SM Lee Hsien Loong at the Nazarbayev University Lecture

Minister of Science and Higher Education Sayasat Nurbek
President of the University, Professor Waqar Ahmad
Faculty members
Distinguished guests
Ladies and gentlemen 

I thank the Minister and the President for your very generous introduction and very warm remarks.

I am honoured by Nazerbayev University’s conferment of an Honorary Professorship, and by your invitation, to address the University today.

Ties between our countries

Ties between Singapore and Kazakhstan, as you have heard, stretch back three decades. As Senior Minister, Mr Lee Kuan Yew visited Kazakhstan in September 1991, at the invitation of then-President Nursultan Nazarbayev. Mr Lee addressed the Supreme Soviet, and it was on the eve of the dissolution of the Soviet Union. And he spoke on economic policy and Kazakhstan’s transition to a free-market economy. From there our engagements grew, and we established formal diplomatic relations in 1993. More recently, we exchanged State Visits in 2023 and 2024, and also exchange visits by our parliamentary leaders. 

Nazarbayev University (NU) itself has a longstanding partnership with the Lee Kuan Yew School of Public Policy (LKYSPP) in Singapore. Since 2013, NU’s Graduate School of Public Policy has partnered the Lee Kuan Yew School to train more than 800 Kazakh officials in leadership and governance. And Singaporean academics have also played a role in NU’s development. For a decade (2015-2025), the Dean of NU’s Graduate School of Public Policy was a Singaporean – Professor Hui Weng Tat from the Lee Kuan Yew School. And currently another Singaporean, Professor Ng Huck-Hui, is NU’s Vice President and Dean of its School of Medicine. I just met Professor Ng, and he is here with us today.

I hope that my visit today will reinforce these warm ties between our countries.

Differences and Similarities

Singapore and Kazakhstan are very dissimilar countries. Singapore is a tiny island, a maritime nation surrounded by water, bereft of natural resources. Kazakhstan is a vast, landlocked country, rich in all kinds of energy and minerals in the ground. We are 6,000 km apart – one in the Asia Pacific, the other in Central Asia.

Yet, we do share certain things in common. Both have neighbours much bigger than ourselves. Both gained independence after splitting off from larger federations, and yet retain close ties. Kazakhstan with the former Soviet Union. Singapore from Malaysia. We both seek good relations with our neighbours, but also reach beyond our immediate regions to build links all over the world.

Between Kazakhstan and Singapore, the volume of trade and investment is still modest. And yet in an interconnected world, global developments and issues affect all of us. With multilateral frameworks under stress, countries need to develop new partnerships with like-minded countries whose interests are aligned. We also need to seek out fresh opportunities for economic cooperation beyond traditional trade and investment partners. Kazakhstan and Singapore therefore have much to gain by closer co-operation, and much to learn from each other’s experiences.

Singapore’s Economic Development Experience

I have been asked today, to talk about Singapore’s approach to developing our economy, and how we have built and maintained economic competitiveness. I propose to describe Singapore’s development journey since the 1950s. What key policies we pursued; how we approached our challenges; how we got here; and how we plan to move forward.

I am very conscious that a country’s economic strategy depends on its geography, history, its culture, and its strategic situation. Singapore’s experience may not be directly relevant elsewhere. We do not claim to have all the answers, not even to our own problems. Nevertheless, I hope you will find something of interest in my story.

Entrepot Trade

Singapore is located at the tip of the Malayan Peninsula, at the Southern end of the Strait of Malacca. It lay along the ancient maritime silk route between China and India. It has therefore long been a trading post, though over the centuries, Singapore’s importance waxed and waned.

A major turning point came 200 years ago, when the British arrived and built a free port in Singapore. Singapore swiftly grew into a thriving entrepot. It facilitated trade between Britain, India, Southeast Asia and the Far East, especially after the Suez Canal opened in 1869. And this was the beginning of modern Singapore.

Seeking a Larger Domestic Market

But after World War II, the entrepot trade began to stagnate. Communist China was closed off from the world, and very poor. Regional countries, which exported rubber, copra, tin, and spices through Singapore, were increasingly looking to bypass us, and trade directly with their end markets.

And meanwhile, Singapore was experiencing a post-war baby boom. In the early 1960s, Singapore had the busiest maternity hospital in the world – Kandang Kerbau Hospital, I was born there, like many Singaporeans. We desperately needed to create jobs for a young and growing population.

Singapore’s leaders believed that the solution was to industrialise the economy – to start labour-intensive manufacturing industries to create jobs and develop the economy; it was also to join the Federation of Malaya, which later became Malaysia – to create a larger domestic market that would make our industries viable.

And hence Singapore joined the Federation of Malaysia in 1963.

