive university in China.
2
Singapore–China Collaboration and Partnership in Science and Technology 205
a ccounting and management sciences, and a fourth university special-

izing in technology and design is forthcoming.
The four universities, together with the Singapore Institute of Man-
agement, provide tertiary education for adults, and are supported by
six feeder polytechnics. In essence, Dr. Pannenborg’s advice was stark
and simple. Singapore has to raise its scientific and technological com-
petence. It has to compete on knowledge rather than numbers. That’s
relevant, as our population is not replacing itself.
Importing foreign labor is never a long-term solution. Great em-
pires in history dependent on slave labor have invariably collapsed.
Elites have to demonstrate that they can walk the talk.
Our massive investment in higher technical education is to secure
our economic future.
If we fail, Singapore will decline into being a low-tech, high-cost
producer. The BRIC countries—Brazil, Russia, India, China, and new-
ly identified South Africa—will dominate the world economy. Their
human and natural endowments will transform them into formidable
high tech, low cost economies.
In 1976, I was a member of the first Singapore delegation to visit
China. The Cold War was on. The United States and its Western allies
had put an embargo on the export of strategic technology to China.
The American Cray supercomputer could not be sold to China. Su-
percomputers are needed for the design of weapon systems such as
intercontinental ballistic missiles.
Our Chinese hosts brought their guests to a computing research lab-
oratory, half the size of a classroom, at Beida. They told us that because
China has no access to ultra-fast supercomputing systems, they had
no choice but to develop their own. Though some of us were skeptical,
the descendants of the people who invented the world’s first calculator,
the ubiquitous abacus, went on to build their own supercomputers for
space research.
Like every other Singaporean, I watched the opening ceremo-
ny of the 2009 Beijing Olympics with awe and fascination. The
Chinese showcased the invention of paper, the compass, and gun-
powder. Without paper, the history of China and the world could
not have been recorded for posterity. Without the compass, Ad-
miral Cheng Ho could not have circumnavigated half the globe.
Without gunpowder, there would be no fireworks to light up the
Olympic skies.
These are useful inventions. Yet I ask myself the nagging question: Do
they demonstrate the superiority of Chinese science? Did the Chinese
discover basic scientific truths such as Newton’s law of gravity, Einstein’s
theory of relativity, or even Archimedes’ principle of b uoyancy?
It appears to me that the Chinese are more adept at empirical rather
than abstract thinking. I very much hope that someone in this audience
will prove me wrong. Otherwise, I have to conclude that the Chinese
excel in thinking within the box and not outside it.
Has this to do with Chinese culture, where as children we are taught
to question neither our parents nor our teachers?
Compared to China, Singapore is not even the size of a county.
Our modern history could be said to have begun in 1819 when it was
founded by Sir Stamford Raffles, a clerk in the English East India Com-
pany, who established Singapore as a free port, open to all races. Our
great grandparents came from Malaya, adjacent Indonesian provinces,
China, India, and the Middle East. It can be said without exaggeration
that all Singaporeans are of immigrant stock.
Modern Singapore started its existence as a British colony. English
became the language of administration, providing a level playing field
for all races. No mother tongue, whether Malay, Chinese, or Tamil,
predominated.
Fortunately for us, English is one of the world’s leading languages
for access to scientific knowledge. The English-speaking United States,
through open policies, has attracted the world’s leading scholars in
science to teach at American universities.
A little red dot on the world map, Singapore has easy access to sci-
entific and commercial knowledge. Though China has the size and the
geopolitical weight to collaborate directly with almost any economy
in the world, I believe Singapore can add value to China by acting as
a bridge or contact point in parts of the world where China is not yet
established.
Let me illustrate this with a plausible example. Three years ago, I
had the pleasure of conducting a seminar for mid-level government
officers from Brunei at the Lee Kuan Yew School of Public Policy. The
one policy issue at the forefront of their minds was: How does Brunei
develop a self sustaining economy once its oil reserves run out?
A few months later, I made a speech to a delegation from South Afri-
can countries visiting Singapore as guests of the Rajaratnam School of
Singapore–China Collaboration and Partnership in Science and Technology 207
International Studies. The delegates were from Mozambique, Rwanda,

