[The following are excerpts from a paper entitled “Lee Kuan Yew: Leading Singapore, Lessons In Leadership,” submitted to Atty. Damcelle Torres Cortes, Professor in Development Management 201 -Managerial Leadership, University of the Philippines – Los Banos (UPLB) – Fidel M. Arcenas]
Economy
Groping for Solutions
The rise of Singapore to the ranks of economic giants was replete with ups and downs, trials and errors, small successes and failures.
Barely a year after Singapore’s independence, Dr. Albert Winsemius – a Dutch economic adviser – observed: “Singapore is walking on a razor’s edge.” [Winsemus first came to Singapore in 1960 when a United Nations Development Program (UNDP) mission, advising Singapore’s government on the country’s industrialization after it reached the limits of its entrepot trade in 1959. He played a crucial role as economic adviser in Singapore for 21 years.]
“We cast around for solutions,“ Lee Kuan Yew said, “and were willing to try any practical idea that could create jobs and enable us to pay our way.” [1]
Tourism
One soft drink manufacturer suggested that Singapore promote tourism since it was labor intensive. The industry would need “cooks, maids, waiters, laundry men, drycleaners, tour guides, and makers of souvenir handicrafts… best of all it needed little capital.”[2] Thus, the Singapore Tourist Promotion Board was created. As expected the tourism industry successfully generated jobs and jump-started livelihood opportunities.
[“To become a strategic leader, you need to become proactive… The object is to start to think and act strategically and to handle the increased complexity resulting from the necessity to integrate numerous elements that are, in some case, far removed from your basic expertise and experience. This process, as (Peter) Drucker taught, requires you to develop expertise outside of your current thinking.”[3]]
Factories and Failures
Tourism wasn’t enough to solve the country’s unemployment. Lee then concentrated on getting factories started. Despite a limited domestic market of 2 million, the government protected locally assembled cars, refrigerators, air conditioners, radios, television sets, and tape-recorders, in the hope that they would later be partly manufactured locally. Businessmen who set up small factories were encouraged to manufacture vegetable oils, cosmetics, mosquito coils, hair cream, joss paper and even mothballs. Hong Kong and Taiwanese investors were attracted to build factories for toys, textiles, and garments.[4]
But everything didn’t turn out smoothly. With insufficient water supply and with an area too small to tolerate pollution of coastal waters, the Economic Development Board’s (EDB) joint venture with a private manufacturer to recycle paper products failed. So did its joint venture for building ships and tankers since Singapore did not produce steel plates and engines. Eventually, Singapore stopped building ships and in its stead concentrated on ship repairing which was more labor intensive.
[“Boldness is not necessarily about go-for-broke, giant-leap projects. More often than not it’s about starting small and gaining momentum…Of course, when you experiment, not everything works out as intended. There are mistakes and false starts. They are part of the process of innovation. What’s critical, therefore, is that leaders promote learning from these experiences.”[5]]
Converting the Baselands
In anticipation to the closure of British military bases, Lee’s government formed the Bases Economic Conversion Department (BECD), and placed it under the Prime Minister’s Office to give the Department more authority in dealing with other ministries. BECD was tasked “to retrain and redeploy redundant workers, take possession of land and other assets the British were vacating, put them to the best use, and negotiate mitigatory aid.”[6]
Lee Kuan Yew was particularly careful with regard to the concessions that the British were willing to extend to Singapore upon their withdrawal. He informed the British government that he was willing to accept whatever financial assistance it would give to Singapore but would not press for them. Lee was more interested in acquiring the assets that they British would rather destroy upon leaving Singapore. This, he said, would promote goodwill and sustain pro-British sentiments in Singapore.
[“Leaders know they have to break down big problems into small, doable actions. They also know that you have to try a lot of little things when initiating something new before you get it right. Not every innovation works, and the best way to ensure success is to experiment with a lot of ideas, not just one or two big ones.”[7]]
The conversion of the naval dockyard to civilian use was successful. Fort Canning, used as bunkers by the British forces during the Japanese invasion, was preserved and the buildings were turned into a clubhouse for leisure and recreation. The Royal Air Force (RAF) Changi air base was expanded thru reclamation and developed, at a cost of $1.2 billion, into what is now the Changi International Airport with two runways. The National University of Singapore (NUS) now occupies what used to be the Pasir Panjang military complex.
