Is Singapore the bright economic light of southeast Asia, or will the notoriously strict city state remain in the shadow of Hong Kong?

A tropical paradise and a lifestyle capital - who wouldn't want to live in Singapore? There are free foot-massage machines in the airport, Grand Prix racing, casinos under construction, Ministry of Sound nightclubs and some of the best food in a region famous for cuisine.

On the minus side, the city-state has wrestled with its authoritarian image - the death penalty for drug smuggling, the whippings doled out to spoiled expatriate brats, the chewing gum ban, the heavy-handed state control of all areas of life.

Most investors looking at Singapore see a modern city-state of 4.5 million people at the southern end of the Malay peninsula, efficient and imaginative when it comes to competing with its neighbours. Called the Garden City, Singapore is the smallest territorial member of ASEAN and its success is one of the great southeast Asian stories of transformation from a post-colonial backwater into a city of gleaming skyscrapers amid the tropical vegetation, under the stewardship of tough leader Lee Kuan Yew.

Law and order is not always a given in southeast Asia, but it is this promise that lures many investors to Singapore's shores, as does strong financial regulation, watertight banking secrecy and encouragement to anyone seeking to do the right kind of business. The Singapore government has carefully managed the development of the city-state into one of Asia's premier business addresses.

While Singapore's critics say it lacks freedom and real democracy, and that the government intrudes into most aspects of private life, its economic health is undeniable.

The economy is currently growing at its fastest rate in two years thanks to a construction boom - in the three months to the end of June, Singapore's economy expanded by 8.2 per cent from a year ago as construction grew by 17.9 per cent.

This construction boom is tied in to the city-state's ability to innovate. Singapore is building two casino resorts and a new financial centre, while property developers are building luxury apartment blocks to house an expected influx of expats lured by the expanding banking sector.

The O'Brien's sandwich shop company, which is expanding strongly in Asia, has made Singapore its base in the region. Formula One is heading there soon, with night-time racing the innovation it plans to bring to the party.

Economists believe that Singapore's ability to continue to grow strongly will depend on the manufacturing sector, which is focused on pharmaceuticals and electronics. The economy is expected to grow by between 6 and 8 per cent this year.

Hark at the words of Singapore's elder statesman, Lee Kuan Yew - he recently predicted that Singapore was set to enter "a golden age" over the next five years due to the city's transformation into a private banking and gaming centre.

The government plans to bring another two million people to live in Singapore in the next 10 years, most of them professionals. However, Lee Kuan Yew says it is important to stop the spike in rents for office and residential space or risk losing out on competitiveness - particularly compared to regional rival Hong Kong, which has become less competitive because of high property prices.

It is this attention to detail, and awareness of the need to keep innovating in order to compete among the Asian tiger nations, that has proven the key to Singapore's success.

Joachim Ihrcke, president of the European Chamber of Commerce in Singapore, says Singapore Inc's constant rejuvenation and has allowed it to stay ahead of international developments.

"Singapore has promoted itself as a regional drug testing centre, a knowledge centre for environmental sustainability, but also as a logistics hub for ASEAN Free Tade Area (Afta) and the related industries, such as the automotive sector," says Ihrcke.

Singapore has kept a tight focus on being the hub for the ASEAN group of nations, and it has also has a strong reputation for law and order. "The easiest thing about doing business in Singapore is that you register a company and begin to do business," he says.

In Singapore, you can set up a company online, and make a small payment to a notary and be in business in days, or make setting up a firm part of your visa application process. The procedure is straightforward and not expensive.

"As a Westerner you think Singapore is western, but if you want to be successful in the long run, you have to learn that underneath the western skin, Singapore is very much Chinese," says Ihrcke.

Mícheál Collins, from Kildorrery in Co Cork, runs a Singapore-based consulting firm, Collins Kumarasinghe Associates, in partnership. He describes Singapore as a "safe pair of hands in Asia".

"While Singapore was once a low-cost outsourcing centre, the years of solid regulation and zero tolerance for corruption are positioning it for dominance in the financial services, corporate services and education sectors, while the low cost manufacturing moves to other countries," says Colllins, who is the first executive director of the Singapore Irish Business Association, and sits on the Board of Singapore's EuroCham.

Singapore has proven adventurous in luring big brands to the island: Ministry of Sound, Café del Mar, even Crazy Horse Paris have been brought in to emphasise Destination Singapore. "It is the fastest, easiest, cheapest, most transparent place in the region, if not the world, to set up a business," says Collins.

Singapore is a meritocratic technocracy, and its government resembles a tightly controlled but efficiently run corporation with lawmakers and senior civil servants the equivalent of directors and senior managers. The elite members are all "scholars" which means they earned their positions by winning competitive scholarships - a Chinese-style of bureaucracy modelled on the teachings of Confucius and one which reflects the fact that 77 per cent of Singapore's population is ethnically Chinese, with the remaining 23 per cent largely composed of ethnic Malays (14 per cent) and Indians (8 per cent).

"Like no other country, Singapore is a country that thrives through being 'On Message'. When the policy is decided, all the players line up to make sure it gets carried out," says Collins.

"There would be no scandal of hundreds of millions of wasted dollars in government IT infrastructure as in Ireland, the project would have been well managed from start to finish, and the appropriate flags raised and dealt with," he adds.

Singapore has been quick to sell its expertise to the Middle East, particularly in areas such as services, education and construction. It also keen to entice talented Indians to come to work and gain experience, at a wage higher than in India while keeping wage pressure lower in Singapore.

But not everyone is enthusiastic about Singapore's prospects. Hugo Restall, editor of the Far Eastern Economic Review, wrote in an article last year, called "Financial Center Pipedreams", that Singapore would not be able to dislodge Hong Kong as the region's financial hub.

"It has certainly enhanced its attractiveness to certain segments of the financial sector. But at the same time it seems to be falling further behind in the race to become the pre-eminent integrated hub. The analogy some use is that Singapore is becoming the Zurich to Hong Kong's London, or the Greenwich, Connecticut to Hong Kong's Manhattan," wrote Renstall.