Forty-five years after Singapore’s expulsion from a union with Malaysia left Lee Kuan Yew in tears on national television, the economy of the city-state he led to independence is poised to overtake its neighbour.
Singapore’s gross domestic product will cap its fastest annual growth this year since independence, rising as much as 15 percent to about $210 billion, while the economy of Malaysia, a country 478 times its size, will expand 7 percent to $205 billion, government forecasts show. The nations are scheduled to release their 2010 data by February.
The island that former economic adviser Albert Winsemius once said was considered a “poor little market in a dark corner of Asia” is now ranked by the World Bank as the easiest place to do business, has the world’s second-busiest container port, and boasts the highest proportion of millionaire households, according to the Boston Consulting Group.
“Singapore kept on moving to the next level as the world economy evolved and adjusted to market demands and investors’ interests,” said Lee Hock Guan, senior fellow at the Singapore- based Institute of Southeast Asian Studies. “Malaysia was struck by the curse of resource-rich countries: It didn’t optimize its human capital.”
From a low-cost manufacturing centre for companies such as Texas Instruments Inc. in the 1960s, Singapore has become the world’s fourth-largest foreign-exchange centre with a S$1.2 trillion ($932 billion) asset-management industry.
Smaller than New York City and the only Southeast Asian nation without natural resources, Singapore has grown 189-fold since independence in 1965, helping boost GDP per capita to $36,537 last year from $512. Malaysia’s economy expanded at one- third the pace during the same period and had a GDP per capita of $6,975 in 2009, up from $335 in 1965.
Malaysia’s growth fell to an average 4.7 percent a year in the past decade, from 7.2 percent in the 1990s, when former prime minister Mahathir Mohamad wooed overseas manufacturers, built highways and erected the world’s tallest twin towers.
“Development is like a marathon and all policies geared toward it must be sustainable and continuous,” said Thomas Lam, chief economist at OSK-DMG, a venture between Malaysian securities firm OSK Holdings Bhd. and Deutsche Bank AG. “Malaysia runs the marathon like a 100 meter event, so you see the initial spurt but not continuous progress in the race.”
Lam, 35, is one of 386,000 Malaysians who have become permanent residents or citizens of Singapore, a list that includes Health Minister Khaw Boon Wan and Oversea-Chinese Banking Corp. Chairman Cheong Choong Kong.
“Singapore seems to offer greater career opportunity and mobility in my field,” said Lam, the second-most-accurate U.S. economic forecaster for 2008 to 2009 in Bloomberg surveys.
After more than 140 years under British rule, Singapore joined the Federation of Malaysia in September 1963 as Lee and his colleagues sought a bigger common market to cut unemployment and curb communism. The merger survived less than two years amid ideological differences and worsening relations between the United Malays National Organisation, which dominated the ruling Barisan Nasional coalition, and Lee’s People’s Action Party.
“For me, it is a moment of anguish,” Lee said on Aug. 9, 1965, the day Singapore became a sovereign state. “My whole adult life, I believed in Malaysian merger and unity of the two territories.” Lee, 87, was Singapore’s prime minister from 1959 to 1990.