1) The development strategy of Singapore
Singapore is a generally acknowledged showcase in promoting industrialization, even though its
domestic market is too Lilliputian for protection. In both contexts, trade restriction – the principal concern
of WTO/GATT – is conspicuous by its absence.
In fact, any industrial policy is viable, if it neither restricts trade, nor triggers
Forming cross country alliances = good.
Infant Industry Protection triggers
actionable compaint. The secret for success is to design a game with win-win solution, and gain the most
among all players. Singapore succeeded by harnessing the trend in international trade, namely, fragmented
production. Trade allows the South to industrialize through the
division of labor with
the North, rather than
In succinct terms, the twin principles of the strategy are
(a) ‘To leapfrog the region’, and
(b) ‘To create a First World oasis in a Third World region’.
(a), to industrialize for Singapore, a small, remote and pre-industrial state, both
the source of technology and the market for output must be found in the industrial world,
half a globe away.
With itself as the core, the ‘oasis’ organizes the desert nearby into an effective
network, to seek outside opportunities on the bases of division of labor. The litmus test of being
‘fully developed’ that Singapore has passed is
to match the
First World in output per capita
Two implications: First, in the developing world, producers suffer twin disadvantages: both an
initially low productivity relative to the North and the costly transportation to that industrial center they
depend on. These drawbacks can be ameliorated through learning by doing and the improvement of
transportation, respectively. Second, further progress can only come from building alliance, and receiving
compensation as fee for service. The services the
may provide the
include both the reduction in
transportation cost, by the use of its superior connection with the North, and trouble-shooting on the basis
of its own experience.
The implication of this strategy of alliance-building – the presence of two complementary patterns,
– is testable.
, the development proceeds from
stage (like being an entrepôt for natural resources gathered nearby), to the
(like focusing on
the division of labor with the developed North), to ultimately the
stage (like providing
service to industrialize neighboring economies). Trade provides the North the access to the low-wage labor
from the South, and the South the only practical chance to participate in industrial production.
Economic development being path-dependent, with all the facilities left by the British intact, it is