It was 3 a.m. and I was fresh off a Singapore Airlines flight from Newark—at 18 hours, the longest regularly scheduled, nonstop commercial flight in the world. Jet lag was playing havoc with my system. So I left the hotel and headed over to Boat Quay, not expecting to find much except fresh air and solitude. This, after all, was Singapore, long ridiculed as a prissy, soulless place, with no DNA for fun, culture or the arts. Singapore? Isn't that where chewing gum is illegal and Cosmopolitan magazine is banned as too racy? Where bars close before anyone starts having a good time, and everyone is so obsessed with work that the government launched a smile campaign to get people to lighten up?

The first time I saw Singapore, while on an R & R break from covering the Vietnam War in 1969, the quay was part of a decrepit waterfront, crowded with sampans and junks. Gaunt, dull-eyed faces peered out of opium dens in a Chinatown alleyway I happened upon. The newly independent country—a city-state about the size of Chicago—was in the process of leveling vast areas of slums and jungle, as well as a good deal of its architectural heritage. There wasn't a lot to do after you had seen the teeming harbor and Bugis Street, where transsexuals sashayed by every evening to the delight of tourists and locals. I stayed only two days, and left thinking I had discovered a remarkably unremarkable country destined to join the impoverished fraternity of third-world nobodies.

Located just north of the Equator, Singapore has never recorded a temperature lower than 66 degrees Fahrenheit, and tropical heat hung heavy the night I returned. I turned onto the stone promenade that followed the Singapore River. Glass-fronted tourist boats were moored at the docks, but there was not a sampan in sight. Boat Quay, renovated, ablaze in lights, startled me. Outdoor restaurants with tables under colorful umbrellas stretched along the waterfront. Across the river, floodlights illuminated the old colonial British post office that has been transformed into the Fullerton Hotel and voted the best hotel in Asia in a recent international survey. The shoulder-to-shoulder bars in the quay were packed with hip young Singaporeans and European expatriates, drinking Guinness and Old Speckled Hen on draft and cheering a replay of the Liverpool-Reading soccer game on flat-screen TVs.

I ordered a Kilkenny. The bartender was doing a Tom Cruise Cocktail routine, flipping bottles behind his back and pouring with a flourish. His assistant, a Chinese Singaporean with silken black hair falling to her waist and low-slung jeans, applauded and gave him a hug. I asked the bartender what time last call was. "Dawn," he said. "We're in one of the new entertainment zones."

Whoooa! Could this be the stuffy, somber Singapore I had been warned about? This tiny nation—whose ascendancy from malaria-infested colonial backwater to gleaming global hub of trade, finance and transportation is one of Asia's great success stories—is reinventing itself, this time as a party town and regional center for culture and the arts. "Prosperity is not our only goal, nor is economic growth an end in itself," says Singapore's prime minister, Lee Hsien Loong. Translation: let the good times roll. Suddenly people are describing the city with a word that, until recently, wasn't even in the local vocabulary: trendy.

The government has lifted its prohibition on bar-top dancing and bungee jumping. Cosmopolitan is very much for sale on the newsstands (though Playboy still hasn't made the cut) and sugarless chewing gum is available (with a doctor's prescription saying it is for medicinal purposes, such as dental health). Plans are under way to build two Las Vegas-style casino resorts, worth a combined $3.3 billion, on Marina Bay. International brand-name clubs, such as Ministry of Sound, the mother of London rave clubs, and Bangkok's Q Bar, have opened satellites here. A colonial-era girls' school, Convent of the Holy Infant Jesus, has been reborn as a complex of upscale restaurants known as Chijmes. All this is enough to make Singapore's traditionally well-behaved 3.6 million citizens feel as though they went to sleep in Salt Lake City and woke up in pre-Katrina New Orleans.

"Night life started taking off in Singapore when the government extended bar hours, just as Bangkok, South East Asia's traditional party town, was cutting them back from 4 a.m., to 2, then 1," says David Jacobson, the American co-owner of Q Bar Bangkok. "It was a pretty draconian turnaround for Bangkok, and what you find is that a lot of people looking for fun these days are avoiding Bangkok and heading to Hong Kong or Singapore instead."