and several other large African states.
Besides rich mineral deposits, these countries are also blessed with
abundant water resources. Their huge rivers could be damned to pro-
duce hydroelectric power.
But who can construct these giant dams? The answer came in a
flash—the Chinese engineers who successfully constructed the Three
Gorges Dam. My finance minister Dr. Richard Hu and I had the unique
experience of visiting the Three Gorges Dam during its construction
phase as guests of the Chinese finance minister.
If we can persuade Brunei and other oil states, South African coun-
tries, and China to get together, a similar Three Gorges Dam can
be built in the strategic heart of Africa to electrify and irrigate the
neighboring states.
How does Singapore fit in? I believe Singapore can assist to mobi-
lize financing and provide project management. As the builder of the
Three Gorges Dam, China would take the lead. Every partner would
bring its knowledge domain to the table.
Brunei and other oil-rich states can diversify from oil to hydro-
electric power, providing a new, clean source of energy for develop-
ing African economies, and provide steady streams of income for
themselves.
I have just outlined “big picture” possibilities. There are also oppor-
tunities for bilateral collaboration. Olivia Lum, founder of Hyflux, the
leading water treatment company, will tell you that the basic mem-
brane research was done in Shanghai laboratories. Chinese PhDs work
at one tenth the salary of their Singapore counterparts.
China is a formidable competitor. Because of her large talent
pool, China is fast generating a high tech, low cost economy. Starting
later, Singapore’s scientific talent pool is more modest. Singapore,
however, has invested in state-of-the-art infrastructure, such as mass
rapid transit systems, giant incinerator plants, deep tunnel sewerage
projects, and deep sea oil drilling rigs.
Like Hyflux, it would make good commercial sense for Singapore
engineering companies to collaborate with Chinese counterparts in
research and design of new projects for third markets. Our investment
in modern infrastructure has over the years yielded valuable operating
data that our statutory boards have simply filed away.
Our Keppels,3 Sembcorps,4 ST Engineerings,5 Creative Technology,6

and future Hyfluxs should engage their Chinese counterparts in explor-
ing third markets for their technology. They can integrate their respec-
tive knowledge domains to compete and win engineering contracts in
third markets against the Americans, the Europeans, the Japanese, and
other BRIC countries.
The Singapore–China Association for the Advancement of Science
and Technology can be the bridge between Chinese and Singaporean
technology companies. It can be the platform for active dialogue and
engagement seeking engineering and technology business prospects
in smaller developing countries.
3
Keppel Corporation is a Singapore-based global company with key businesses
in offshore and marine, property, and infrastructure. See http://www.kepcorp.
com/ (accessed on August 15, 2010).
4
Sembcorp Industries, is a leading energy, water, and marine group and a world
leader in marine and offshore engineering. In addition, it is an established de-
veloper of integrated industrial towns in Asia and a provider of environmental
solutions. See http://www.sembcorp.com/(accessed on August 20, 2010).
5
Singapore Technologies Engineering Ltd. is an integrated engineering group
specializing in innovative solutions and services in the aerospace, electronics,
land systems, and marine sectors. See http://www.stengg.com/(accessed on
August 20, 2010).
6
Creative Technology is the worldwide leader in digital entertainment products
for the personal computer and the Internet. See http://sg.creative.com/ (accessed
on August 20, 2010).
List of Acronyms
ABS Association of Banks in Singapore

AIG American International Group, Inc.
ASEAN Association of Southeast Asian Nations
A*STAR Agency for Science, Technology and Research
AVA Agri-Food & Veterinary Authority of Singapore
BMA British Military Administration

BRIC Brazil, Russia, India, China
BT Business Times, a Singapore newspaper
CAAS Civil Aviation Authority of Singapore

CCP Chinese Communist Party
CEO Chief Executive Officer
CFO Chief Financial Officer
COE certificate of entitlement
CPF Central Provident Fund
CTO Chief Technology Officer
DPM Deputy Prime Minister

DBS Development Bank of Singapore
ECAFE Economic Commission for Asia and the Far East

(United Nations)
210 List of Acronyms
EDB Economic Development Board

EEC European Economic Community
forex foreign exchange
GDP Gross Domestic Product

GIC Government of Singapore Investment Corporation
GLC government-linked companies
GNP Gross National Product
GRC group representation constituency
HDB Housing and Development Board

HR human resources
HSBC The Hongkong and Shanghai Banking Corporation
IE International Enterprise Singapore

IHHI Ishikawajima-Harima Heavy Industries Co., Ltd.
IMF International Monetary Fund
IR integrated resort
JTC Jurong Town Corporation
KOSTRAD Komando Cadangan Strategis Angkatan Darat

(Army Strategic Reserve Command)
LISU Light Industry Service Unit

LKYSPP Lee Kuan Yew School of Public Policy
MAS Monetary Authority of Singapore

MICA Ministry of Information, Communications and the Arts
MITI Ministry of International Trade and Industry (Japan)
MNC multinational corporation
MND Ministry of National Development
MOF Ministry of Finance
MP Member of Parliament
MTI Ministry of Trade and Industry
MRT mass rapid transit
List of Acronyms 211
NAM Non-Aligned Movement

NParks National Parks Board
NTU Nanyang Technological University
NTUC National Trades Union Congress
NUS National University of Singapore
NWC National Wages Council
OCBC Oversea-Chinese Banking Corporation

OUB Overseas Union Bank
PAP People’s Action Party

PLA People’s Liberation Army
PPE philosophy, politics, and economics
PSA Port of Singapore Authority
PSC Public Service Commission
SCAAST Singapore–China Association for Advancement

of Science and Technology
SIA Singapore Airlines
SIFS Small Industries Finance Scheme
SLA Singapore Land Authority
SNEF Singapore National Employers Federation
SME small and medium enterprise
SMU Singapore Management University
SPH Singapore Press Holdings
SVCA The Singapore Venture Capital and Private Equity
Association
TFP total factor productivity
UOB United Overseas Bank

USSR Union of Soviet Socialist Republics
WTO World Trade Organization

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Reprinted with the permission of the Singapore Land Authority.

