WHY is it that some countries boom while others go bust? Adam Smith tried answering that question in 1776 when he wrote the first economics textbook: The Wealth of Nations.

Since then, we have achieved new insights. But not all nations have done equally well in their lessons.

Take South and North Korea. They have similar land area, natural resources, language, climate and culture. Yet one is an economic powerhouse while the other is in a permanent state of crisis.

The same is true for Thailand and Myanmar. Also Mexico versus Cuba, South Africa versus Zimbabwe, Greece versus Bulgaria and Dubai versus Sharjah.

Is one country doing something right while the other got it all wrong?

Singapore has a limited land area and no natural resources. In the early 1960s, it was described as "a mosquito infested swamp land". Yet it has managed to survive and prosper.

If we were to "pair" ourselves with another spot, it might be with Bintan, Indonesia. Both are islands. Both are located in the same part of the world.

In fact, Bintan would appear to have the advantage. Its land area is more than twice that of Singapore (1,866 versus 666 sq km). Yet its per capita GDP lags far behind Singapore's.

Setting up good economic policies isn't rocket science. Any country can do it. But not everyone does. The GDP difference between "twin spots" is enormous. (See table below.)

What makes a nation successful? What gives it get-up-and-go?

For the benefit of Kim Jung Il, Fidel Castro, Robert Mugabe and all of Myanmar's generals, here is Singapore's secret for success in eight easy steps.

8 Steps to prosperity

Other people's money: Why fear foreign investment? It is the only way a country can quickly build factories and import technology.

In the late 1960s, Singapore made presentations to multinational companies (MNCs), convincing them to come and set up shop here.

Other developing economies did the opposite. They feared exploitation and foreign ownership. They discouraged foreign investment.

Too bad. They missed out.

Foreign talent: How many Singaporeans are world experts in the molecular biology of reverse osmosis DNA extraction? Sorry, but it is zero.

We have no choice but to import the expertise.

So what? There seems to be no harm if a few of our neighbours have peculiar names like Messerschmitt instead of common ones like Tan.

Stability: Last month, Exxon-Mobil picked Singapore to build its largest petro-chemical plant in Asia. Other MNCs make similar choices every month. A key reason is predictability.

Companies can relax if they know the policies that brought them here in the first place will still be around in 20 years' time.

Invest: Which is best: Debts or surpluses?

Debts allow a country to spend now and live it up in the short-run. Surpluses benefit future generations.

Singapore has chosen to invest in the future. Its sovereign funds are estimated by Morgan Stanley at more than $700 billion. That makes it the second largest in the world, after United Arab Emirates.

Comparative advantage: Economics is sure of one thing - a country should focus on its natural advantages. That makes sense unless it has none.

What if you are like Singapore: We have no oil, no mining and no farm  land. There is no choice but to go out and create opportunities. But how do you create something from nothing?

In the 1950s, we were No. 1 in nothing, zero, zip. Today, we are a world leader in airlines, port facilities, shipbuilding, shipping, semi-conductors, telecommunications, tourism, banking, scientific research and education.

Singapore has invented a new economic concept: Created advantage.

Low, low, low: Low inflation plus low deposit rates equal low borrowing costs. They reduce the hurdle for new projects to succeed. It gives business a boost and helps firms prosper. It cuts the cost of financing a house or car.

Strong $$$: It doesn't work for every country. But it does for us since Singapore imports 60 per cent of its GDP.

Unfortunately, a strong currency also slows exports. The solution: Focus on high-value industries. Then sell customers on the idea that price isn't everything. Quality and expertise count too. When convinced, they will pay top dollar for our exports.

Legal system: If a business partner cheats you, pray that it happens in Singapore. Here, you can simply go to the courts to set things right. It is like having a second chance. You don't get that in any other countries.

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