If Singapore were a college student, it'd be the iconic student-athlete -- a polite, white-bread, high-school valedictorian, a two-sport college athlete, who also happens to be a top-ranked Division I running back, a Heisman trophy finalist and a future NFL star -- a Toby Gerhart among countries.

Indeed, the number of times that Singapore appears at the top of global economic rankings is nothing short of astonishing -- and kind of annoying. Singapore has been ranked #1 in global innovation and competitiveness. It's ranked first for having the most open economy for international trade and investment. And it's the world's easiest place to do business. And unlike, say, a (lucky) trust-fund country like Norway which pumps its wealth out of the ground, Singapore achieved all this by dint of sheer hard work. Over the past 40 years, Singapore has transformed itself from an economic backwater to an Asian Tiger success story. When this former British colony became a fully independent country in 1965, its per capita GDP was a lowly $511. Today, that figure has risen to $53,192, making Singapore wealthier per person than the United States.

So, if you believe that betting on the perfect kid is a worthwhile investment strategy, you could do worse than to include Singapore in your investment portfolio.

The "Perfect Kid": Getting the Basics Right

A city-state located at the tip of the Malay Peninsula with a population of just over 4.8 million, ironically, the secret to Singapore's success is the diametric opposite of the individualistic, entrepreneurial-driven, quintessentially American success story of Silicon Valley. Singapore's authorities are famously interventionist, having power to prosecute individuals who violate laws relating to "improper use of the Internet." They once even famously banned the sale of chewing gum.

Its positively un-American approach to economic development notwithstanding, Singapore has gotten the basics right. And Singapore's low levels of corruption, skilled workforce, stable environment, and efficient infrastructure have made it arguably the greatest economic success story among the Asian Tigers. Corporate tax is a mere 17% and personal taxes are only 20% on incomes over $300,000 Singaporean dollars ($213,000). In the midst of the Great Recession, unemployment never hit higher than 3.4% --a figure unimaginable to most Western economists. Recently, Singapore also has become the world's fastest-growing offshore banking center, and its strict bank secrecy laws and a favorable tax regime have put the country on track to become the 21st century's answer to Switzerland.

Not that it's been clear sailing for Singapore over the past decade. Since the 1997-98 Asian financial crisis and the sudden downturn in world trade in 2001-02, the government has intensified its efforts to nudge Singapore toward the development of a "knowledge-based" and service economy. During the 1990s, Singapore was the world's leading producer of disk drives. Today, like its neighbors, Singapore is facing the loss of competitiveness against China. That's why the philosopher kings of Singapore have embarked upon a mission to promote Singapore as a premier tourist destination.

Singapore was hit hard by the global economic downturn, but has bounced back quickly. In the second and third quarters of the year, GDP rose by nearly 9% and has now made up all but 1.8% off its peak. Property values have soared, forcing the government to take steps to prevent possible asset bubbles. Singapore's economy likely will expand at a rate of 6.5% in 2010 -- a rate virtually unheard of for a country already this wealthy.

The "Perfect Kid": Path to Stock Market Profits

While the U.S. markets have had quite a run since last March, Singapore has outperformed the S&P 500 over the last 12 months by almost two-to-one. Since the market bottomed in March of 2009, the iShares MSCI Singapore Index (EWS) is up an eye-popping 114%.

While the headlines blare about China's and India's economic achievements, Singapore just might be the single most under-appreciated economic success story on the planet. And you too can participate in the fruits of this Asian Tiger's remarkable economic success by investing in the iShares MSCI Singapore Index (EWS) ETF.

As annoying as the Perfect Kid can be, it's hard to argue with success -- and profits.

Sincerely,

Nicholas A. Vardy
Editor, The Global Guru

P.S. Don't miss Nicholas Vardy LIVE on Friday, February 5, 2010, 6 p.m. - 6:45 p.m. EST. That day, you'll see him live via Webcast from the Money Show in Orlando, Fla. Starting promptly at 6:00 p.m. EST, Nicholas will discuss "How to Invest Like Harvard," detailing the #1 secret behind the Harvard endowment fund's extraordinary investment success, and how you can put that secret to work in your own portfolio. To register for the Webcast, click this link.

P.P.S. If you want to keep up with my latest insights on developments in fast-paced global markets, you can now follow me on Twitter on @NickVardy.

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