Unfortunately, this merger failed. The larger domestic market never materialised. There were also other deep political problems and communal tensions. Two years later, Singapore separated from Malaysia to become an independent nation.

MNCs, Export-orientation, International Financial Centre

This was a major turning point.

As one of our founding fathers said, having previously convinced them­selves that an independent Singapore could not survive, they now had to spend the rest of their lives proving themselves wrong.

The leaders decided that industrialisation and labour-intensive manufacturing was still the way forward. But now without a domestic market, import substitution no longer made sense. We had to manufacture for export – not just to the region, but to the world. And that meant we had to be internationally competitive – both as the individual firms, as well as the whole economy.

We decided to leapfrog the region and develop export markets in the developed economies in Europe, America and Japan. We adopted English as our common working language. We aggressively sought investments from Multi-National Corporations (MNCs). Only MNCs had the technology, management expertise, competitive products, and market reach to make this strategy work, and generate well-paying jobs for our population. We did our best to help the first MNC projects do well. Their success attracted more investments. MNCs became a major engine of growth.

We also decided to make Singapore an international financial centre. We were in the right time zone to host an offshore Asian dollar market, inspired by the offshore Euro dollar market. We would host international financial transactions after business in the US closed, and before business in Europe opened the next day. We convinced foreign banks that we could provide the stable conditions, the good infrastructure and skilled professionals that they needed, along with strong rule of law and competent regulatory institutions. The foreign banks set up here. Our financial industry grew beyond supporting our own economy to service the region around us, which was also taking off.

Though entrepot trade was reaching its limits, we did not give up on our port. We invested in modern port infrastructure, started containerisation earlier than other ports, and aimed to become a major node in global maritime trade, which we believed would continue to grow.

And fortunately, it turned out so.

To do all this, we had to abandon the old adversarial model of labour-management relations. We persuaded the trade unions and employers to instead form a tripartite partnership, three-way partnership, between the unions, employers and government. The three partners built trust in one another, adopted a win-win approach, and cooperated to enlarge the economic pie. We set up a tripartite National Wages Council to make annual wage recommendations. These set expectations for businesses and workers, guided wage negotiations and prevented wage inflation.

These strategies succeeded. Unemployment fell, incomes rose. The economy took off, creating good jobs for our people.

Corrective Wage Policy, 1985 Recession, Moving up the Value Chain 

We started in 1965, by the late 1970s, our economy had reached a transition point. Unemployment had almost disappeared. The economy was experiencing labour shortages. During the years of rapid growth, the National Wages Council had restrained wages. Now wage levels were too low. Firms had little incentive to raise productivity or invest in workers. For our economy to develop and upgrade further, we needed to change course.

So the Government launched a deliberate “corrective wage policy” to raise wages significantly. The aim was to push companies towards higher-tech, higher value-added activities. And this worked for several years, as the economy continued to boom. But the wage policy overshot.

In 1985, external conditions changed. Singapore suddenly entered a deep recession, our first since independence. We studied the problem, and concluded that we had allowed our business costs, especially wage costs, to go way out of line. And Singapore had become internationally uncompetitive. A painful correction was necessary.

The textbook answer to this situation would have been to let the Singapore dollar depreciate, and allow domestic inflation to erode the purchasing power of nominal wages, in order to restore competitiveness by stealth. We did not think this was a good solution. We felt that would undermine workers’ trust in the government, and weaken the tripartite partnership.

The alternative, cutting wages directly, was politically impossible, not even in Singapore.

Fortunately, Singapore had a third option. We had a compulsory national retirement savings scheme – the Central Provident Fund (CPF). And in the years when wages were rising sharply, the Government had steadily raised contributions by workers and employers to this Central Provident Fund. By 1985, the contribution rate had reached 50% of wages. 50% of your salary was paid into a mandatory personal retirement savings account. Cutting this rate would lower wage costs without reducing workers’ take-home pay. It was still politically difficult, but doable. We bit the bullet and cut the CPF contribution rate significantly. The effect was an immediate 12% reduction in wage costs. This drastic action, coupled with severe wage restraint, brought our labour costs back into line, and restored our competitiveness.

Singapore recovered quickly from the recession. We went back to growing at 10% every year. But restored cost-competitiveness was not the only factor.

After the recession, we shifted our economic strategies. We pushed for higher value-added, tech-intensive investments. Beyond manufacturing projects, we started getting MNCs to set up their overseas and regional headquarters in Singapore. We got overseas headquarters here, operational headquarters – to manage their regional activities; and to do product development, market research, human resources, and finance work out of Singapore. We also promoted the export services sector – for examples, in transport and logistics, hospitality and tourism. We invested heavily in reskilling our workers, as the nature of jobs changed. We restructured our taxes, lowering personal and corporate tax rates and introducing a goods and services tax, to spur enterprise and create a light but progressive tax system.

