Busiest ports Business friendly Asian Tiger Highest Trade/GDP Ratio 4 th biggest financial centre
Singapore economy at a glance: Singapore is a global trading power. Its strategic geographical location, stable government, reliable workforce, pro-business environment, transparent legal system and sound infrastructure make it a trading hub. It has one of the busiest ports and is among the top financial centers of the world. Singapore economy depends heavily on trade with Wholesale and retail trade, business & financial services and insurance sectors being the major contributors to Singapore s GDP. Top 5 exporting nations of Singapore are USA, Australia, UK, Japan and China, while the top 5 importing nations include USA, UK, Netherlands, China and Japan. Majors commodities imported include food, tobacco and beverages and machinery and transport while products exported include Integrated circuits, food, chemicals and refined petroleum. Singapore invests maximum in China, UK, Hong Kong and Indonesia while Singapore receives investments from USA, Netherlands, Britain, Japan and UK. Singapore s central bank and financial authority, Monetary Authority of Singapore (MAS), regulates the monetary system via the foreign exchange mechanism by intervening in the SGD market. The main objective of Singapore s monetary policy is to promote price stability for sustainable economic growth. MAS have a managed float regime.
Why is Singapore a trade hub? Singapore attracts a large amount of foreign investment due to following reasons: Trade Infrastructure: Singapore has attractive trade infrastructure giving it an important competitive sources of advantage. Singapore has one of the best infrastructures in land, air, sea. Political stability: The country has political stability which further attracts the investors. Custom procedures: Singapore has the highest levels of efficiency of custom procedures related to the entry and exit of merchandise. Port of Shanghai, Singapore Efficient labor markets: It has one of the highest literacy rates, most efficient goods and labor markets. Free Trade agreements (FTAs): It has signed more than 20 regional and bilateral FTAs with over 31 trading partners. Singapore has six free trade zones within its port areas which helps in entrepot trade and promotes the handling of transshipment cargo. Metals trading hub: Singapore has removed the Goods and Services Tax (GST) from investment grade- gold silver and platinum making it advantageous for trading of metals.
First-ever global grains trading desk set up by World s largest independent oil trader Vitol has, along with top agri-commodities players, Cargill and Louis Dreyfus Robust trade ecosystem: The ecosystem includes price discovery platforms, physical storage facilities, trade finance capabilities trade talent and other trade infrastructure. Louis Dreufus, global agro-commodity giant, chose Singapore Exchange for its first bond issuance. However, as every coin have two sides. Trading in Singapore also has some impediments. Ministry of trade and industry, Singapore Singapore offers limited access to capital, small pool of trading professionals and relatively high cost base. Relative high cost base puts Singapore at a disadvantage when compared with other low cost locations. Marina bay financial centre, Singapore
Singapore FDI in major sectors Source: Bloomberg Singapore invests in various sectors. However, the major investment has been in 3 sectors mentioned in the above chart. Investment in Finance and Insurance sector is the highest and is also growing over the last few years. Wholesale and retail sector receives the second highest FDI. Benefits to Indian companies in establishing office in Singapore Ease of operation in Singapore makes it one of the most favored destinations for investment and businesses set up. Singapore has topped the World Bank s Doing Business 2013 survey of 185 countries. Singapore ranked fourth while India comes in at 173, In terms of starting a business,. Further, it takes three permits and three days to start a business in Singapore. While in India, it takes 12 approvals and 27 days to start a business in India. Singapore is an important strategic trading post, giving India trade access to the Far East. It is easy to enter into markets like Malaysia, Indonesia, Vietnam through a Singapore setup. If the company want to grow business in Southeast Asia, Singapore is the best place to start with.
Tax Advantage: Singapore has double tax avoidance agreements with many nations. Further, there is no capital gains tax or dividend taxes in Singapore. The city-state caps corporate tax at 17 per cent, compared with more than 30 per cent in India plus huge indirect taxes. The Double Taxation Avoidance Agreement (DTAA) with Singapore that incorporates Limit-of-Benefit (LoB) clause has provided comfort to foreign investors based there. Negligible-to-low rates of taxation in Mauritius, Cyprus and Singapore explains the high volumes of foreign direct investment (FDI) and portfolio investments received through these countries. Less corruption: It has a politically stable economy with almost a zero rate of corruption. India -Singapore relations: The trade relations between India and Singapore have been strong and friendly over the years. Both the countries have also signed the Comprehensive Economic Cooperation Agreement (CECA) to improve the trade, investment and co-operation. Singapore has invested in projects to upgrade India's ports, airports and developing information technology parks and a Special Economic Zone (SEZ). In 2013, India was Singapore's 11th largest trading partner and 12th largest export destination, with total trade volume of 25.5 billion Singaporean dollars (USD 20.36 billion). Singapore has replaced Mauritius as the top source of FDI into India, accounting for about 25 per cent of FDI inflows in 2013-14. During the last financial year, India attracted $5.98 billion in FDI from Singapore, whereas it was $4.85 billion from Mauritius.
Source: Bloomberg Source: Bloomberg