Singapore has earned a prominent position in global trade by establishing itself as a major international trade hub. At the heart of this success lies the strategic utilization of Free Trade Zones (FTZs), which play a crucial role in the country’s international trade policy. These FTZs act as powerful drivers, drawing businesses from all corners of the world and positioning Singapore as a top choice for international trade and investment.
Let’s explore with Singapore Company Formation the multi-faceted nature of Singapore’s Free Trade Zones, examining their significance, key benefits, and the key players involved in their operations. We specifically focus on the Jurong Port Free Trade Zone, shedding light on the opportunities it offers to businesses seeking global growth, efficiency, and sustainable development.
Understanding Singapore’s Free Trade Zones
Singapore, a renowned country known for its trade focus and business-friendly regulations, has integrated Free Trade Zones (FTZs) as a vital element of its international trade strategy.
The Singapore Free Trade Zones form an extensive network that spans the entire island, encompassing significant locations such as the Port of Singapore and Changi Airport, as well as several designated areas.
Operated by three main authorities, namely PSA Corporation, Jurong Port, and Changi Airport Group, Singapore’s FTZ Areas include nine key areas:
- Brani Terminal
- Keppel District Park
- Tanjong Pagar Terminal and Keppel Terminal
- Sembawang Wharves
- Pasir Panjang Wharves
- Jurong Port
- Changi Airport Group
- Changi Airport Cargo Terminal Complex
- Airport Logistics Park of Singapore
Singapore Free Trade Zone Regulations
The Free Trade Zone Act was enacted in Singapore in 1966 and underwent amendments in 2014.
According to the regulations outlined in the Free Trade Zone Act, the following aspects are governed:
- Penalties for non-compliance with the guidelines set by free zone officials.
- Oversight of corporate entities’ activities in free trade zones is carried out by the Free Zone Steering Committee, the Head of Singapore Customs, and the Minister for Business and Commerce.
- The licenses and authorizations required for manufacturing and distributing goods within the free zones.
- The types of services that free zone enterprises are permitted to conduct in Singapore.
Benefits of Singapore Free Trade Zone
The primary benefit for businesses operating in Singapore’s free zones is the extensive storage services offered, catering to both domestic and international companies. Singapore’s free zones are strategically located near the country’s busiest waterways, providing a significant advantage to cargo industries.
Operating within Singapore’s FTZs offers several key advantages that optimize trade and logistics processes, including:
- Exemption from duties and taxes: Businesses within Singapore FTZs enjoy the benefit of not having to pay customs duties and taxes on goods. This relief reduces financial burdens, making operations more cost-effective and competitive.
- Streamlined customs procedures: Singapore’s FTZs have simplified customs processes, minimizing bureaucratic obstacles and accelerating the movement of goods.
- Efficient logistics and transportation infrastructure: Equipped with state-of-the-art logistics and transportation facilities, FTZs enhance the speed and reliability of supply chain operations. Businesses can access a comprehensive range of logistics services, including warehousing, distribution, and transshipment facilities.
- Access to global markets: Singapore’s extensive network of free-trade agreements (FTAs) agreements (FTAs), investment guarantee agreements, and Double Taxation Avoidance Agreements (DTAAs), such as the India-Singapore DTAA and the Malaysia-Singapore DTAA, grants businesses access to markets worldwide. These agreements promote seamless trade relations and provide businesses with access to a vast customer base.
The Jurong Port FTZ: An Important Gateway to Southeast Asia
The Jurong Port Free Trade Zone (FTZ) benefits from its excellent geographical position in Singapore. Situated in the vibrant Jurong Industrial Estate, this FTZ holds a strategic location in close proximity to essential transportation hubs and major shipping lanes. Being near the Port of Singapore, renowned for its high activity and advanced container facilities, further improves its connectivity and accessibility to both Southeast Asian and global markets.