The aim was to shift the economy towards more complex activities, which our increasingly well-educated workforce could perform, and activities that linked Singapore more closely to our region, which was also taking off.

Together, these measures delivered sustained strong growth for another decade, until the Asian Financial Crisis (AFC) in 1997/1998.

The Asian Financial Crisis

The Asian Financial Crisis severely affected the Singapore economy. We were at ground zero – the crisis had started in Thailand, then spread to Malaysia and Indonesia, and beyond. Many of these countries had overborrowed in US dollars, ran into balance of payment crises, and had to call in the IMF. But Singapore ran a healthy trade surplus and had no nett borrowings. And hence we did not experience any capital flight. Instead, there was a flight to safety – capital flowed into Singapore, and the Singapore dollar actually appreciated modestly.

In the midst of the crisis, we took advantage of this confidence in Singapore to transform our financial sector. We had grown our financial sector steadily by being very careful and cautious, taking minimal risks and keeping everything under tight control. But to take it the next step forward, our regulators needed to become less risk averse. We had to loosen up in a controlled way, in order to inject more vibrancy and create more opportunities in the financial industry. And we judged that we now had accumulated the experience and the credibility to do so. So, we carefully shifted our regulatory approach from tight regulation to a more risk-based supervisory regime.

The whole process took 4-5 years. It made Singapore more attractive to global financial institutions, which started moving more activities here. We became a major international financial hub, linking up with Tokyo, Hong Kong, New York and London.

2000s to the Present Day

At around the same time, we started to develop a knowledge-based economy. We built up research and development (R&D). We invested patiently and steadily in both basic and applied research. This supported advanced manufac­turing industries like semiconductors and biomedical, which became important contributors to the economy. It also spawned new startups based on the R&D advances. We improved our education system, to create more pathways for diverse talents and interests, and to prepare Singapo­reans for jobs that required critical thinking, innovation, and lifelong learning. To support the growing economy, we allowed in a controlled, steady flow of foreign workers. We made it easy for companies to bring in skilled professionals with the talent and expertise that their businesses needed. And these foreigners complemented our own workforce, and enabled companies to create more good jobs for Singaporeans. We invested in enabling infrastructure. Physical infrastructure – new airport terminals, a new integrated and automated container port, high-quality public transport and public housing. Digital infrastructure like Information Technology (IT), a nation­wide fibre network for broadband internet, mobile networks, and digitalised Government services.

These moves carried our economy from the early 2000s to the present.

The Present: Another Turning point

Now, we are at another turning point.

Singapore prospered not just because of our policies and strategies. We were helped greatly by favourable external conditions that prevailed for most of the six decades since independence. There was a functioning, rules-based multilateral trading system. Most countries shared a broad desire to pursue economic integration, win-win partnerships and mutual prosperity. In the Asia Pacific region, the US was the dominant power, ensuring regional security and enabling countries to grow and prosper and compete in peace. From the 1980s onwards, China re-entered the global economy and grew rapidly – but still within this same framework of Pax Americana. And this created the best of both worlds for Asian countries. These factors enabled Singapore to link up with the regional and global economies and to grow steadily.

But the strategic environment has now changed significantly. Major power rivalry is now intense. The US is reassessing its approach to the world. It is no longer willing to play the same global role as before, whether in security or trade. National security and resilience now take precedence over economic well-being. Trade dependencies are being weaponised. Multilateralism is breaking down.

This is a much less conducive environment for countries to grow and develop in.

The Way Forward

What policies and strategies should Singapore adopt in this environment?

We have just concluded an Economic Strategies Review, rethinking our position. We formed a tripartite committee, involving government ministers, business leaders, and union representatives. We have periodically convened such committees, especially during major turning points. They are invaluable not just for generating new ideas, but also to build consensus and commitment amongst businesses, unions and the population on the way forward.

What are some of the key things we must do?

Firstly, Singapore must continue to be open and outward looking. Bigger countries may be able to promote self-sufficiency by erecting trade barriers to protect their domestic markets. But for Singapore, closing ourselves off and turning inwards is simply impossible. We will always have to do business with the world, even as we diversify and secure our own supply chains. Hence our emphasis on growing ties with non-traditional partners, such as Kazakhstan and the Central Asian economies. In fact, even bigger countries emphasising resilience and security still cannot avoid having to trade with others, and to cooperate with like-minded and trusted partners. And this creates opportunities for Singapore to retain a niche for ourselves, and earn a living in the world, provided we remain competitive and trusted, and possess capabilities that make us useful to others.

