(April 13): Senior Minister Lee Hsien Loong’s essay, Microeconomics in Public Policy: A Practitioner’s View, published on March 31 in the Singapore Economic Review, matters not because it unveils a dazzling new economic theory, but because it does something far rarer: it explains, with unusual clarity, why Singapore works. Its core argument is simple. Governments should respect incentives, price scarcity honestly, and help citizens in ways that do not destroy the very discipline that keeps a system alive. Lee’s three rules are straightforward: use market forces when designing policy, price scarce resources instead of allocating them by bureaucratic whim, and deliver support through cash or cash-like transfers instead of blunt subsidies. Adam Smith would have recognised the logic immediately. What is unusual is that Singapore built a state around it.

That is the first lesson for Asean. Singapore did not become Singapore by choosing between free markets and state intervention, but by mastering the harder craft of combining both. The state intervenes heavily, yet does so with economic literacy. It builds housing, but prices it with market awareness. It shapes healthcare, but still insists on co-payments, savings and insurance discipline. It limits cars through Certificates of Entitlement (COEs), prices water to reflect long-run scarcity, and then cushions the blow with targeted support. This is not laissez-faire. It is not socialism. It is technocratic realism.

Singapore’s record gives that realism credibility. Its Housing and Development Board (HDB) says it has built more than one million homes and houses about 80% of Singapore’s resident population, while its 2023/24 household survey found that over nine in 10 HDB households own their homes. In healthcare, Singapore’s Ministry of Health says the public system is organised around three healthcare clusters and 11 public hospitals. Meanwhile, World Bank data show Singapore’s health expenditure remains low as a share of gross domestic product by advanced-country standards. The point is not that markets solve everything. It is that social policy collapses when governments pretend incentives do not matter.

The hardest edge of Lee’s essay is its honesty about scarcity. Land is scarce. Road space is scarce. Water is scarce. Public money is scarce. The real question is not whether scarcity exists, but whether governments have the courage to admit it. Much of Southeast Asia still prefers make-believe. We underprice politically sensitive goods, subsidise too broadly, create bureaucratic exceptions, and then act surprised when debt grows, waste multiplies and reform becomes politically radioactive. Indonesia’s long history with fuel subsidy reform is a case study in this habit: the economics were widely understood, but reform kept colliding with fear of public backlash. France’s Yellow Vest revolt and Chile’s 2019 unrest offered the same warning from outside the region: even economically rational pricing can explode when trust is thin and the burden feels unfair.

This is where Lee’s essay becomes more than a tidy policy paper. It is really about legitimacy. Pricing scarcity is the easy part. Convincing citizens that the pricing is fair, necessary and not merely another elite extraction scheme is the hard part. Singapore could raise water prices and pair them with U-Save rebates because Singaporeans broadly believed the state was competent enough to manage the pain honestly. That trust did not come from slogans. It came from decades of relatively clean administration, institutional seriousness and a public service built to attract capable people rather than drive them away. Transparency International’s 2025 Corruption Perceptions Index ranked Singapore third in the world. That is not cosmetic. It is structural. You cannot run first-rate policy on third-rate credibility.

There is a broader Asian lesson here. The region’s best-performing states did not rise by abolishing markets. Post-war Japan, South Korea during its export-drive years, and Taiwan in its industrial ascent all used strong states to steer markets, reward performance and discipline waste. Singapore took that logic and refined it with extraordinary consistency. Lee’s essay belongs to that tradition. Its message is that public purpose and market logic are not enemies. The state can set the architecture, but incentives must still do the heavy lifting. That is why Singapore’s institutions often look strange to ideologues and perfectly sensible to practitioners.

If there is one country in the region standing at the crossroads of this exact transition, it is Malaysia. We should read this essay carefully. We are still too fond of the theatre of compassion and too wary of the mechanics of discipline. We often act as though low prices are automatically humane and honest pricing is somehow cruel. That is childish economics. A blanket subsidy is often just a lazy transfer to people who do not need help. A targeted rebate is less theatrical, more precise and usually more just. Lee is right to stress cash and cash-like assistance over price distortion. The point is not merely efficiency. It is moral seriousness. Help the people who need help. Do not torch the incentive structure for everyone else.

The same lesson applies to public administration. Singapore’s insistence on competitive public-sector remuneration has always offended romantics, but it solved a real problem. A clean and capable state costs money. Many countries try to buy integrity on the cheap and then act shocked when corruption spreads. That is not fate. It is design failure. If governments want high-calibre people handling procurement, land, licences, hospitals and public funds, they cannot structure public service as an act of financial self-sacrifice and hope virtue fills the gap. Lee’s essay is quietly ruthless on that point, and rightly so.

But the essay should not be read as a photocopiable instruction manual. Singapore’s instruments rest on foundations many neighbours do not have: high state capacity, low corruption, administrative continuity and a public culture more willing than most to accept hard trade-offs. A COE-style regime in a weakly governed country would become a racket. Water repricing without trust would become a riot. Healthcare co-payments without a credible safety net would become cruelty. The lesson for Asean is not “copy Singapore”. It is “build the kind of state that can survive telling the truth”.

That matters even more now. The World Bank’s January 2026 regional outlook expects East Asia and Pacific growth to moderate, while debt, ageing and weaker productivity add pressure across the region. A separate World Bank report has warned that chronic disease is rising across East Asia and the Pacific, threatening productivity and increasing healthcare burdens. The easy era is fading. The region is entering a harsher climate.

History is not kind to states that mistake success for permanence. Venice looked unbeatable until trade routes shifted. Hong Kong seemed a permanent miracle until geopolitics barged into the room. The real genius of the Singapore model, then, may not be that it respects economic gravity. It is that Singapore has historically known when to adjust course before turbulence becomes catastrophe.

That is what Asean should learn from Singapore: not merely how to price cars, water or housing, but how to govern without flinching from arithmetic. Do not smother scarcity with slogans. Do not confuse subsidy with strategy. Do not insult citizens by pretending that somebody else can always pay. Adam Smith wrote the theory centuries ago. Lee Hsien Loong’s essay is a reminder that the real challenge was never understanding the manual. It was building a political culture disciplined enough to use it.

Abbi Kanthasamy is a Canadian entrepreneur, photographer and writer.