Singapore has a strategic location which is in the heart of Asia, and it enables businesses to access the region’s rapidly expanding markets. Singapore’s extensive connectivity to regional and global markets has made its position as the connecting hub for Asia to the world, and the world to Asia.
As one of the major historical trading hubs in Asia, Singapore has a strong business, cultural and linguistic links to many Asian markets. Additionally, Singapore’s cultural and linguistic connections across Asia, a highly qualified workforce, and an openness to top global talent makes the country to support the global business community in Asia.
There are many factors to make Singapore a strategic location for business and also popular as a gateway to Asia. You may be curious about what makes the country attractive to foreign markets, and so on. Here are a few reasons that you should know!
The Reasons Why Singapore is a Gateway to South East Asia
Singapore’s economy also grew by 0.7% year-on-year in 2019, according to the Ministry of Trade and Industry (MTI). It was better than the 0.6% growth forecast by analysts polled by Bloomberg, although it was far below the 3.1% expansion in 2018.
According to official data from the World Bank and projections from Trading Economics, the Gross Domestic Product (GDP) in Singapore was worth US$382 billion in 2019. The GDP value of Singapore represents 0.32% of the world economy.
Singapore’s research and innovation ecosystem has played a key role in a global business hub. Its ecosystem brings together academia, government and the private sector to collaborate and innovate on solutions that are practical to the needs of the global market.
In fact, Singapore houses 6 out of 12 Southeast Asian unicorns, such as Razer, Sea, Lazada, Grab, Trax and Bigo Live, and the country also homes to 40.000 startups too.
Furthermore, Singapore combines the world’s second-highest proportion of high-skilled employment with significant strengths in the quality of its education system and staff training. WEF’s Human Capital Index reported that Singapore ranks 11th out of 130 countries, which has developed 73% of its human capital.
This year, Singapore’s economic freedom score is 89.4 and makes the country the world’s most open economy by the Heritage Foundation. Its overall score remains unchanged from 2019, only with a small improvement in the business freedom score by a small decline in the government integrity score.
Hence, the country is still ranked the 1st among 42 countries in the Asia-Pacific region, and its overall score is well above the regional and world averages.
Singapore actively encourages investment through an array of tax and non-tax incentives. These are intended to boost local companies to expand and internationalize production, including an investment in Research and Development (R&D), training, and access procurement opportunities amongst others.
There are incentive provisions to encourage companies to establish their global or regional headquarters in Singapore. Furthermore, it is also to promote technology and knowledge transfer, and enhance Singapore’s appeal as a service hub.
The Foreign Direct Investment (FDI) in Singapore is thriving too. At the end of 2018, the stock of FDI in Singapore grew by 10.8% to reach $1.736.8 billion at the end of 2018. The growth was attributed to an increase in equity investment. Between 2014 and 2018, the FDI stock grew at a compounded annual growth rate (CAGR) of 11.8%.
However, the financial and insurance services sector remained as the top sector which is S$927.9 billion or 53.4%. Most sectors, with the exception of wholesale and retail trade, registered increases in their FDI stock too.
The government is continuously supplying the national economy with public investments, such as transportation infrastructure projects, and programs encouraging the transfer towards the future economy. In 2017, the government mobilized more than US$8 billion (about 2.5% of GDP) to improve productivity and boost innovation in 23 associated industries in growth sectors.
Singapore has signed the Asian Free Trade Area agreements (AFTA), the Trans-Pacific Partnership (TPP) and several bilateral agreements to support local trade and manufacturing in all ASEAN countries, and facilitating economic integration with regional and international allies. Thus, Singapore has an open economy which is driven by trade in goods and services until this day.
Successful Foreign Businesses in the Country
There are some successful businesses in the financial sector, for instance, HSBC and Standard Chartered Bank
HSBC is one of the easiest banks to establish in Singapore. Now, it is a prominent player in Singapore’s financial services sector, and serving the banking needs of multinational corporations, home-grown business, private banking clients, institutional and retail customers.
Another well-known bank in Singapore is Standard Chartered, a part of an international banking group with more than 150 years of history in the world’s most dynamic markets. It is also one of the first international banks to receive a Qualifying Full Bank (QFB) license, an endorsement of the Group’s long-standing commitment to the business in the country.
A provider of global payment and receivables solutions for education, healthcare, and business, called Flywire, has expanded in Singapore. Its global headquarters in Boston, Massachusetts in the USA, offers a hassle-free and cost-effective experience for clients.
But today, Flywrite is the preferred way for international students to pay their tuition at over 1.400 educational institutions in 6 continents.
One of the biggest e-commerce in Southeast Asia, Lazada Group founded in 2012, with a presence in 6 countries, Indonesia, Malaysia, The Philippines, Singapore, Thailand and Vietnam. Lazada connects this huge and diverse region through the technology, logistics and payment capabilities.
These successful foreign companies have been proof that Singapore is a gateway to Asia. Many foreign investors laid eyes on this country in terms of doing businesses, as the country itself is widely seen as an attractive and yet lucrative market for the small and medium enterprises, and multinational companies.
It is no surprise if you are looking into the country for your upcoming business. You need to remember one important thing, which is a preparation that will bring you to a successful business in the future! Viettonkin Consulting can help you prepare your company’s business expansion to Singapore.