Successfully investing in Singapore

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last updated on 27 May 2020 | 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. In addition, the city state – like many other countries – is badly affected by the Covid-19 crisis. The responsible Ministry of Trade and Industry estimates a negative growth of -4 to -1 per cent for 2020. For the year 2021, the International Monetary Fund expects Singapore to recover by up to 3 per cent.

 

The government is trying to mitigate the economic consequences of Covid-19 with two supplementary budgets and a stimulus package of over 55 billion Singapore Dollars. The extent to which these measures can cushion the economic effects remains to be seen.

 

In general, however, due to a long-term political agenda the general future outlook is positive. The Covid-19 crisis should further strengthen Singapore's role as a safe haven in the Southeast Asian region.

 

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

In the “Global Competitiveness Index 2019” of the World Economic Forum, Singapore ranks 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 many times 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 in connection with a strict policy on anti-corruption and anti-money laundering. Singapore ranked fourth out of 180 countries in the global corruption perception index of “Transparency International” in 2019.

 

The following areas are considered key sectors and are particularly supported by the government:

  • High technology industry (e.g. precision engineering, electronics, semiconductor and robot technology),
  • Health care (e.g. medical technology and pharmaceutical industry),
  • Urban planning and development (including environmental and water technologies; means of transport and planning),
  • Logistics and aerospace technology,
  • Regional and global financial services (including financial technologies) as well as
  • Research, development and education.

 

According to the current development, we also assume that the IT services/technology sector (including cybersecurity, data centers), the so-called lifestyle branch and the topic of renewable energies will 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. Thus, in 2016, Singapore adopted the OECD's Framework on “Base Erosion and Profit Shifting” (BEPS), which had implications for tax structuring possibilities and mainly for 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 faced with an increasingly restrictive administrative practice as regards awarding work permits. Also the establishment of a representative office as the “first step” to the Singaporean market is possible only when strict conditions are met. It should also not go unnoticed that Singapore was voted the third most expensive city in the world by the mobility service provider “Mercer” in its “Cost of Living Rating” in 2019.

 

What role does Singapore play within ASEAN?

Singapore is working hard to expand its function as a hub in the region. The city state has long been a logistics, financial and investment hub and serves as a regional headquarter for many foreign companies in the Asia-Pacific region. Singapore would like to expand this function and is increasingly focusing on establishing itself as dispute settlement and restructuring hub. Singapore has a first-class infrastructure in the area of dispute resolution through the combination of the “Singapore International Commercial Court”, the “Singapore International Arbitration Center” and the “Singapore International Mediation Center”. International agreements, such as the Hague Convention on Choice of Court Agreements or the “UN Singapore Convention on Mediation”, also ensure simplified enforcement and ultimately serve to provide legal certainty. As a restructuring hub, Singapore now offers similar to the US insolvency law opportunities for cross-border restructuring of companies in financial distress.

 

In your opinion, how will Singapore develop?

For many years now, Singapore has boasted remarkable economic growth and is expected to continue on this upward trend also in the future. It remains to be seen to what extent the Covid-19 crisis will affect Singapore's medium to long-term development. Dealing with other challenges, such as the aging of society or the dangers of climate change, will also have a major impact on the further development of the city state. In addition to the linked political tasks, Singapore will in particular have an increased tax requirement in the future. This has been taken into account recently with the announcement of an increase in GST from 7 to 9 per cent between 2021 and 2025.

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