Quora Answer: How Did Singapore become the Hub of Banking?

The following is my answer to a Quora question: “How did Singapore become the hub of banking?”

There is a tremendous amount of literature on how Singapore became a finance centre.  In summary, the foundations of it can be found in the policies of Lee Kuan Yew, and the pioneer generation of policy makers.

Firstly, in a time when much of newly independent Asian and African nations were playing the nationalist card, including Malaysia, Singapore was ahead of the curve in embracing globalism.  Some countries were busy tearing down the civil institutions of their “colonial oppressors”.  Singapore built on whatever they inherited from the British.  We took the pragmatic approach, not the emotional one.  An example of this was in Lee Kuan Yew getting soft loans and investment commitments from Japan, barely a generation after the Japanese Occupation.  Instead of ostracising them, as much of East Asia still did, he used it as a bargaining chip.

Secondly, there was the entire social engineering that dragged this population into the developed world.  He sold the people a vision of an independent Singapore that was greater than the sum of its parts, and he had the credibility that the people believed him.  This, coupled with the PAP’s emphasis on incorruptibility and rule of law, made Singapore an attractive place to do business in a swamp of rabid nationalism, insurgency and corruption.  Whilst the argument is that Singapore’s unique position gave it an advantage, this does not apply as much in banking and finance.  Singapore is a financial power that punches way above its weight because of farsighted policies that have been, and continue to be put in place.

For example, Singapore’s financial institutions are exceptionally sound, with MAS insisting on a reserve that is higher than even the US.  We are amongst the first and foremost in implementing Basel II and III.  Our tax regime taxes consumption, not wealth accumulation.  We facilitate fund transfers and have no currency controls.  Most importantly, we do not sit on our laurels, but are always anticipating storms over the horizon, and implementing initiatives that are ahead of the curve, including exploring early technology adoption and progressive policy making.  Whilst we have the advantage of being at the crossroads of Asia, it is our good governance and credibility that gives others confidence to park their wealth here.