But the new Singapore isn't only about partying. In a city that long considered a cultural event something you found in a movie theater or a shopping mall, Singapore's government is spending hundreds of millions of dollars on museums, cultural festivals and the arts. It even subsidizes avant-garde theater that sometimes dares touch on sensitive or controversial subjects. Performers such as Eric Clapton, Bobby McFerrin, the St. Petersburg Philharmonic Orchestra and the Vienna Boys' Choir have appeared at the $390 million Esplanade Theatres on the Bay, which sits on the site of an old British gun battery. No one in the Esplanade audience even seemed to notice that the guest conductor of the National Orchestra, Jacoma Bairos, had a ponytail. This in a country where authorities a generation ago could deny entry to long-haired male travelers. Recently, so many people were on hand for a Vatican exhibition at the Asian Civilizations Museum that doors were kept open round-the-clock to accommodate last day procrastinators. The director, sensing a marketing opportunity, showed up at midnight in a housecoat to address the crowd.

"I went to London when I was 16 and had no intention of ever coming back," says Beatrice Chia-Richmond, artistic director of the Toy Factory theater ensemble. "I was determined to breathe the air Byron and Keats breathed. But in a sophisticated place like London, no one is surprised by anything, because everything has been done. That's not the case in Singapore. You can make mistakes of the most dire kind, and you can live to direct again. That makes this an exciting time. Suddenly, it's no longer cool to be an uptight country."

Truth be told, Singapore may never have the edginess of Bangkok, the flashiness of Shanghai or the cultural charm of Hanoi. The over-50 crowd, conservative and cautious, wants neither to see the social order turned upside-down nor the pursuit of fun become too much of a distraction. As Chan Heng Chee, Singapore's ambassador to the United States, puts it, "We are fun-loving, but not recklessly fun-loving. Everything is just so." Some artists, too, are skeptical, saying the evolution of art and culture needs to bubble up from the people rather than trickle down from the top by government decree. Can creativity, they ask, truly flourish in a society where there are limits on freedom of expression, politics and policy are not openly debated and the state-controlled media tiptoe around controversy as gracefully as ballet dancers?

"I remember when the government decided we needed a biotech industry and one sprung up overnight," says Adrian Tan, a 29-year-old theater director and orchestra conductor. "But arts and culture and moral norms are not things you can put $10 million or $100 million into and just make happen."

Glen Goei, who spent 20 years in theater and film in New York and London and starred with Anthony Hopkins in the play M. Butterfly, is one of the artists who has returned to test his homeland's new frontiers. His adaptation of Little Shop of Horrors was to open three nights after I met him at the Victoria Theater, a handsome Victorian Revival building that once served as the British town hall and was the site of war-crimes trials that followed Japan's World War II occupation of Singapore. Goei runs the Wild Rice Theater; wearing flip-flops, shorts and a polo shirt, he sat alone among a sea of empty red velvet seats while workmen with hammers and paintbrushes put finishing touches on the set. Advance sales had been brisk. Goei looked at his watch. It was nearly midnight.

"Have things changed in Singapore?" he asked, then answered his own question. "Yes. Fifteen years ago we didn't have a single actor surviving full-time as an actor. Today, we've got 60, 70, 80, and a bunch of theater companies. But having said that, we've still got censorship on a lot of levels. We're still not allowed to talk about politics, race, religion, which is really what good theater is all about—an examination of social issues and values. But I can understand our paranoia and insecurity." It comes, he said, from being surrounded by Muslim countries, from being small and vulnerable and not wanting to do anything that threatens stability and ethnic consonance.

I left Goei to hail a cab for the hotel, but got sidetracked outside the theater by a towering bronze statue of Sir Stamford Raffles, the British naturalist and statesman officially recognized as the founder of modern-day Singapore—surely making him the only non-royal European so honored by the country he helped colonize. He stands with his feet firmly planted and his arms folded across his chest, not far from the banks of the Singapore River, from which he first stepped onto the island of Singapore on January 28, 1819, ushering in 140 years of British rule. "Our objective," he said, "is not territory, but trade, a great commercial emporium."

