Cut Red Tape, Cut Corruption

At a recent conference, I got to ask the Prime Minister of Singapore, BG Lee Hsien Loong, a question. The question I posed was, in essense, “how did Singapore manage to rid itself of corruption after independence, and what lessons can the emerging democracies of today take away from Singapore’s experience?”.

In his answer, Prime Minister Lee gave credit to the system of government left behind by the British in 1959, and to the work of past Prime Ministers since independence, including his father, Lee Kuan Yew, for Singapore’s rise to First World status. But what he didn’t say- perhaps so as not to be rude to the British members of the audience - was how much work Singapore has done over the past fifty years to cut the red tape out of the system of bureacracy they inherited from the British, and why this has been such an important factor in reducing corruption.

Deep down, every businessman knows that “red tape” and Third World corruption are corelated. In many Third World countries, control of the red tape is a “gravy train”. Want a business license? Pay up. Need a telephone connected? Money, please. Need capital to start a business? Kick me back a percentage of the profits.

In First World countries, such as Singapore, or the US, it is the *ease* of doing business, virtually universal access to capital, and the corresponding *speed* of wealth creation that enables these countries to prosper, and corruption to be controlled - not anything else. Because in countries where wealth can be created legally and fast, corruption doesn’t stand a chance.

In his highly-readable book “Hackers and Painters”, author Paul Graham shows that if an intelligent person is able to earn money through business faster than they can through criminal activities, they will choose to go into business, rather than pursue corrupt or illegal activities. He successfully articulates the view that “speed of doing business” is probably the most critical factor that drives a country’s success as a business destination.

According to Graham, in too many countries, “the fastest way to obtain wealth is to steal it”. However in so-called First World societies, the opposite is generally true. In Singapore or Silicon Valley, you can obtain fabulous levels of wealth much faster by creating assets legitimately - such as Google ($130b), YouTube ($1.6b) or MySpace ($0.5b), using available education and private capital - than you can by theft, or corruption. And in these places, sophisticated safeguards make it hard for criminals to accumulate meaningful amounts of wealth via corrupt activities.

You can see the results today in places where corruption is low, and trust is high - like Singapore. Singapore is experiencing an explosion in private banking activities - the result of wealth-creation on an unprecedented scale. The capital entrusted to these private banks will undoubtedly find its way back into the Singapore economy and the country will continue its cycle of growth. If only other countries would take note - when corruption is relegated to the back seat in terms of wealth-creation, it is possible to establish a permanent cycle of growth.

It isn’t only about speed - universal access is another important factor. Singapore, like the United States, is one of the few places on Earth where pretty-much anyone in society has a chance at becoming wealthy - relatively fast. As in the US, in Singapore, you can initiate all the actions essential to creating wealth - finding investors, forming companies, creating teams of educated employees, building assets, moving inventory and information between markets, and taking your company public - with respect for the genuinely disadvantaged, all most people need is the will.

Note: In the past ninety days, we’ve expanded our worldwide operations significantly, both through wholly-owned offices and reseller relationships. We’ve chosen countries that have fast-growing economies friendly to entrepreneurs - Australia, Hong Kong, Singapore, South Africa, the United Arab Emirates, the United Kingdom. In each one of these places, we have not encountered corruption at any level. We have been able to register a company and get our operations up and running in less than a week.

In every one of these countries, our business development employees didn’t need to wait for a visa to get in (China and India, please take note), and we didn’t need to wait long on licenses, either. In each location, we got the strong feeling these governments understand that “speed of doing business” and “trust in the system” are the essential ingredients of wealth creation - and eradicating corruption.