International Trade in Singapore

News Related to International Trade in Singapore

Business outline for Singapore

Main Industry Sectors

Singapore's economy is highly industrialized. The biggest sector is the manufacturing sector, followed by the wholesale and retail sector, business services, transport and communication and financial services. The electronics and petrochemical industries are dominant. The services sector contributes almost three quarters of the GDP and employs three quarters of the active population. The industrial sector represents a quarter of the GDP. The primary sector is almost nonexistent (except for the cultivation of orchids, vegetables and fish for aquariums). Singapore does not have any mineral resources.

Singapore is a regional trading hub. The Port of Singapore is amongst the world's biggest and is the second traffic center for container transshipment, behind Hong Kong.

Economic Overview

Singapore's economy was particularly affected by the international financial crisis, because of its very extreme financialization, and its large degree of openness, and thus its dependence on international trade. While GDP growth was above 7.5% from 2004 to 2007, it dropped sharply in 2009 (-1.3%). However, boosted by the regional economic recovery which fuelled a sharp increase in exports, as well as by the resumed vigor of domestic demand, Singapore's growth reached an exceptional degree of 15% of the GDP in 2010. This growth should probably slow down in 2011 and reach a more sustainable level.

The strong recovery context allowed the government to put an end to the exceptional tax measures adopted in order to combat the crisis. The present priorities are to channel this strong growth, contain the hike in real estate prices and fight against inflation pressures. Mid-term objectives of promoting innovation and research and productivity gains are again pursued. IN order to maintain its competitive position despite the growth of salaries, the government seeks especially to promote activities with high added value (such as biotechnology, R&D and pharmaceutical products) in the manufacturing and service sectors.

The level of per capita wealth in Singapore is amongst the highest in the region. After a long period of full employment, unemployment has appeared, especially due to structural economic chances (outsourcing of low-skilled work) and worsened during the crisis. However, it decreased in 2010 and now remains at around 2% of the active population.

FDI in Figures

Singapore has based its economic development on a proactive strategy to attract FDI and trade openness. According to the World Bank, Singapore is the country where it is easiest to do business. Favorable lending to foreign investors, simple regulatory system, tax incentives, high-quality industrial real estate park, political stability and absence of corruption make Singapore an attractive destination for investment.

According to the UNCTAD, Singapore leads the list of the most attractive countries in the world, together with the United States, but the performance of its City is comparatively low in terms of receiving FDI. United States is by far the biggest investor, followed by Japan, Europe, China and India. Following the global recession, FDI flows have decreased and are expected to recover slowly in the coming years.

FDI Government Measures

Singapore is open to foreign investment and offers tax incentives to companies after they register with Economic Development Board. However, the country continues to maintain monopolies in certain sectors (financial services, professional services, media and telecommunications). Government linked corporations play a dominant role in the domestic economy and to a large extent, on investment.

Country Strong Points

Singapore is the easiest country in which to do business, according to the Doing Business 2009 World Bank report. Singapore has excellent telecommunication, financial,and transport infrastructures, and its strategic location at the crossroads of maritime routes and proximity to the big markets is an advantage. The country offers tax concessions and easy loan conditions as part of investment incentives.

Country Weak Points

The lack of transparency in administrative incentives and the non-internationalization of the Singaporean dollar are investment hindrances. Despite being a free port, tariff protection for industrial firms is not provided. The dominant role of semi-public companies could hinder investments in some sectors.

Foreign Trade Overview

A real warehouse and crossroads of international trade, Singapore is highly dependent on external trade, which represents more than 400% of the GDP (2007-2009). The strategy adopted by the country is to promote export while being careful to minimize barriers to imports. Singapore signed the Asian Free Trade Area agreements (AFTA in the ASEAN context) and several bilateral agreements.
Singapore imports machinery and equipment, mineral fuels, chemical products, food commodities and consumption goods from Malaysia, United States, China, Japan, South Korea, Indonesia and Saudi Arabia. The country exports machinery and equipment (electronic), consumption goods, pharmaceutical products and mineral fuels to Malaysia, Indonesia, Hong Kong, China, the United States, Japan and Australia.
Singapore shows a high trade surplus, a trend which should continue in the coming years.