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Successfully investing in Singapore

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last updated on 19 May 2021 | reading time approx. 3 minutes

 

 

 

How do you assess the current economic situation in Singapore?

Singapore, as a hub in the Asia-Pacific region, depends heavily on the global economic climate. It is not surprising that Singapore was badly hit by the Covid-19 crisis. Its economy shrank by 5.4 per cent in 2020, Singapore's first annual contraction since 2001 and its worst recession since independence. The government announced a stimulus package of up to 100 bio. Singapore Dollar in 2020 to help mitigate the negative effects of the global economic downturn. The outlook for the year 2021 is more optimistic: The bulk of Singapore's economy is expected to recover and GDP growth is estimated at 4 to 6 per cent in 2021. Some sectors, however, such as transport, tourism and aviation, may need a longer time to recover. The manufacturing sector is set to expand due to robust semiconductor demand from the 5G and automotive markets. The information and communications and the finance sectors are also expected to continue to grow, supported by sustained enterprise demand for IT and digital solutions, and credit and payment processing services respectively.

The government allocated another 11 bio. Singapore Dollar for a new fiscal package in 2021, named the Covid-19 Resilience Package, which extends existing schemes to help businesses and save jobs. The Covid-19 crisis will further strengthen Singapore's role as a safe haven in the South East Asian region.

 

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

According to the “IMD Competitiveness Ranking 2020”, Singapore ranks again first among the most competitive countries in the world. This confirms that Singapore's investment environment continues to be very good. The stable political system, world-class infrastructure, an excellent connection to global trade, and the 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 in connection with a strict policy on anti-corruption and anti-money laundering. Singapore ranked number 3 out of 180 countries in the global corruption perception index of “Transparency International” in 2020.
 
The following areas are considered key sectors and are particularly supported by the government:

  • 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;
  • nnovation and digital solutions (e.g. promoted by initiatives such as Data Innovation Programme Office and FinTech Sandbox).


Singapore intends to become 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 4th largest global exporter of high-tech goods – it produces 5 of the world’s top 10 drugs, and is the 5th largest producer of refined oil.

The IT services/technology sector (including cybersecurity, data centers) is expected to grow and the so-called lifestyle branch and the renewable energies/green technologies sector to continue to establish themselves and offer great potential in the future.
 

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” (BEPS), which had implications for tax structuring possibilities and transfer prices. In addition, banks and corporate service providers are required to thoroughly examine all customers as part of an extensive “customer due diligence” audit. The compliance rules (“Know your Customer”) are closely monitored by the regulatory authorities. Companies are also confronted with an increasingly restrictive administrative practice with respect to work permits for foreigners. In order to fight the spread of Covid-19, Singapore currently applies quite extensive travel restrictions with the benefit that the Covid-19 virus is under control within the island. Singapore was voted the fifth most expensive city in the world by the mobility service provider “Mercer” in its “Cost of Living Rating” in 2020.

 

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

Singapore plans to build 42,000 homes in a newly developed residential district as “eco smart city”. With 80 per cent 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. The Covid-19 crisis had a strong impact on Singapore's economy last year and full recovery will take some time. However, the government acted fast and provided enough funds in the framework of the stimulus packages to mitigate the negative effects of the crisis and to prepare Singapore for the digital transformation of its economy. Singapore will be ready to secure its place as regional hub for high-end manufacturing, R&D, logistics and the service industries. Mid to long-term Singapore will have to deal with other challenges, such as its aging society and environmental sustainability.

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