Singapore, then just a pimple on the southern tip of the Malay Peninsula, was a swampy fishing and trading village when Raffles arrived. It had few people, no resources and no relief from the blistering heat. But like all valuable real estate, it had three key attributes: location, location, location. "The City of the Lion" stood at the crossroads of the Orient, amid the Strait of Malacca and the shipping lanes that link the lands of the Indian Ocean and the South China Sea. Like Hong Kong and Gibraltar, it would become a cornerstone of Britain's empire, and its port would eventually become one of the world's busiest.

As trade increased and an infrastructure was built up under the British, migrant workers—Chinese (who today make up more than three-quarters of the population) and Indians, many of them from what is now known as Sri Lanka—began arriving to join the indigenous Malays. The island became a rich blend of colors, religions (Buddhism, Taoism, Islam, Confucianism, Christianity, Hinduism) and languages (English, Mandarin, Malay and Tamil). By World War I, Singapore's population had reached 340,000, and a city had emerged with two-story shop-houses, handsome government buildings and a harbor filled with the ships of many nations. The residents were largely uneducated. And, like many port cities, Singapore was crowded with transient males, gamblers, prostitutes and opium users. (The British had a virtual monopoly on the sale of opium.) Singapore became known as Sin City, only in part because of the abbreviation of its name, in striking contrast to the strait-laced, priggish image it would nurture after independence in 1965.

The British defended Singapore with 85,000 troops in World War II and considered the island impregnable. But in February 1942, Japanese forces poured south down the Malay Peninsula. After a week of fierce fighting and mounting Allied and civilian casualties, Lt. Gen. Tomoyuki Yamashita, his open-neck shirt dripping with medals, his boots kicked off under the negotiating table, and Lt. Gen. Arthur Percival, wearing shorts and a mustache, faced each other in the downtown Ford Motor Company factory. Yamashita pounded on the table with his fists for emphasis.

"All I want to know is, are our terms acceptable or not? Do you or do you not surrender unconditionally? Yes or no?" the Japanese commander demanded. Percival, head bowed, answered softly, "Yes," and unscrewed his fountain pen. It was the largest surrender in British military history. The myth that British colonial powers were invincible and that Europeans were inherently superior to Asians was shattered. Japan renamed Singapore Syonan-to, Light of the South Island. The sun was setting on the British Empire.

The drab, one-story Ford factory has been transformed into a sparkling war gallery and museum, paying tribute to the courage and suffering of the Singaporean people during the Japanese occupation. Changi Airport, built by the Japanese using Allied POWs, still survives too, though not in any form an old veteran would recognize. Changi now handles 35 million passengers a year and has been rated "Best Airport in the World" 19 years in a row by Business Traveller, UK magazine. Search as I might, I couldn't find the ghosts of the old Singapore. The musty romance of the tropics, the restless adventurers stooped with drink and island living, the echoes of Somerset Maugham and the sea captains of Joseph Conrad have slipped away, along with pith helmets and Panama hats. In their place are the trappings of a city that feels as new as Dubai, humming with efficiency and industriousness, living by its wits, knowing well that if it doesn't excel it will be swallowed up by the pack.

What happened to the old Singapore? "We destroyed a lot of it," says Tommy Koh, chairman of the National Heritage Board and a leading figure in the city's cultural renaissance, "but we realized just in time that we were also destroying our heritage in the process. Entire neighborhoods were knocked down for new development, in Chinatown and other places. For the first two decades of independence, the mind-set of the whole nation was to erase the old and build the new in the pursuit of economic progress. People like me who wanted to save what was historic were brushed off as artsy liberals. But you have to remember that in the 1960s, we were a very poor country."

Singapore, in fact, had so many problems on the eve of independence in 1965 that pundits predicted its early demise as a nation. A two-year federation with Malaysia had collapsed. The Chinese and Malay communities were at each others' throats. College campuses were roiled by leftist students. Communists had infiltrated the unions. A bomb claimed three lives in the inner city. On top of all that, Singapore had no army and was without resources or even room to grow. It had to import much of its water and food, producing little else beyond pigs and poultry and fruits and vegetables. Sewers overflowed in slums that reached across the island. Unemployment was 14 percent and rising; per capita income was less than $1,000 a year.

