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Successfully investing in Singapore

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​​​​​​last updated on 7 June 2024 | reading time approx. 4 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.
  
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 1,400 in 2024. 
  
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 19 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 February 2024, Singapore’s economy grew by 0.4 percent in 2023 and the GDP growth forecast for 2024 has been maintained at 1 percent to 3 percent. 
  
As in past economic crises, Singapore’s very open economy bounces back quickly when being hit by a global growth downturn.
   

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

According to the “IMD World Competitiveness Ranking 2023”, Singapore ranks fourth among the most competitive countries in the world; Germany is number 22 in this ranking. In 2023, the city-state was home to 4,200 regional headquarters of multinational companies. 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 neighbouring 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 2023.
  
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 four of the world’s top ten drugs and is among the world’s top ten exporters of machinery and equipment.
  
The IT services/technology sector (including cybersecurity, data centres, 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, 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”.
   

Singapore to become a smart sustainable city. What opportunties 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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