Strategic hub
Singapore is a microstate located in Southeast Asia with a population of 5.5 million. Given its strategic location, many foreign companies doing business in this part of the world have chosen it as their regional center. Singapore is one of the largest financial centers, and in 2022 it was ranked 6th in the “Global Financial Centers Index” after New York, London, Hong Kong, Shanghai, and Los Angeles.
As a country with a booming economy, Singapore plays a vital role in driving growth in the Association of Southeast Asian Nations (ASEAN). Singapore’s gross domestic product was $396.9 billion ($72,794 per capita) in 2021. Services account for 73.57% of GDP, industry for 26.4%, and agriculture for 0.03% in the GDP structure terms. Regarding the business environment, 99% of companies (296,000) are small or medium-sized enterprises.
Singapore’s labor force is considered one of the most skilled in the world. The main economic sectors are ICT, finance, and chemicals. Singapore is an important center for global and regional trade. As a country with almost no natural resources, it is heavily dependent on imports, especially when it comes to electronics, fuels, and pharmaceuticals. In 2021, Singapore’s exports were worth $457.1 billion, and imports were worth $406.3 billion.
Population of Singapore
The population of Singapore is 5.5 million. Singapore is an ethnically diverse country with four official languages: Mandarin, English, Malay, and Tamil. People of Chinese descent make up 75.7% of the Singaporean population. People of Malay descent account for 15.2% of the population, and another 7.5% are of Indian descent.
Singapore is also a religiously diverse country. About 40% of the inhabitants are Buddhist or Taoists, and about 20% are Christian. The other large groups are Muslims and Hindu communities, accounting for 14% and 5% of the population. Food and cosmetics entrepreneurs should pay close attention to this information, as exporting some products to Singapore may require importers to obtain halal certification.
Singapore is undergoing a demographic transformation similar to other Asian countries. The population is aging rapidly, with a low fertility rate and longer life expectancy. The proportion of citizens aged 65 or older has increased from 11.1% in 2012 to 18.4% in 2022. It implies that in the coming years, investment in the healthcare sector and the development of the medical equipment market, including innovative agetech solutions, that is, technologies that improve the quality of life for seniors, are expected to increase.
Logistics center
Singapore is a pivotal shipping hub in East Asia. The local port is the second busiest in the world after Shanghai, with about 130,000 ship calls annually. It currently houses 84 container berths. In 2020, it recorded a throughput of 37.5 million TEUs. Singapore’s port provides trade connections to 600 ports in 123 countries. It is also one of the world’s leading ship bunkering facilities.
Singapore is a core port on the sea route that is part of the New Silk Road being developed by China and on many regional sea routes, including those between China, Australia, and Europe. The growing popularity of the Northern Sea Route, a seasonal shipping route in the Russian Arctic, could also be an opportunity. Singaporean companies can get involved in projects such as the production of icebreakers and equipment needed for oil and gas extraction in the Arctic region.
On the other hand, however, the Northern Sea Route may result in less sea traffic to Singapore. Competition from Chinese ports is also slowly increasing. Therefore, the authorities are investing in infrastructure, such as the Tuas mega port, to make Singapore more competitive. It’s part of the “Industry Transformation Maps” strategy to boost innovation and productivity of Singapore’s economy.
International trade
Singapore is the 14th largest exporter and 15th largest importer in the world. Exports have outweighed imports in recent years. Regarding “Singapore’s National Hydrogen Strategy,” green energy-related trade can be expected to increase. Singapore’s main trading partners are China, Hong Kong, Malaysia, the US, Indonesia, South Korea, Japan, Vietnam, Thailand, and Australia.
The largest group of imported goods by Singaporeans are electrical machinery (33.9%), oil and mineral fuels (18.6%), industrial machinery (14.7%), precious stones and metals (5.3%), precision instruments (3.63%), organic chemicals (2.21%), plastics (2.04%), chemical products (1.33%), and aircraft (1.23%). Other goods include cosmetics, motor vehicles and parts, pharmaceuticals, and various food categories.
Among the most exported goods are electrical machinery (36.5%), industrial machinery (15.1%), oil and mineral fuels (10%), precision instruments (4.89%), precious stones and metals (4.62%), plastics (3.48%), organic chemicals (3.01%), cosmetics (2.27%) and pharmaceuticals (2.25%). In addition, Singapore exports chemical products, prepared foods, aircraft, motor vehicles and parts, and iron and steel articles.
Trade agreements
Singapore has negotiated many trade agreements. They were concluded with both individual countries and associations of countries.
Singapore has signed free trade agreements with the following countries:
Australia
China
Costa Rica
India
Japan
Jordan
New Zealand
Panama
Peru
South Korea
Sri Lanka
Turkey
United Kingdom
United States
Agreements with associations of countries:
Association of Southeast Asian Nations (ASEAN)
European Union (EU)
European Free Trade Association (EFTA)
Gulf Cooperation Council (GCC)
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
Regional Comprehensive Economic Partnership (RCEP)
Agreements as an ASEAN member:
Australia and New Zealand (ASEAN-Australia-New Zealand Free Trade Area, AANZFTA)
China (ACFTA)
India (AIFTA)
Japan (AJCEP)
South Korea (AKFTA)
Singapore – European Union relations
In October 2018, Singapore and the European Union concluded a trade and investment protection agreement. Singapore is the EU’s 16th largest trading partner and the most vital partner among ASEAN countries. The European Union’s trade balance is positive. Singapore is a major destination for European investment in Asia and the third largest Asian investor in the EU, after Japan and Hong Kong.
Singapore is crucial for European companies as a target and intermediate market, offering opportunities for expansion into other Asian markets. More than 14,000 European companies are registered in Singapore. Many use Singapore as their regional headquarters, logistics, or distribution center for the Southeast Asian region.
Opportunities and challenges
Singapore’s market operates under transparent rules. Administrative operations for foreign entrepreneurs are conducted efficiently, and a developed infrastructure facilitates the distribution of goods. English proficiency is widespread, making the process of registering a business easier. About 99% of all imports enter the country duty-free and are only subject to the 7% Value Added Tax (VAT). On the other hand, a high excise tax is imposed on goods such as wine, spirits, tobacco products, oil, and motor vehicles.
Non-tariff barriers include import restrictions, fees, and sanitary and phytosanitary regulations. Importing certain goods, especially foodstuffs, may require a license, permit, or prior notification to the Singaporean side. Products that must comply with import requirements are vegetables and fruits, live animals, meat and meat products, chemicals, fuels, weapons, diamonds, medicines, and petroleum products. A list of controlled goods is available on the Singapore Customs website.
Some products are prohibited from being exported to Singapore: pistol-shaped lighters, rhino horn, chewing gum, fireworks, and some telecommunications equipment, such as scanning receivers, military communication devices, telephone voice changing devices, and radio communication jamming devices.