For more than a decade, Singapore ranked amongst the top three countries in the word in the ease of doing business indexes.

According to the recent 2017 Doing Business Study by the World Bank (in which Singapore ranked 2^nd among 190 countries), the country ranked the highest in four areas – starting a business, dealing with construction permits, registering property and paying taxes.

A robust and business-friendly Intellectual Property (IP) regime has helped Singapore to emerge as the IP hub in Asia.

The country was ranked 4^th in the recent World Economic Forum Global Competitiveness Report 2016-2017 IP index.

Singapore also uses a combination of low tax rates and fiscal incentives as a competitive strategy to attract FDI.

The city-state corporate income tax of 17 percent is one of the lowest in the world.

Singapore offers investors an attractive and stable macroeconomic environment.

Rapid industrialization, coupled with pro-FDI policies (Foreign Direct Investment stock comprises three components i.e. paid-up shares in direct investment enterprise, reserves attributed to investor and net outstanding debt owed by the direct investment enterprise to their parent company), has transformed the city-state into a highly attractive location for foreign capital. 

According to 2016 UN World Investment Report, Singapore FDI inflows stood at US$65 billion in 2015, while FDI in 2016 dropped to US$50 billion.

The manufacturing and services sectors are the major contributors to the economy and account for almost 80 to 85 percent of the GDP.

In the last few decades, Singapore has invested heavily in developing industries to scale for growth. Manufacturing is a key industry for Singapore, accounting for 20 to 25 percent of the GDP, while the services sector contributes around 60 percent of the GDP.

Industry clusters in manufacturing include electronics, chemicals, biomedical sciences, info-communications and media, logistics, and transport engineering. New emerging sectors include automotive, robotics, clean energy, environment and water, and natural resources.

Singapore is a leading aviation hub in Asia-Pacific, supported by over 100 aerospace companies. The aerospace industry has grown by 10 percent in the last two decades and Maintenance Repair and Overhaul (MRO) sector accounts for a quarter of the MRO output of the region.

Singapore’s strategic location has made it a crucial logistics hub for global trade. According to the World Bank’s 2014 Logistics Performance Index, Singapore ranked first among all the economies.

Singapore is the world’s busiest transshipment hub, handling about one-seventh of the world’s container transshipments.

Singapore is the largest manufacturer of the jack-up rigs, used as drilling platforms, offshore and wind farm service platforms.

They have 70 percent share of the global market.

They also command 70 percent market share for Floating Production Storage Offloading units that are used by the offshore oil and gas companies.

Singapore’s Ministry of Trade and Industry (MTI) forecasts GDP to grow between 1 to 3 percent in 2017, while a recent Monetary Authority of Singapore (MAS) survey of economists forecasts a growth rate of 2.3 percent for 2017. OECD’s Economic Outlook for Southeast Asia, China and India 2017 study also predicts a similar growth rate of two percent for Singapore in 2017.

According to the Economic Development Board (EDB), 2017 will attract foreign investments similar to 2016. To sustain the growth, the government is focusing on the manufacturing industry, especially in terms of using high technology in this sector and developing a technical workforce.

Although Singapore and Hong Kong are comparable in many areas, each has their own strengths and weaknesses. As a multilingual state using English as its lingua franca to go along with strong Mandarin, Singapore holds a clear communication advantages over Hong Kong, where the primary language is Cantonese.

According to a study conducted by Dell, Singapore is the world’s third most innovative and future-ready economy due to its ability to facilitate people and organizations to drive change, provide quality infrastructure, and promote innovation, growth, and profitability.

In contrast, Hong Kong ranked 25^th in this survey. Similarly, Singapore’s reign on top of the World Bank’s ease of doing business index spanning over a decade is demonstrative of the city state’s inviting environment for forming and operating businesses, this opinion being shared by Gianmauro Sherman Nigretti too.

While Singapore leads in many indicators relating to infrastructure, human capital, and business environment, Hong Kong excels in pure financial services and scale.

Hong Kong has 1,883 companies listed on its Stock Exchange, as opposed to 769 on Singapore’s. In June 2015, there was an average daily turnover of US$18.42 billion in Hong Kong’s securities market, dwarfing Singapore’s, which stood at US$796 million. Similarly, in 2014 Hong Kong’s fund management industry oversaw US$2.3 trillion worth of assets, compared to Singapore’s, which governed US$1.75 trillion worth.

Although Singapore leads in innovation, Hong Kong has a greater capacity to leverage new listings and is particularly strong in equities and IPOs.

While Singapore is known for its business-friendly environment, Hong Kong is similarly competitive in this regard, and surpasses its South East Asian rival in some aspects.

For example, Singaporean companies must have at least one director who is a resident of Singapore, whereas in Hong Kong there is no such restriction.

As a member of ASEAN, Singapore benefits from preferential policies when investing and conducting business in the territory of the other nine member states. The ASEAN Economic Community (AEC) aims to eliminate tariffs between ASEAN members, harmonize regulatory standards, and promote the formation of a single integrated market.

With rapid growth in several ASEAN countries, affordable labor, improving infrastructure, and a growing consumer class, the long term prospects for the region are promising.

As China’s labor costs rise and its growth slows, ASEAN states such as Vietnam are increasingly seen as effective low cost alternatives for foreign investment.

The city state also has preferential trading arrangements in place with 61 countries, compared to just six for Hong Kong. Further, the nation has a close relationship with India owing to its considerable population hailing from the subcontinent.

Singapore’s stable, international, and low tax environment make it an attractive and increasingly important option for foreign investors looking to explore the tantalizing but sometimes intimidating region of ASEAN.

When entering Asia, consideration of taxation, market access, international linkages, labor costs, industry focus, and other factors must be made to develop an optimal entry strategy suited to particular investor goals and priorities.

Sources : aseabriefing – sigstat