Singapore's Rise and the World Bank
Most countries that work with the World Bank stay borrowers for decades. Singapore borrowed for about ten years, then basically stopped needing the money. That is the short version of this chapter.
This is part of my retelling of “50 Years of Singapore and the United Nations” (Tommy Koh, Li Lin Chang, Joanna Koh, 2015, ISBN: 978-9814713030).
Chapter 27 is written by Janamitra “Dev” Devan, who became Vice President at the World Bank Group (WBG). He tells the story of how Singapore’s relationship with the World Bank went from borrower to quiet period to full-blown strategic partner.
The Early Years: Borrowing Just a Little
Singapore joined the World Bank Group in 1966 as the 104th member. At that point, its GDP per capita was around US$3,150. That put it in the middle of poor Asian countries. Nothing special on paper.
Between 1959 and 1975, the World Bank gave Singapore nine loans covering 14 projects. The first one was a small S$45 million loan in 1963 to build the Pasir Panjang power station. After that, about US$181 million went toward things like port expansion, sewage, power, telecoms, water, and education.
That is not a lot of money compared to what other countries borrowed. France got the very first World Bank loan ever to rebuild after World War II. China opened its doors to the World Bank to help set up its growth path. South Korea relied on the Bank to recover from the devastation of the 1950s war. Singapore used the relationship, but nowhere near as much as those countries.
By a generation later, in 2013, Singapore ranked third in the world with a GDP per capita of almost US$37,000. That is one of the fastest climbs in economic history.
Why Singapore Stopped Borrowing
After 1975, the relationship basically went quiet. J.Y. Pillay, who was Permanent Secretary of the Ministry of Finance in the 1970s, put it simply: Singapore “didn’t require loans.”
There is more to it than that, though. Singapore’s first-generation leaders were deeply skeptical of foreign aid. They believed development had to come from within. From hard work and smart policies, not aid money.
Dev shares a personal memory from 1981. He was a young economist at the Monetary Authority of Singapore. Dr Goh Keng Swee, the former Deputy Prime Minister, hosted weekly lunches for young professionals. During one of these lunches, a discussion came up about paying dues to the World Bank and IMF. Dr Goh asked, almost in frustration: “Why are we even members of the WB and the IMF?” He questioned whether Singapore actually got anything useful from those institutions.
Singapore did stay a member, of course. But that attitude tells you a lot about the thinking at the time.
And it was not just Singapore being difficult. The World Bank and IMF were getting criticized from many directions during that era. Critics said they forced aid on developing countries with unreasonable conditions. Many countries that received aid got stuck in dependency. Singapore’s leaders watched other countries in Latin America, Asia, and Africa stagnate despite receiving aid. They decided to build their own path through savings policies, good infrastructure, rule of law, and smart regulation.
The World Bank also pushed what was called the “Washington Consensus” at the time: free trade, floating exchange rates, free markets. Singapore’s government-led companies did not fit that model at all. World Bank professionals “frowned upon” Singapore’s approach to government-linked companies. As Robert Zoellick later put it, Singapore proved the skeptics wrong “rather decisively.”
Fighting the “Graduation” Label
In the mid-1980s, the World Bank tried to create a new classification system that would label countries as either “developed” or “developing.” Singapore, along with Israel and Hong Kong, would have been classified as “developed” under this system.
That sounds like a compliment, but it was actually a problem. If Singapore got “graduated” to developed status, it would lose the Generalized System of Preferences (GSP) trade privileges. Those trade benefits were too important to Singapore’s economy to give up.
Patrick Daniel from the Ministry of Trade and Industry was tasked with defending Singapore’s position. His argument was clever. Multinational corporations contributed almost 70 percent of Singapore’s GDP. As Patrick put it, “We didn’t care who owned the cow as long as it produced milk.” But if those MNCs left, Singapore would lose a huge chunk of its economy overnight. Singapore’s structure was fundamentally different from a typical developed country.
Lee Hsien Loong, then Minister for Trade and Industry, and Patrick made the case to Jean Baneth, the World Bank’s director overseeing the new classification. Jean was convinced.
The World Bank ended up scrapping the “Developed vs. Developing” labels entirely. Instead, they went with “Low-, Middle-, and Upper-Income” categories. Singapore certainly played a part in that outcome. Singapore stayed “ungraduated.”