The handover was completed in 1971, and Sui Sen, the BECD chairman, also converted many pieces of real estate into commercial use, made easier “by the buoyant world economy, with world trade expanding at about 8 to 10 percent per annum.” [8]“The withdrawal,” Lee said, “was observed with goodwill to both sides. The 30,000 retrenched workers were absorbed by industries we attracted from abroad. When the withdrawal was completed in 1971, our people were quietly confident. There was no unemployment, and no land or building was left idle or derelict. The single British battalion with a squadron of helicopters, together with the Australian and New Zealand battalions…contributed to stability and security.”[9]
Sabbatical at Harvard and Engaging the MNC’s
After Lee Kuan Yew had established the policies to cushion the loss of British military spending, he went to Harvard where he became an honorary fellow of the Kennedy School of Government. It was there that Lee met many scholars and the discussions sparked off many useful and interesting ideas. Of his experience in Harvard, Lee wrote: “I learned much about American society and economy by reading and talking to Harvard Business School professors such as Professor Ray Vernon. Vernon gave me a valuable lesson on the ever-changing nature of technology, industry, and markets, and how costs, especially on labor-intensive industries, determined profits.”[10]
[Maxwell quotes Rick Warren, author of The Purpose Driven Life: “if you want to lead, you must learn. If you want to continue to lead, you must continue to learn. This will guarantee that you will be hungry for ever greater accomplishments. And it will help you to maintain credibility with your followers.”[11]]
After years of trial and error on how best to accomplish his vision, Lee concluded that “Singapore’s best hope lay with the American multinational companies (MNCs).”[12] Taiwanese and Hong Kong entrepreneurs, Lee observed, brought in low technology, while American MNC’s used higher technology in large-scale operations which generated many jobs. Lee explained: “They (American MNC’s) had weight and confidence. They believed that their government was going to stay in Southeast Asia and their businesses were safe from confiscation or war loss.”[13]
This position ran counter to the prevailing attitude towards MNCs at that time. MNC’s then were considered exploiters of cheap land, labor and raw materials. Many Third World Leaders believed the theory that MNC’s were the new instruments of colonialism that left the developing countries selling raw materials to and buying manufactured goods from the advanced countries.
But Lee would not be constricted by any theory or dogma. Singapore, he argued, did not have natural resources which the MNC’s could exploit. All it had were “hard-working people, good basic infrastructure, and a government that was determined to be honest and competent.”[14]
“Our duty,” Lee stressed, “was to create a livelihood for 2 million Singaporeans. If MNC’s could give our workers employment and teach them technical and engineering skills and management know-how, we should bring in the MNC’s.”[15]
[“All leaders challenge the process… Leaders are pioneers. They are willing to step into the unknown. They search for opportunities to innovate, grow and improve.”[16]]
Attracting Foreign Investments
Lee’s government then adopted Winsemius’s recommendation to put up a one-stop agency to sort out all requirements for investors, “whether related to land, power, water, or environmental and work safety. Experts from UNDP and ILO provided technical assistance to the Economic Development Board (EDB) which is in charge of investment promotions with particular focus on the four industries which Winsemius recommended: “ship breaking and repair, metal engineering, chemicals, and electrical equipment and appliances.”[17]
Sui Sen, as the first chairman of the EDB, was given the choice of the brightest and the best of government scholars who had returned from universities in Britain, Canada, Australia and New Zealand. Sui Sen, who was a quiet but outstanding administrator who had the ability to get the best out of those who worked with him, provided the inspiration to these young workers.
[“Grand dreams don’t become significant realities through the actions of a single person. It requires team effort. It requires solid trust and strong relationships. It requires deep competence and cool confidence. It requires group collaboration and individual accountability. To get extraordinary things done, leaders have to enable others to act.”[18]]
The EDB was so successful that it had to break off into different components. The industrial estates section into Jurong Town Corporation and the development finance section into the Development Bank of Singapore (DBS). The banked provided capital venture financing to entrepreneurs.
EDB officers imbibed the values and attitudes of the ministers – a willingness to learn from others and a readiness to accept a assistance from any quarter. That they were able to speak English, which we adopted as a working language, was an advantage. They worked hard to interest foreign investors in the opportunities in Singapore.
Lee told of an anecdote: “When Chin Bock (an EDB officer) first began visiting corporate offices, the CEOs did not even know where Singapore was. He had to point it out on their globes, a little dot at the tip of the Malay peninsula in Southeast Asia. EDB officers would sometimes call on 40 to 50 companies before getting one to visit Singapore. They worked with inexhaustible energy because they felt the survival of Singapore depended upon them. Ngiam Ting Dow, a young EDB director, later permanent secretary of the ministry of trade and industry, remembered what Keng Swee told him, that every time he drove by a school and saw hundreds of children streaming out, he felt downhearted, wondering how to find jobs for them when they left school.”[19]
From defining Singapore’s vision, Lee has successfully inspired a shared vision.