Lee Kuan Yew, the Cambridge-educated prime minister who led Singapore through six years of self-rule and the first 25 years of independence, was so anxious about the future he had trouble sleeping. His wife got a doctor to prescribe tranquilizers. When the British high commissioner arrived at his residence one day with an urgent message from her majesty's government, a physically exhausted Lee had to receive the envoy while lying in bed. "We faced tremendous odds and an improbable chance of survival," he wrote in his memoir. "...We inherited the island without its hinterland, a heart without a body."

Lee's father was an inveterate gambler whom Lee remembers turning violent after losing nights at the blackjack table and demanding that his wife give him jewelry to pawn. One of the first things Lee Kuan Yew did after independence was take aim at vice. He banned casinos. He slapped high taxes on tobacco and alcohol. He targeted drug traffickers. Singapore emerged as a no-nonsense, moralistic society not noted for humor or levity.

Lee stepped down as prime minister in 1990. He had presided over a generation of stunning economic growth, but no one considered Singapore a world-class city like London, New York or Tokyo. There was no magnet except business—no arts to speak of, no creativity, no unpredictability, not a hint of wackiness. And that was costing Singapore a lot of money in lost tourist revenue and expatriates who found Thailand or Malaysia more interesting. The job of fine-tuning Singapore and ushering in an era that didn't equate fun with guilt fell to the prime ministers who followed Lee—Goh Chok Tong and, in 2004, Lee's elder son, Lee Hsien Loong. The younger Lee instructed his cabinet ministers to look at ways of "remaking" Singapore.

Tourism accounts for only about 3 percent of Singapore's economy, and therein lies the motivation to fiddle with success: the pint-size country needs to stay competitive to survive, whether it's to cash in on the region's booming tourism market or to nurture an atmosphere in which creativity takes root. The bottom line for the government in most policy decisions is money—not money for greed's sake but money to provide the foundation for a stable, prosperous middle class that holds together an ethnically and religiously diverse population.

Lee Kuan Yew, who will turn 84 this month, spends time these days as an elder statesman for Asia, advising other countries how to prosper in a global economy. No one doubts his credentials. Singapore's per capita income has soared to $29,940, one of the highest in Asia. Its port is the world's busiest as measured by tonnage. Its national carrier, Singapore Airlines, is the world's most profitable and has been voted by readers of Condé Nast Traveler the best airline in the world 18 of the past 19 years. The airline has 9 new aircraft and 88 more on order, and will pay cash for every one of them. Singapore's homeowner rate (90 percent) is among the highest in the world, as is its literacy rate and penetration of broadband. In various annual surveys, Singapore is regularly at or near the top on the list of countries that are the most business friendly, most transparent, least corrupt, most economically free, most globalized and least enmeshed in bureaucracy and red tape.

All of which raises an obvious question: How did Singapore accomplish so much with so little while many other developing countries loaded with natural resources and plentiful land failed? The answer is good governance and a widely held belief that being second best isn't good enough. Instead of cronyism, Singapore embraced meritocracy. Salaries in the public sector—it's not uncommon for senior public servants to earn $500,000 a year—are competitive with those in the private sector, enabling the government and the military to recruit the best and brightest. At independence, instead of tearing down the overt symbols of colonialism in a burst of ultranationalism, Singapore accepted the reality of the past. English was made the language of business, schools and government, and streets with names like Queen Elizabeth Walk and Raffles Boulevard are reminders that Singapore's history didn't begin in 1965. Rather than playing ethnic groups off against each other, as some governments did, Singapore gave top priority to creating an integrated, racially harmonious society where everyone shared the fruits of prosperity. Quota systems, for instance, ensure that all public housing has a representative mix of Chinese, Indians and Malays.

"We have used meritocracy and pragmatism more ruthlessly than any government," says Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy. "And ours is the least ideological government in the world. It doesn't care if a principle is capitalistic or socialist. If it works, we use it."

The government, a parliamentary republic, operates like a corporate board of directors with a conscience and a mandarin upbringing. It micromanages every aspect of daily life, in some cases with extreme penalties. Drop a cigarette butt on the street and it will cost you a $328 fine. Spray-paint graffiti on a wall and you can be caned. If you are over 18 and caught with more than 15 grams of heroin, the penalty is mandatory execution. (Amnesty International says Singapore hanged about 400 people between 1991 and 2003, the highest per capita execution rate in the world.) Don't even think about jaywalking or speeding. Try urinating in a camera-equipped elevator in public housing and the police will come knocking.