The largest Singapore Free Trade Zone Warehouse
Jurong Port holds the distinction of being Singapore’s largest Free Trade Zone (FTZ) and is equipped with an extensive 170,000 square meters of warehouse facilities, offering abundant storage space for businesses to manage goods effectively. Annually, the port accommodates over 15,000 vessels from both the local region and international destinations. In 2022, Singapore’s various terminals, including Jurong, collectively handled an impressive 37.3 million 20-foot equivalent units (TEUs) of containers, ranking second in container handling volume after Shanghai. Additionally, Singapore’s terminals efficiently managed 577 million tons of cargo in the same year.
The Jurong Port Free Trade Zone caters to a wide array of industries and offers a diverse selection of high-value multipurpose terminals. As part of its vision to be a forward-looking multipurpose port, it strives to stay ahead of evolving cargo and import demands.
To achieve this, the port is segmented into energy terminals and multipurpose terminals. The energy terminals encompass the largest oil storage terminal in the Asia Pacific region, while the multipurpose terminals feature specialized facilities for handling cement and steel, each with its dedicated terminal. Furthermore, the port has extensive expertise in managing bulk cargo, including livestock, timber, paper, rubber, and metal products.
Requirements for Establishing a Business in FTZ Area in Singapore
Aspiring entrepreneurs seeking to establish businesses within Singapore’s Free Trade Zones (FTZs) must meet specific criteria to comply with the country’s corporate laws and the Free Trade Zones Act.
It’s worth mentioning that companies setting up in these FTZs are commonly referred to as free zone companies.
These zones welcome both local and foreign investors interested in conducting operations within Singapore. Both individuals and corporate entities must obtain a permit from the PSA Corporation Authority before commencing their business activities.
Singapore boasts a remarkable number of free zones, a surprising fact given its relatively small size. Each of these zones offers tailored amenities to cater to the specific needs of the enterprises located there.
To start a business in a trade-free zone in Singapore, certain requirements must be met:
- The founder’s visa or identification card is essential.
- The required financing will be determined based on the company’s income.
- The company’s name must be registered with the Trademark Registry.
- The articles of foundation are necessary.
- If a company operating in an FTZ needs a Singapore FTZ warehouse, it must have a paid-up share capital of $100,000.
- Those seeking a coworking space should have an initial paid capital of S$50,000.
- The paid-up share capital should be deposited in the first year of existence. However, the business is allowed to use this capital for operational expenses.
International Trade Performance of Singapore in 2022
Singapore thrives as a regional hub for commerce and international trade, showcasing advanced financial markets, a strong legal framework, a well-managed economy, and a highly educated populace. Its strategic location and extensive transportation links make it a crucial gateway for the flow of goods, services, investments, and ideas throughout the region. As a result, an increasing number of multinational corporations choose to establish their Southeast Asia and Asia-Pacific operations in Singapore, bringing with them foreign direct investment, intellectual property, and a talented pool of human capital.
In the fourth quarter of 2022, Singapore experienced a 1.0 percent decline in total merchandise trade compared to the same period the previous year. This marked a significant shift from the 25.7 percent growth observed in the preceding quarter. However, during the same timeframe, total services trade bucked the trend by increasing by 7.0 percent year-on-year, following the strong growth of 12.5 percent in the third quarter.
Looking at the entire year of 2022, Singapore’s total merchandise trade saw a remarkable surge of 17.7 percent, reaching $1.4 trillion, up from $1.2 trillion in 2021. This growth was mainly driven by a substantial increase of 47.5 percent in oil trade, which benefited from higher oil prices compared to the previous year. Additionally, non-oil trade also experienced a healthy growth of 11.9 percent. Within the merchandise trade, both exports and imports saw positive gains, with exports rising by 15.6 percent and imports growing by 20.1 percent.
In tandem with the robust performance of merchandise trade, total services trade also had a positive year, rising by 10.8 percent to reach $758 billion in 2022, up from $684 billion in 2021. Within the services sector, both exports and imports increased, with exports growing by 12.1 percent and imports expanding by 9.3 percent over the course of the year.
