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Successfully investing in Singapore

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last updated on 16 June 2023 | reading time approx. 3 minutes

 

 

 

How do you assess the current economic situation in Singapore?

Singapore has a highly developed and successful market-based economy, which is driven by exports mainly in electronics, chemicals and services. The country is known for having a highly skilled and productive workforce, a favourable business environment, a stable political climate, and an economic policy that encourages free trade, investment and innovation.

Being a trading and services hub for the region, Singapore`s economy was heavily affected by the Covid’19 crisis, the travel restrictions and disrupted supply chains. However, Singapore managed to keep its key in­dus­tries, its harbour, manufacturing and the financial services sector open and functional at all times during the pandemic. By doing, Singapore affirmed its role as a safe haven in Southeast Asia once again.

Currently, Singapore benefits from geopolitical developments and the search for diversification of supply chains. Companies relocate regional functions to Singapore and investors allocate funds to the city state and set-up family offices here. The number of family offices increased from around 400 at the end of 2020 to more than 700 in 2023. 

Innovation and digitalization are further drivers of Singapore’s economy. The government invests heavily in the digital transformation of the economy and in increasing productivity. It intends to keep a strong manufacturing sector, which contributes almost 22 percent of the GDP. Electronics and chemicals will continue to play a key role in this context.

According to an announcement by the Ministry of Trade and Industry in May 2023, Singapore’s economy grew by 0.4 percent in the first quarter of 2023 and the GDP growth forecast for 2023 has been maintained at 0.5 percent to 2.5 percent. 

As past economic crises have shown, Singapore’s very open economy will likely be one of the worst-hit by a global growth downturn. But it is also likely to bounce back quickly once the world economy shows signs of recovery.

 

How would you describe the investment climate in Singapore? Which sectors offer the largest potential?

According to the “IMD World Competitiveness Ranking 2022”, Singapore ranks third among the most compe­ti­tive countries in the world; Germany is number 15 in this ranking. This confirms that Singapore's investment environment continues to be very good. The stable political system, world-class infrastructure, excellent con­nec­tion to global trade, and top-rated education system are the foundations of the country's investment cli­mate. In the regional context, Singapore clearly distinguishes itself from its neighboring countries with regards to the rule of law and a strict policy on anti-corruption and anti-money laundering. Singapore is ranked number 5 out of 180 countries in the global corruption perception index of “Transparency International” in 2022.
 
Key sectors that are particularly supported by the government include: 
  • High technology industry (e.g., precision engineering, electronics, chemicals, semiconductor and robot tech­no­logy)
  • Health care and biomedical science (e.g., medical technology and pharmaceutical industry)
  • Urban planning and development (including environmental and green technologies)
  • Logistics, transport engineering and aerospace technology
  • Regional and global financial services (including financial technologies)
  • Research, development, and education
  • Innovation and digital solutions (e.g., Singapore`s National Artificial Intelligence Strategy)

By moving its industrial base up the value chain, Singapore intends to strengthen its position as the leading industrial hub for companies worldwide. The excellent manufacturing ecosystem has led companies to set up not just production facilities, but the full suite of headquarters, R&D, and supply chain management functions in Singapore to serve the region. Singapore is the world’s 5th largest global exporter of high-tech goods. It pro­duces 4 of the world’s top 10 drugs and is among the world’s top 10 exporters of machinery and equipment.

The IT services/technology sector (including cybersecurity, data centers, fin-tech, and cloud solutions) is expec­ted to grow as well as the renewable energies/green technologies sector. 

Pharmaceutical and biotechnology firms profit from Singapore’s talent pool and R&D ecosystem. BioNTech con­fir­med the set-up of a mRNA manufacturing facility and its regional headquarter in Singapore, where companies like GlaxoSmithKline, MSD, Roche have already based a range of commercial activities. Singapore is on its way to become an established biomedical sciences hub.

 

What challenges do German companies face during their business ventures into Singapore?

Companies and private individuals have always benefited from low tax rates in Singapore. In the meantime, the city-state has vowed to shed its image as a tax haven. Singapore adopted the OECD's Framework on “Base Ero­sion and Profit Shifting”, which had implications for tax structuring possibilities and transfer pricing. In addi­tion, the compliance rules, including the “Know Your Customer” due diligence imposed on banks, corporate fi­ling agents and other service providers, are closely monitored by the regulatory authorities and may slow down some processes. 

Companies are also confronted with an increasingly restrictive administrative practice with respect to work passes for foreigners. Even though Singapore has recently introduced new visa types for highly skilled work­force, some industry sectors still face constraints to bring in foreign employees. 

Several factors have led to a drastic increase of housing prices recently. Singapore was ranked second most expensive city in the world for international employees by the mobility service provider “Mercer” in its “Cost of Living City Ranking 2023”.

 

A smart eco-city is to be built in the western region of Singapore. What opportunities does this present?

Singapore’s “smart sustainable city” initiative aims to harness solutions across industries to ultimately create green, digital and efficient urban spaces. 

As an urban living laboratory, companies are testing and developing smart city technologies in Singapore that will be used to commercialize sustainable solutions for Asia. The Singapore government promotes five key pil­lars: Infrastructure, Built Environment, Clean Energy, Water & Environment and Urban Mobility which together form the Urban Solutions & Sustainability sector, an increasingly important growth area for both the region and Singapore.

Singapore plans to build 42,000 homes in a newly developed residential district as “eco smart city” and aims towards a target of ‘greening’ 80 percent of its buildings by 2030.  With 80 percent of residents living in public housing, a government’s commitment to sustainable urban design could create a lot of opportunities. 

Urban planners advocating green design principles and “smart” technology will need sensors and data analy­tics to run a smart and green city. Leveraging data and digital technologies, including Artificial Intelligence, will be used to enhance public transport, to improve waste treatment and to reduce energy consumption. Singapore already acts as a test bed for self-driving vehicles and traffic control systems; and could also assume this role for many other green and “smart” solutions for a sustainable urban development.

 

In your opinion, how will Singapore develop?

For many years now, Singapore has boasted remarkable economic growth, has re-invented itself and is expec­ted to continue on this upward trend in the future. Singapore embraces Industry 4.0 and is ready for the digital transformation of its economy. It will secure its place as a regional hub for high-end manufacturing, R&D, logis­tics and the service industries and be the role model as Asia’ s green and smart city. Mid to long-term Singa­pore will have to deal with other challenges, such as its aging society and environmental sustainability.

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