These two decisions proved to be among the most important in our economic history. Promoting exports and promoting foreign direct investments at a time when few other countries were doing the same gave Singapore a decisive advantage. But it was an advantage that Singapore had to work hard to realise. •  The government developed industrial land, put in place infrastructure facilities, reformed labour laws to promote industrial peace, and invested in basic education with emphasis on technical skills relevant to industrialisation. •  Sound fiscal and monetary policies ensured macroeconomic stability and underpinned investor confidence. The two strategies paid off handsomely. •  By 1975, Singapore had established a substantial industrial base, with manufacturing’s share in GDP climbing to 22% from 14% in 1965. •  The economy was at full employment and it was clear that Singapore had to move up the value chain towards more capital-intensive and skill-intensive activities. The compositional change within manufacturing was striking. •  Industrialisation began in the 1960s with factories producing items such as matches, fish hooks and mosquito coils. o  •  By the way, for those unfamiliar, mosquitoes used to spread life-threatening diseases in the tropics in those days until the disease-causing ones were eradicated in 2033 by genetic modification. In any case, these labour-intensive industries saw a steady decline through the 1970s. By the late 1970s and early 1980s, we saw the emergence of strong clusters in higher valueadded electronics, petrochemicals, component and precision engineering.
Like Kashmir, it is difficult to see a definitive solution to the North Korean problem. But this too can be managed. The six party talks have reduced the risk of accidental war. The key actors are rational and, despite their differences, share a common interest in a peaceful resolution of the issue. Kim Jong Il is a master of brinkmanship. But he too is rational and must know that war will lead to the outcome that he fears most, the disappearance of North Korea as a sovereign state. Therefore, while he may go to the very edge, unlike Saddam Hussein, Kim will not deliberately step over it. The North Korean issue is a strong incentive for the US and China to cooperate for their common interest. The risks of miscalculation are perhaps highest over Taiwan. The issue is extremely delicate because it engages the domestic politics of China, US and Taiwan. There is growing tension between economic forces that are integrating Taiwan with the Mainland and Taiwan’s desire for a separate identity. No PRC leadership can ever tolerate a bid for independence by Taiwan. If Taiwan pushes too far, the Chinese must react or be exposed as a ‘paper tiger’. The US stand, and perceptions of the US stand in China and Taiwan, are key to the problem. President Bush has said publicly that he does not support Taiwan’s independence. But the US may still be drawn into a Cross Straits conflict. If this happens, there will be serious consequences for the entire region.