[“Leaders have to enlist others in a common vision…People must believe that leaders understand their needs and have their interests at heart…To enlist support, leaders must have intimate knowledge of people’s dreams, hopes, aspirations, visions, and values.”[20]]
[“That’s why I say that anyone can steer a ship, but it takes a leader to chart the course. Leaders who are good navigators are capable of take their people just about anywhere.” [21]This, according to Maxwell is the “Law of Navigation.”[22]]
The government played a key role in attracting foreign investments to Singapore. It built essential infrastructure, established well-planned industrial estates, extended equity participation in industries, offered fiscal incentives, engaged in export promotion, established good labor relations and sound macroeconomic policies, and set the fundamentals to enable private enterprises to conduct business successfully. Here, as head of government, we see Lee’s quality as a manager with amazing conceptual skill.
[“Conceptual skill is the cognitive ability to see the organization as a whole system and the relationships among its parts. Conceptual skill involves the manager’s thinking, information processing, and planning abilities…It means the ability to think strategically – to take the broad, long term view – and to identify, evaluate, and solve complex problems.”[23]]
The first major break in foreign investments came in October, 1968 when Texas Instruments set up a plant to assemble semiconductors – then a high-technology product. It was able to start production within 50 days after its decision to invest in Singapore. National Semiconductor soon followed, then Hewlett-Packard.
By the end of 1970, the government had issued 390 pioneer certificates – giving investors tax-free status for up to five years, extended to 10 years for those issued after 1975.
Most foreign investors, who were anxious to venture in Taiwan and Hong Kong which were closer to China – then grappling with Mao’s Cultural Revolution, decided to head for Singapore.
“By the 1970s,” Lee wrote, “glowing reports on Singapore had appeared in American magazines, including US News & World Report, Harper’s and Time. In 1970, General Electric (GE) set up six different facilities for electrical and electronic products, circuit breakers, and electric motors. By the late 1970s, GE was to become the largest single employer of labor in Singapore. American MNC’s laid the foundation for Singapore’s large high-tech electronics industry.”[24]
As Singapore moved into the early 1980s, it had overcome its unemployment problems. But it had to contend with an emerging predicament: how to improve the quality of the new investments and with it the education and skills levels of its workers. In 1997, Singapore had 200 American manufacturing companies with over S$19 billion worth of investments in book value. They were the largest foreign investors and they upgrade their technology and products, enabling them to reduce their unit labor costs while paying higher wages without losing competitiveness.
Becoming a Financial Center
How Singapore became a financial center is another interesting story. Sometime in 1968, Wisenmius called up his friend Van Ornen who was the vice president of Bank of America branch in Singapore. Wisenmius told Van Ornen that Singapore wanted, within 10 years, to be the financial center in Southeast Asia. Van Ornen told Wisenmius to see him in London, saying “In five years you can develop it.”[25]
When they met in London, Van Ornen took Wisenmius to a large globe and said: “…the financial world begins in Zurich. Zurich banks open at 9 o’clock in the morning, later Frankfurt, later London. In the afternoon Zurich closes, then Frankfurt and London. In the meantime, New York is open. So London hands over financial money traffic to New York In the afternoon New York closes; they had already handed over to San Francisco. When San Francisco closes in the afternoon, the world is covered with a veil. Nothing happens until next day, 9:00 A. M. Swiss time, then the Swiss banks open. If we put Singapore in between, before San Francisco closes, Singapore would have taken over. And when Singapore closes, it would have handed over Zurich. Then, for the first time since creation, we will have a 24-hour round-the-world service in money and banking.[underscoring supplied]”[26]
Wisenmius submitted a report on his proposal to EDB chairman Sui Sen. After studying the project and weighing the risks, Lee Kuan Yew told Sui Sen to go ahead.