If people develop bad habits, Singapore may step in with a behavior modification program, such as the government-sponsored Courtesy Campaign or the private-sector Kindness Movement. It might blitz the nation with TV ads and brochures and posters that stress the importance of being good and thoughtful neighbors. Past targets include: people who talk on cellphones at movies or fail to flush public toilets and couples who don't start their wedding dinners on time. (Couples who sent invitations urging their guests to be punctual were eligible to win $60 shopping vouchers.) When Singapore's birthrate soared, the government offered women incentives not to have children. When the birthrate plummeted, the state's Baby Bonus gave couples tax rebates and monthly child-care subsidies. To address Lee Kuan Yew's belief that intelligent couples should marry and have children to keep the gene pool strong, officialdom set up a matchmaking service complete with Love Boat cruises. It also gave it an Orwellian name, Social Development Unit, or SDU; young Singaporeans joked that SDU stood for single, desperate and ugly. (SDU hung up its cupid's quiver in late 2006. In 23 years, some 47,600 SDU members were married.)

All this social engineering has turned Singapore into something of a nanny state. But the People's Action Party, which has won every election since the end of colonial rule, has a quick rejoinder: check the results. Singapore's crime rate is one of the lowest in the world. There is no litter or graffiti. Everything is orderly, on time, efficient. True to Confucian doctrine, group achievement is celebrated above individual accomplishment, authority is respected and the duty to take care of one's family is so integral to society that elderly parents can sue their grown children for non-support. The "perfect" society. Yet perfection came at a price. Personal freedoms were surrendered, creativity and risk-taking never flourished, the leadership seemed to lurk behind every tree. Singapore was admired but not envied. "Growing the creative industry," as the government refers to its promotion of arts and culture, was a luxury that had to wait until Singapore's survival was assured.

Tommy Koh, the arts patron, remembers that in 1968, when he was Singapore's ambassador to the U.N., the mission in New York City was decorated with cheap posters. He pleaded with then-prime minister Lee Kuan Yew for $100 to replace them with some original work by a Singaporean artist.

Lee did not see it as a chance to promote Singaporean culture. "What's wrong with the posters?" he asked. Koh eventually got his money and bought an ink-brush painting by Chen Wen-Hsi, Singapore's most celebrated pioneer artist. It hangs in the Singapore U.N. Mission to this day. From that modest beginning, the Foreign Affairs Ministry has built a significant collection of Singaporean art to display in its far-flung embassies, and the Singapore Art Museum has put together the world's largest public collection of Southeast Asian art.

The time between my first and last visits to Singapore spanned 37 years. The changes had been unimaginable. There was the obvious: the stunning skyline and growing prosperity; the absence of pollution and traffic gridlock, thanks to an exorbitant tax on cars and a system that turned major streets into toll ways during peak hours; the landscaping that gave the entire city a garden-like atmosphere and, like everything else in Singapore, was intended to provide something practical—shade, a deterrent to pollution and a reduction in temperatures of a degree or two.

There was also the abstract: the realization that it is architects and artists who make a city great, not computer engineers and civil servants. In loosening up, the government recognized the convergence of economic progress and cultural and individual innovation. The anxiety with which Singaporeans viewed the future has been replaced by confidence. "In my parents' time, the mind-set was work hard and make a good home for your family," says Choo-sin Nong, a recent university graduate. "For my generation, it's let's get out in the world and see what we can do." The question remains whether Singapore can keep getting the pace and mix right and give birth to a truly vibrant and creative society.

On my way out of town, speeding along a road whose grassy shoulders are as carefully manicured as the fairways at Augusta, I saw an unusual sight ahead. The gardeners had forgotten to mow a little patch where the grass stood a foot high. Ahhh, I thought: even in Singapore people can get lackadaisical. But wait. As we passed the patch, a neatly lettered sign informed me: "This grass has been purposely left long to permit insect life."

David Lamb was the Los Angeles Times' Southeast Asia bureau chief from 1997 to 2001. Justin Guariglia is the author of the recent photo book Shaolin: Temple of Zen.