Supply Chains: Singapore
After rapid industrialization in the 1960s, Singapore has evolved into a major logistics and trade hub, and is now the fifth-largest economy in ASEAN. Singapore has an open investment regime and a welcoming business climate, with tax incentives and a streamlined regulatory system. Although Singapore is more often viewed as a source of foreign direct investment (FDI), rather than a recipient, it still attracts substantial foreign investment in areas of financial and business services, as well as manufacturing in petrochemicals, electronics, and equipment. In 2020, it received US$90.6 billion in inbound FDI versus US$59.7 billion five years earlier, an increase of 52 percent. However, due to the COVID-19 pandemic and economic fallout, real GDP in 2020 decreased by 5.4 percent.
Singapore’s cutting-edge financial infrastructure, transparency, and business-friendly regulations attract the regional headquarters of many multinationals and enable Singapore to be the source of a large amount of FDI for the rest of Asia. However, Singapore’s small size presents some challenges because of its inability to absorb large projects due to land constraints. Singapore is looking to prioritize foreign investment around cybersecurity and digital innovation, and the government is correspondingly investing in artificial intelligence, automation, and smart cities technologies. Singapore currently ranks 6 out of 146 in economic complexity.
To encourage greater FDI, the government has been promoting Singapore as a research and development (R&D) hub by implementing financial incentives and partnership opportunities through its research institutions. The government’s Economic Development Board (EDB) also offers streamlined support to potential investors by providing information and access to foreign investment incentives. In recent years, Singapore’s top foreign sources of investment have been the United States, the Netherlands, and China.
Recent Investment/Supply Chain Policies
- On March 26, 2020, the Parliament passed the Economic Expansion Incentives (Relief from Income Tax) (Amendment) Act 2020 to expand the investment allowance regime and ease rules of investment. More specifically, the act expands the investment allowance regime to include “corporate partnerships” and the “construction and operation of any submarine cable system” and creates a new framework for transferring tax incentive awards between companies due to corporate restructuring, amalgamation, and so on.
- On March 1, 2020, changes to the Global Investor Programme, announced by the Economic Development Board in early 2020, came into effect. Changes include a streamlined application process for permanent residency (PR); an expansion of the scope of investors who may receive PR; an increase in the minimum revenue requirements for established business owners, from S$50million to S$200 million (US$36.9 million to US$147.8 million).
SPECIAL ECONOMIC ZONES
- On February 3, 2021, the Economic Development Board (EDB) and Enterprise Singapore (ESG) announced the launch of the Southeast Asia Manufacturing Alliance (SMA), which seeks to "promote a network of industrial parks to manufacturers who are interested in [investing] both in Singapore and the region." According to EDB Chairman Dr. Beh Swan Gin, the SMA "will make it easier for manufacturers to learn about the advantages and strengths of the participating industrial parks and their respective ecosystems, and simplify the process for companies to establish their operations there.”
- On March 5, 2021, the Maritime and Port Authority of Singapore announced that it had "set a target to bring in S$20 billion [US$14.8 billion] in total business spending commitments from maritime companies from 2020 to 2024."
- On May 4, 2020, the Intellectual Property Office of Singapore launched the SG Patent Fast Track Program to “expand support for innovation to all sectors.” Under the program, which is expected to end on April 29, 2022, the application-to-grant process for patents in all technology fields will be shortened from two years to six months.
- On January 14, 2020, the Variable Capital Companies Act 2018, passed by Parliament on October 1, 2018, officially came into effect. According to the Accounting and Corporate Regulatory Authority, the act creates a "new corporate structure for investment funds" that allows fund managers "greater operational flexibility and cost savings."