[“Leaders are dreamers. Leaders are idealists. Leaders are possibility thinkers. All enterprises, big or small, begin with imagination and with the belief that what’s merely an image today can one day be made real in the future. Turning possibility thinking into an inspiring vision – and inspiring vision that is shared – is the leader’s challenge.”[27]
Singapore made a modest start with an offshore Asia dollar market – the counterpart of the Eurodollar market. It was simply called “the Asian dollar market.” In 1997, the Asian dollar market exceeded US$500 billion, nearly three times the size of Singapore’s domestic banking market. The growth was phenomenal since it fulfilled a market need. International financial transactions increased exponentially as trade and investments spread across the world to include East Asia, with Singapore as one of its key centers.[28]
Singapore attracted international financial institutions by abolishing withholding tax interest income earned by nonresident depositors. By 1990, Singapore had become one of the larger financial centers of the world, with its foreign exchange market ranking fourth in size after London, New York and only slightly behind Tokyo.[29]
Lee Kuan Yew explained: “The foundations for our financial center were the rule of law, an independent judiciary, and a stable, competent, and honest government that pursued sound macroeconomic policies, with budget surpluses almost every year. This led to a strong and stable Singapore dollar, with exchange rates that dampened imported inflation.”[30]
Assessing Success
In assessing Singapore’s economic success, Lee Kuan Yew cited the following as key factors:
1. Planning for the broad economic objectives and the target periods within which to achieve them;
2. Faith in its young officer who had integrity, intellect, energy, drive and application;
3. Quality of the people in charge; and
4. Confidence
“If I have to choose,” Lee declared, “one quality to explain why Singapore succeeded, it is confidence. This was what made foreign investors site their factories and refineries here. Within days of the oil crisis in October 1975, I decided to give a clear signal to the oil companies that we did not claim any special privilege over the stocks of oil they held in their Singapore refineries. If we blocked export from these stocks, we would have enough oil for our own consumption for two years, but we would have shown ourselves to be completely undependable. I met the CEOs or managing directors of all oil refineries – Shell, Mobil, Esso, Singapore Petroleum, and British Petroleum on 10 November 1973. I assured them publicly that Singapore would share in any cuts they imposed on the rest of their customers, on the principle of equal misery. Their customers were in countries as far apart as Alaska, Australia, Japan, and New Zealand, besides those in the region.”[31]
“This decision,” Lee stressed, “increased international confidence in the Singapore government that it knew its long-term interest depended on being a reliable place for oil and other business.”[32]
By the 1990s, Singapore – with a total refining capacity of 1.2 million barrels per day – became the world’s third largest oil-refining center after Houston and Rotterdam; the third largest oil trading center after New York and London; and the largest fuel oil bunker market in terms of volume.[33]
As a leader, Lee Kuan Yew, exhibited leadership qualities as he transformed a tiny island into one of the world’s leading economic players that his constituents, foreign investors and governments can trust.
[“Honest, forward looking, inspiring, and competent; these are the characteristics that have remained constant over more than twenty years of economic growth and recession, the surge in new technology enterprises, the birth of the World Wide Web, the further globalization of business and industry, the ever-changing political environment, and the expansion, bursting, and regeneration of the Internet economy. The relative importance of the most desired qualities has varied somewhat over time, but there has been no change in the fact that these are the four qualities people want most in their leaders.
“Because these findings about the characteristics of admired leaders – people would be willing to follow – have been so pervasive and so consistent, we’ve come to call this “The Kouzes-Posner First Law of Leadership.
“If you don’t believe in the messenger, you won’t believe the message.”[34]]
[J. C. Maxwell cited the value of trust as the Law of Solid Ground, saying “trust is the foundation of leadership.”[35]
Maxwell quoted Craig Weatherup, who retired as founding chairman and CEO of the Pepsi Bottling Group, as saying: “People will tolerate honest mistakes, but if you violate their trust you will find it very difficult to ever regain their confidence.”[36]]
[1]Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc
[2] Ibid
[3] W. A. Cohen;A Class with Drucker;AMACOM, NY
[4] Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc
[5] J. M. Kouzes & B. Z. Posner, The Leadership Challenge, 4th Edition, published by Jossey-Bass
[6] Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc
[7] J. M. Kouzes & B. Z. Posner, The Leadership Challenge, 4th Edition, published by Jossey-Bass
[8] Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc
[9] Ibid
[10] Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc.
[10] Ibid
[11] J. C. Maxwell; Leadership Gold; Thomas Nelson, Inc.
[12] Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc
[13] Ibid
[14] Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc.
[15] Ibid
[16] J. M. Kouzes & B. Z. Poser, The Leadership Challenge, 4th Edition, published by Jossey-Bass
[17] Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc.
[18] J. M. Kouzes & B. Z. Posner, The Leadership Challenge, 4th Edition, published by Jossey-Bass
[19] Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc.
[20] J. M. Kouzes & B. Z. Posner, The Leadership Challenge, 4th Edition, published by Jossey-Bass
[21] J. C. Maxwell; The 21 Irrefutable LAWS OF LEADERSHIP; Thomas Nelson, Inc
[22] Ibid
[23] R.L. Daft; New Era of Management;CENGAGE Learning Asia Ptd. Ltd.
[24]Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc.
[25]Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc.
[26] Ibid
[27] J . M. Kouzes & B. Z. Posner, The Leadership Challenge, 4th Edition, published by Jossey-Bass
[28] Lee Kuan Yew; “From Third World to FIRST”; HarperCollins Publishers, Inc.
[29] Ibid
[30] Ibid
[31] Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc.
[32] Ibid
[33] Lee Kuan Yew, “From Third World To FIRST,” HarperCollins Publishers, Inc
[34]J . M. Kouzes & B. Z. Posner, The Leadership Challenge, 4th Edition, published by Jossey-Bass
[35] J. C. Maxwell; The 21 Irrefutable LAWS OF LEADERSHIP; Thomas Nelson, Inc.
[36] Ibid
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