The Relationship Heats Up Again
By the late 1990s, Singapore had clearly entered the ranks of advanced countries. Case studies about its success were popping up everywhere. Developing countries around the world wanted to learn from Singapore.
The real turning point came in the 2000s. Two things happened. First, in 2006, Singapore hosted the 61st IMF-World Bank Annual Meetings. This was the biggest global event Singapore had ever organized up to that point.
Second, in 2007, Robert Zoellick became the 11th President of the World Bank Group. Zoellick was a big admirer of Singapore. He had first visited in 1989 with Secretary of State James Baker and developed strong relationships with Singapore’s leaders over the years. He admired how Singaporeans took “an analytical approach on almost everything.”
Dev recalls his own job interview with Zoellick in 2009. Zoellick quizzed him on Singapore and clearly knew a lot about the country himself. At the end of the interview, Zoellick said: “Well, if you come from Singapore, you’ve gotta be good.” Dev got the job as joint World Bank-IFC Vice President.
Zoellick wanted more Singaporeans at the World Bank. He thought they could help counsel clients from emerging markets. And he was right. Dev met heads of state from Africa and Central Asia who constantly asked him about Singapore’s development experience. These leaders were not just looking for loans. They wanted knowledge.
The Singapore Hub
Zoellick saw a win-win opportunity. Singapore was a knowledge economy. The World Bank had vast resources but needed to be less Washington-focused. Why not partner up?
In December 2008, Zoellick signed a deal with the Singapore government to create the “Singapore Hub.” It started with a focus on urban development, combining Singapore’s expertise with the World Bank’s global experience to develop better urban solutions for developing countries.
In 2010, Zoellick told his team to come up with a plan to expand the hub beyond just urban issues. There were skeptics inside the World Bank who thought putting a hub in a developed country like Singapore would look bad. Singapore was not a “client” anymore in the traditional sense.
But Dev pushed for something bigger. He told Peter Ong, Permanent Secretary of the Ministry of Finance, that the hub should be a “microcosm of the WBG.” Why not bring more World Bank functions to Singapore? African clients could come to Singapore to get World Bank expertise. There was no reason to keep everything in Washington.
In September 2011, Zoellick and Deputy Prime Minister Tharman announced the expansion. The enlarged Singapore Hub brought together all three arms of the World Bank Group (the WB, IFC, and MIGA) under one roof. That was a first outside of Washington.
Zoellick also thought the hub would help Singapore’s brand. Having a World Bank presence would boost Singapore as a location for financial and development work. He was happy to later see DPM Tharman selected as Chair of the IMFC, which effectively serves as the IMF’s board of ministers.
What the Hub Actually Does
Since its formation, the hub has grown fast. It provides advisory services to countries in the region and around the world. Projects include helping East Asian economies set up public-private partnership financing frameworks, running training programs, testing urban solutions, and serving as a knowledge exchange center.
Through the hub, the IFC built up a Global Infrastructure Fund that reached US$1.2 billion by end of 2013, beating its initial target of US$1 billion. Singapore’s GIC is an anchor investor.
As of the time this chapter was written, Singapore was in discussions with Jim Yong Kim, the World Bank Group President who came after Zoellick, about the next phase of the hub’s operations.
From Borrower to Partner
The full arc of this story is pretty remarkable. In 1966, Singapore was a small, poor country borrowing relatively modest amounts from the World Bank. By 2014, it had raised its capital contribution from US$38.6 million to US$672 million. Singapore went from a country that could barely afford power stations to one that hosts a World Bank hub advising other countries on how to develop.
Dev ends the chapter by noting that Singapore’s growth experience could help the World Bank pursue its twin goals of ending extreme poverty and building shared prosperity. As he puts it, Singapore could provide “a lesson or two on how smart growth can make them happen faster.”
About the Author
Janamitra “Dev” Devan was formerly the Vice President and Head of Network of the World Bank Group and before that was McKinsey Global Institute’s Director for Asia based out of Shanghai. At the WBG, he oversaw 1,000 professional staff across six global practices and managed a lending portfolio of $10 billion. He was responsible for the WBG’s flagship Ease of Doing Business report and the Women, Business and the Law annual reports. He represented the World Bank at the Financial Stability Board in Basel. He was one of the core members who shaped the Singapore Hub under Robert Zoellick’s direction. He has a PhD in Business Economics and International Business from Indiana University.