I know Malaysia expelled Singapore in 1965. But, since then, the economies of both countries seem to diverge drastically. What factors made Singapore so much more successful, economically, than Malaysia?
I know part of this is foreign direct investment and the state wanting industrialization, but Malaysia (for example) gets foreign direct investment and industrialization and seems to be nowhere near Singapore in terms of development. Does this have something to do with the types of foreign direct investment or how industrialization is implemented, or something else entirely?
Edit: Apologies, but I focused a lot of this on Malaysia unnecessarily. This could easily be a comparison between Singapore and any other nation. I just want to know what they did differently that was so successful, and why other developing nations don't just do the same things.
This is a difficult question indeed, but David S. Landes in "The Wealth and Poverty of Nations" tries to address this. You are correct that the type of Foreign Direct Investment (FDI) is very important, specifically since Singapore received more FDI from places with overvalued currency. The type of industrialization is essential and Malaysia never seemed to implement industries that were in incredibly high demand in first world nations while Singapore's leadership focused on electronics and photographic (Landes, 476). Singapore also began to make the shift to service industries in the mid 1990s as some FDI began to dry up in other nations (like Malaysia), but allowed them to keep their FDI growing. Due to this we actually began to see some companies in Singapore outsourcing their phones to Malaysia.
I know this is very cursory and I hope someone can expand a bit more, but basically the big differences is the FDI and what their government did with it.
The lack of overbearing government regulations has made it much easier for Singaporeans to start businesses and made Singapore much more attractive for foreign direct investment. If you look at the Index of Economic Freedom, Singapore ranks number 2 in the world, after Hong Kong.
There's a case study (Todaro, Michael P. Economic Development, Tenth Edition. 2009. p.133) that compares South Korea and Argentina, who were at similar levels of development 50 years ago. South Korea shifted to a more market oriented economy, while Argentina maintained significant levels of red tape. Over time you can see how much their levels of economic development have diverged. The same basic principles hold for most countries, including Singapore.