singapore and malaysia these two countries are geographical neighbors but their development paths have not always been the same both countries are dominating economies in the southeast asian region or particularly among asean countries.
Now because of the historical ties between them people often compare these two in many sectors so today let's see how they compare in terms of their economies you might be aware of the fact that malaysia and singapore were a single country you see malaysia was formed on september.
16 1963 by the merger of the federation of malaya with the former british colonies and singapore was one of the 14 states of malaysia but the union was unstable due to distrust and ideological differences between the leaders of singapore and the government of malaysia they often disagreed on aspects like.
Finance politics and racial policies so in 1965 singapore was separated from malaysia and formed an independent nation here the journey of both nations started if we compare both the nations at the beginning both struggled a lot economically but eventually both came out of that.
Phase in their own way for instance 50 years ago singapore was an undeveloped country with a gdp per capita of less than 320 today it is one of the world's fastest growing economies its gdp per capita has risen to sixty thousand dollars making it the sixth highest in the world for a country that lacks territory and.
Natural resources this kind of economic growth is remarkable yet malaysia's case was different unlike singapore malaysia has always been a resource-rich economy and this helped them tremendously in their economic success malaysia used to be the world's largest rubber producer and today is a major.
Palm oil producer the country also has large reserves of oil and natural gas but commodity exports are sometimes very volatile and dependent on the supply and demand of the international market that's why after the 70s the malaysian economy began a transition towards a more multi-sector economy.
According to the world bank the country's gdp per capita has grown from 400 in 1970 to 10 000 in 2020. even though malaysia has performed well in past decades it still has not achieved the high income status which is a gdp per capita of above 12 000 and there are multiple reasons for that you see malaysia is overly dependent on.
Foreign direct investments for its growth and after the financial crisis of 1997 and 98 private investors have taken a backseat malaysia is also spending less on research and development compared to other nations in the region due to this new indigenous business is not taking place in the country.
Many experts believe that due to all these reasons malaysia has fallen into a middle income trap now if you are thinking why singapore didn't end up in a middle income trap then there are some things the country did differently singapore achieved remarkable growth through embracing globalization free.
Market capitalism emphasizing the importance of education and good government policies singapore created an environment that was safe corruption-free and low in taxation in order to attract investors and even though the country is not gifted with natural resources like malaysia it does have a good geographic.
Location singapore is at the center of major shipping routes which connects the west with asia's big economies like china japan and south korea singapore used this advantage to create its shipping industry the port of singapore is now the world's busiest tranship in port.
In terms of total cargo tonnage handle it has become the world's second busiest behind only the port of shanghai convenient location and low taxation also helped the country to become asia's swiss in recent years many assets formerly held in switzerland have been moved to singapore.
The skilled labor force has also helped singapore tremendously from the manufacturing of textiles garments and basic electronics at the beginning to biotech research pharmaceuticals and integrated circuit design singapore has gained high income jobs now even though singapore has achieved.
More economically than malaysia there is a catch singapore has shown how it is possible to create a prosperous society for all citizens but only at a price there has been little room for political freedom and the power and role of civil society has been much reduced.
On the other side malaysia is a parliamentary democracy with a federal constitutional monarchy plus they inherited a british-style civil service which has still been maintained the question of political interference arises from time to time but their legal system is clearly pretty high quality.
Another factor to look at is even though malaysia is stuck in the middle income trap it has followed excellent macro economic management the country consistently has very low inflation and has never had a balance of payments crisis malaysia also has an excellent physical infrastructure with good roads harbors.
And telecommunication networks so even though singapore is ahead still malaysia has managed to achieve significant economic growth in the past few decades which too is remarkable due to this malaysian citizens enjoy an affluent lifestyle compared to most of the asean countries also the world bank estimates that.
Malaysia could escape the middle income trap and enter the league of high-income nations between 2024-2028 along with all the differences both these nations share some common things as well in terms of creating a mixed economy and encouraging privatization malaysia and singapore have much in common.
Both countries moved from strong government-controlled approach to free-market capitalism approach in the 1980s also both countries have encouraged inward direct financial investments and have developed strong financial markets at the end it is quite clear that both singapore and malaysia have shown.
Amazing economic development over the past three decades both are great trading nations taking advantage of their geographical locations at the same time they are developing their own capabilities to manufacture educate innovate and finance other sectors of the economy.
Both governments have followed the good development plan which helped them to pull themselves out of the harsh post-colonial struggle so what do you think about these two neighbors tell us in the comments below and if you are new to this channel do consider subscribing thank you.