Sunday, 26 July 2015

Why Cuba needs to follow the Singapore model

By Debora L. Spar, Published The Straits Times, 24 Jul 2015

In the next few years, the Cuban people will be faced with a huge decision: How to develop their nation. As the Castro brothers fade from the scene and relations with the United States thaw, a new generation of Cuban leaders will be forced to grapple with the inevitable challenges of political and economic reform.

Like the governments of Eastern Europe after the fall of the Berlin Wall, they will have to plot a path from communism to capitalism; like their neighbours across Latin America and the Caribbean, they will have to juggle a historical distaste for Western (and particularly United States) imperialism with a desire for Western goods, technology and capital. Like leaders everywhere, they will almost certainly have to strike a balance between the demands of economic prudence and political expedience, forming institutions that will serve their country over the long run while heeding their citizens' call for more immediate change.

Whoever these new leaders will be and however they will come to power, they will face a panoply of development options and an avalanche of advice. But they would do well, in the early days of their decision-making, to heed the model of another island nation - one dealing with the loss of a legendary leader and that arguably handled its post-colonial development better than any other small country. I'm referring, of course, to Singapore.

Between 1965 and 1991, the tiny city-state grew at an astonishing compound annual growth rate of nearly 14 per cent. Critics of the island's performance accused its celebrated leader Lee Kuan Yew of thinly veiled tendencies towards communism and authoritarianism; they argued that the country's pace of growth was being artificially inflated by investment rates that would quickly prove impossible to sustain. Yet Mr Lee and Singapore outlived, and outperformed, their detractors. The country maintained strong growth throughout the 1990s, stumbling only slightly during the 1997-1998 Asian economic crisis, and achieving levels of per capita income that approached those of the industrialised West. Even in the early years of the 21st century, as Mr Lee slipped from politics, Singapore maintained an average annual growth rate of around 5 per cent.

In retrospect, it is easy to attribute Singapore's extraordinary trajectory to luck, or to a hard-working culture, or to Mr Lee's undeniable record of micromanaging his citizens and quashing dissent. But the real reason behind Singapore's success was the country's unique understanding of what it had to offer the world and how to craft a development strategy around an honest appraisal of those assets.

At Independence, Singapore was little more than a rock in the sea - a small colonial outpost half the size of modern-day Los Angeles, wedged between Malaysia and Indonesia. It had no natural resources, no industrial infrastructure, and a population split among ethnic groups that shared no true common language. It had a deep-water harbour, however, and a port situated at the southern entrance to the strategically important Strait of Malacca. From this port, Mr Lee and his comrades built their nation. They invested all the capital funds they could muster into the port's development. Several years later, they financed repair and refuelling facilities that would induce ships to come - and stay.

Singapore's leaders trained a labour force to service both port and airport, leveraging the island's location to become a regional hub for shipping, commerce and foreign investment. They kept workers compliant and content by investing heavily in housing, developed a sophisticated method of forced savings that channelled the nation's capital into internal investments. It was a system - a carefully analysed, constantly re-examined plan for taking what Singapore had and maximising its use. In contrast, the history of post-colonial development is littered with great visions brought down by limited or mismatched resources. Brazil, for example, has a legacy of over-investing in grand projects (dams, ports, railways) that never meshed with either its assets or the world's needs.

Kenya constructed major fish-processing plants in the 1970s, neglecting to consider that most of the local population had no history of eating fish and that the economy had no means of providing the freezers and clean water that the plants required.

None of this is to say that developing countries such as Cuba need to think small. On the contrary, the lesson from Singapore is that starting from a realistic assessment gives countries the power over time to think big. In the 1980s, for example, Costa Rica leveraged its political stability and extreme biodiversity to position itself as a centre for ecotourism in Latin America and to then entice investment from foreign manufacturers, many of whose executives had first visited the country as vacationers. Similarly, once Botswana had crafted a stable structure of property rights around its underground wealth of diamonds, which elsewhere are typically exported in their rough state, it formed an integrated, profitable industry around polishing and cutting the stones.

The Singaporean model is more powerful than dreaming and more likely to achieve results. And it is widely replicable, not with regard to the details of what Mr Lee and his colleagues did, of course, but with regard to how. They were honest and clear about what their country did and did not have; methodical in their planning and execution; and steadfast in their follow-through. These are lessons that Cuba's next generation of leaders would be well-advised to consider. They should build gradually from the assets that Cuba has - fertile land, an enviable location, and an eager and wealthy diaspora - rather than aim for Utopia.


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