Product Managers: ISBN-13: 978-981-4336-07-9

Compositor: Cengage Learning products are represented

For product information,

Part I: Toward a Knowledge-based Economy:

Part II: Pillars of the Knowledge-based Economy 91

Part III: Implications of the Singapore

List of Acronyms 209

I t is no secret that Singapore has developed into one of the most

As Dean of the Lee Kuan Yew School of Public Policy (LKYSPP), at

The Secret of the Singapore Success Story

Based on his rich, forty-year experience in Singapore government as

Dynamics of the Singapore Success Story, 4.

Knowledge-driven Economy, 1998.

a “knowledge-based economy.”5 According to Drucker, the applica-

 An information and communication technologies infrastruc-

Ngiam explains that the Singapore success story unfolded over

In five decades (1960–2010), the Singapore economy evolved from

In recent years, Ngiam’s speeches, writings, and interviews have

k­ nowledge-based economy in Singapore. Lastly, I will offer a coherent

ernment ministries, charged with running the department on a day-to-day basis.

Dynamics of the Singapore Success Story

So what is it that we have that others do not to sustain our position

The emergence of a global economy is recognized as one of most important

Part I of this book includes Ngiam’s writing on strategic pragmatism

Viewed from a comparative perspective, the experience of both

In my opinion, [Deng Xiaoping’s] greater contribution to political

Also in this speech, Ngiam puts forward an insightful formula:

In development economics, all countries go through three ­stages and

Put in a larger context by introducing Japan’s experience, Ngiam

­ ccording to Ngiam, it is good governance. “Good governance is based

Our schools and universities can move from teaching acquisition

Over the last fifty years of rapid economic development, Singapore

The Central Provident Fund Board can also be a knowledge

African countries such as yours are blessed with abundant natural

Pillars of the Singapore Dynamics

­ ccording to Ngiam, there are at least three: political and institutional

In addition to political succession, the nurturing and deployment of

Is it any wonder, then, that we have a lopsided state with a strong,

Hence, Ngiam advocates redeploying elites from the public sector

The press, according to Ngiam, is another important institutional

Ngiam offers a solution:

My personal answer is to do a double E degree, that is, ­engineering

and measure, economics teaches one how to calculate risks and

In his speech to the Academy of Principals, Ngiam argues that the

Ngiam has faith in the spontaneous forces of the social sector. To

needs in society and facilitate the emergence of solutions from many

Government facilitates and mobilizes the altruistic intentions of

Government should leave the society alone. Nevertheless, in his

United ­Overseas Bank Luncheon, respectively, on this topic. In fact,

To grow Singapore’s own timber, according to Ngiam, the venture

Venture capital and private equity companies have a crucial role to

The Implications of the Singapore

Following the four-phase growth model developed by Ngiam

[knowledge].”54 Meanwhile, China should also undertake fundamental

The Ngiam Framework for the Dynamics

Booster 2: Good Governance

Booster 1: Strategic Pragmatism

Political and Educational Financial

Institutional and Social and Banking

According to Ngiam, Singapore’s success story is all about a move-

in all economic activities. Reflected in Ngiam’s economic growth

“Report of the Economic Strategies Committee,” 5. See http://www.esc.gov.

Part II: Pillars of the Knowledge-based Economy 91

List of Acronyms 209

k nowledge-based economy in Singapore. Lastly, I will offer a coherent

In development economics, all countries go through three stages and

ccording to Ngiam, it is good governance. “Good governance is based

ccording to Ngiam, there are at least three: political and institutional

My personal answer is to do a double E degree, that is, engineering

United Overseas Bank Luncheon, respectively, on this topic. In fact,

By themselves, these would be monumental tasks testing the limits

the Singapore branch of the Bank of America, he saw an opportunity

1965 generation. I told them of the privations of the Japanese

oment the billions of dollars we spend on our schools, polytechnics,

of Entitlement scheme, which all Singaporeans are now familiar with,

with a Chinese company to finance, build, and operate hydroelectric

Hangzhou may have been breathtaking, it is today’s miniature Japanese

irecting mind of a business, an institution, a charity, or indeed the

erchant class, thinking that they will attempt to bribe us at the drop

New Jerusalem. I invite my younger colleagues to dream their own

T hank you for inviting me to join the Ministry of Finance celebrating