Secondly, we must continue to support multilateralism. Multilateralism remains important, and there still needs to be rules that apply to everybody, big and small. There still exist many countries that uphold the WTO framework, and Singapore will work with them. And together, we can pursue pragmatic reforms to make the WTO more effective. The first best solution – reaching a consensus among all WTO members – has too often become a mechanism for obstruction and paralysis. But second-best solutions – coalitions of the willing, advancing shared interests but still within the WTO framework – are workable and important. For example, Singapore co-convened (with Japan and Australia) plurilateral talks on e-commerce under the WTO. This resulted in the WTO Agreement on Electronic Commerce, the ECA. In March, 66 WTO members adopted interim implementation pathways for this agreement, including Kazakhstan and Singapore. Such partnerships supplement the multilateral framework, and are especially valuable to small and middle-sized economies.

Thirdly, domestically, we will maintain our approach of combining strict market discipline with an activist state. We have long relied on market forces to make our firms and economy efficient and competitive. Wherever possible, we have achieved social and political objectives not by imposing administrative requirements, but by harnessing market forces and aligning economic incentives. The free-market economy incentivises our people to work hard and to do well. It is the impetus for wealth creation and progress.

But the Government also plays an important role setting the overall framework for the free market, and creating the conditions for enterprise to thrive – our government has actively invested in infrastructure and skills, promoted new economic activities, developed capabilities, opened up new markets overseas, and overcome market failures and coordination problems. While industrial policy has come in and out of fashion in other countries, in developed economies, Singapore has consistently practised this form of industrial policy for decades.

Fourthly, Singapore must remake our economy, again and again. This will certainly require state policy and active intervention. For example, to encourage firms to embrace AI and reap its benefits, and to ready our workers for the rapid changes and disruptions that AI will bring. This means strong state support to build up continuing educa­tion and training for workers, and to help displaced workers or those who are in transition to find new jobs and careers. We must also continue investing in and deepening capabilities in areas where Singa­pore is strong. For example, our air hub, our container port, and our financial sector. These activities themselves must change. They must embrace technology and innovate, to transform the way they operate and grow, and take them to the next level. We will also foster a dynamic enterprise ecosystem, and help Singapore-based companies succeed globally. MNCs remain important to us, but they need to be comple­mented by successful companies with Singaporean roots. And in all these areas, the Government can and will play an enabling role.

Finally, and most critically, Singaporeans must stay united. Our society must not be split by racial or religious differences, frictions between old and new citizens, or divides between rich and poor. We are a multi-racial society. We also depend heavily on immigrants and foreign workers to top up and complement our own population. And as our society matures, social mobility will tend to diminish. Hence, we must be especially watchful of these fault lines. For us to stay united, growth has to be inclusive, and has to benefit everyone. The fruits of growth must be shared broadly and equitably. No one should be left behind. And hence the importance of strong and effective social policies, for example, public housing, public healthcare, public education.

Social and political cohesion has always underpinned Singapore’s economic success. Singapore is a country, and not just a city or an economy, unlike Hong Kong, or Dubai, or London. The Government has been able to pursue sound policies, and make tough trade-offs in the country’s long-term interest, because Singapore’s politics has worked. We have maintained trust between the population and its leaders. Citizens have confidence their leaders will deliver effective government and make good decisions on their behalf. The leaders have delivered on their promises, retained public support, and been able to win renewed mandates in successive elections. And this has helped us to recruit capable, committed individuals to enter politics, to serve the nation and deliver the quality of government that citizens expect and deserve. This has created political stability, and given leaders the latitude to pursue difficult and at times, even radical policies, and still carry the public with them. This has long been a precondition of our economic success.

We are thankful to have kept this up, now for over six decades, and the present generation is doing its best to sustain this virtuous cycle of good politics and good policies into the future.

Conclusion

So, ladies and gentlemen, I have tried to give you a sense of how Singapore has developed our economy and kept it competitive. What our considerations and approaches were, the difficulties we encountered, and how we tackled them.

Singapore has not progressed in a straight line. We have repeatedly had to reinvent ourselves, in order to overcome setbacks and changed circumstances, and resume our journey forward. In the current uncertain and troubled world, we have to respond with equal resourcefulness and resolve.

Kazakhstan and Singapore face quite different circumstances. Singapore’s policy choices reflect our unique context. Kazakhstan may well have to make different choices.

But what is more broadly applicable is the need to build systems capable of continuously adapting and readapting, based on strong fundamentals like state capacity, market discipline, and inclusive policies. So that when circumstances change, or when policies fail to work as intended, we can adjust and move forward together. That is what Singapore has had to do, again and again. And many other countries too.

I hope through exchanging views and learning from each other’s experiences, Kazakhstan and Singapore will both find better ways forward, and so improve our peoples’ lives.

Thank you very much.