When it comes to investment destinations, Singapore stands out as a prime choice due to its advantageous geographical location. Situated at the heart of Southeast Asia, this island city-state has established itself as a global economic powerhouse. In this article, we will delve into the reasons why Singapore’s geographical location is a convincing factor for potential investors. From its strategic position for trade to its diverse industry sectors, Singapore offers a compelling case for businesses looking to establish a foothold in Asia.
Singapore geographical location advantage
Singapore’s strategic location serves as a key gateway for international trade. Situated along major shipping routes, the country has a natural advantage as a transshipment hub. Its deep-water ports and world-class logistics infrastructure have transformed Singapore into one of the world’s busiest maritime centers. This strategic positioning facilitates efficient trade flows, connecting businesses to markets across the globe.
We will provide comprehensive information about Singapore’s geographical location advantages. Let’s check below:
1. Diversity of agricultural resources
First of all, Singapore has limited natural resources, with no natural forests remaining. The agricultural sector has a minimal impact, focusing on intensive cultivation of vegetables, fruits, and poultry for local consumption. The local fishing industry supplies some fresh fish, while offshore vessels provide the majority. Singapore also exports orchids and aquarium fish.
2. Contribution of Singapore’s industry
Since the late 1960s, Singapore has focused on export-oriented industrialization, attracting foreign investment through liberalization and incentives like free trade zones. Over time, there has been a shift from labor-intensive industries to high-tech sectors such as electronics, precision equipment, and oil refining. These sectors bring higher value-added to production.
3. Professional service and tourism
Singapore leverages its expertise in knowledge-intensive activities like communications, information services, and financial services. The tourism sector benefits from its strategic location, excellent air transport, and investments in hotels and shopping centers. Duty-free shopping, recreational attractions, and a renovated beachfront attract tourists.
4. Center of financial
Singapore excels in sophisticated financial services, with a growing venture capital market and a prominent role as an international financial center. The Asian Dollar Market facilitates currency trading, and the Development Bank of Singapore is the largest local bank. The Stock Exchange of Singapore is a vital player in the region’s financial landscape.
5. Ideal trade of location
Singapore acts as a financial intermediary, facilitating the exchange of raw materials for finished goods. Major imports include machinery and crude petroleum, while machinery and refined petroleum products are key exports. China, the United States, Indonesia, Malaysia, and Japan are important trading partners. Entrepôt activities contribute significantly to Singapore’s exports. The oil-refining industry plays a significant role. Joint-venture projects with Malaysia and Indonesia further foster trade, including investments in Batam Island.
6. Connection between center businesses
Singapore has one of the world’s busiest ports, overseeing multiple terminals and handling a significant volume of containerized cargo. Despite a well-developed road network, traffic congestion remains an ongoing issue. To address this, a light-rail mass transit system connects major population centers with business districts. Singapore is linked to Peninsular Malaysia by rail, and Changi Airport serves as a major regional and international air hub.
7. Administration and Social Conditions
The Westminster model forms the basis of Singapore’s operation as a unitary parliamentary democracy. Close coordination is maintained between the political and administrative arms of the Singaporean government. The administrative structure encompasses various ministries and statutory boards, staffed by civil servants who are monitored by an independent Public Service Commission.
Singapore strategic location for trade
Singapore continues to serve as a financial intermediary, facilitating the exchange of raw materials like rubber, timber, and spices from the Southeast Asian region for finished goods. The country imports machinery, transport equipment, and crude petroleum, while exporting mainly machinery and refined petroleum products. China, the United States, Indonesia, Malaysia, and Japan are key trading partners for Singapore. About one-third of Singapore’s export trade can be attributed to entrepôt activities, which involve transshipment of goods and occasionally their processing or manufacturing in the immediate area. Notably, the oil-refining industry has played a significant role in this capacity. Singapore has also pursued joint-venture projects with Malaysia and Indonesia to foster additional trade, making investments in the nearby Indonesian island of Batam a key aspect of these efforts.
Report of Singapore industry sector breakdown in first quarter in 2023
In the first quarter of 2023, there were several notable developments across various sectors:
– The manufacturing sector contracted by 5.6% YoY, following a 2.6% decline in the previous quarter. All clusters, except for the transport engineering cluster, experienced a decrease in output.
– The construction sector expanded by 7.2% YoY, which was a slight slowdown from the 10.0% expansion in the preceding quarter.
– The wholesale trade sector contracted by 2.5% YoY, reversing the 2.4% growth seen in the previous quarter.
– The retail trade sector expanded by 2.5% YoY, showing a moderation from the 5.1% growth recorded in the fourth quarter of 2022.
– The transportation & storage sector experienced a growth of 0.7% YoY, which was a deceleration from the 2.5% growth in the previous quarter.
– The accommodation sector expanded by 21.9% YoY, extending the 7.8% growth in the preceding quarter.
– The food & beverage services sector’s growth rate moderated to 12.2% YoY, down from 19.6% in the fourth quarter of 2022.
– The finance & insurance sector contracted by 0.9% YoY, continuing the decline of 0.3% in the preceding quarter.
– The real estate sector expanded by 9.2% YoY, which was a slowdown from the 15.2% growth in the previous quarter.
– The professional services sector expanded by 5.7% YoY, following a 6.1% expansion in the preceding quarter.
Why do business in Singapore? Here is the answer
Beyond its geographical advantages, Singapore offers a host of compelling reasons for businesses to set up operations.
1. Singapore’s Infrastructure for the Future
Singapore has established itself as a leader in telecommunication and information technology infrastructure. With a mobile penetration rate of 159%, it demonstrates the country’s strong connectivity. Serving as a major submarine cable hub, Singapore is connected to 23 active subsea cables. Additionally, the nation plans to introduce 5G networks by 2021, with coverage expected to reach at least half of Singapore by the end of 2022.
2. Reliable Electricity Supply
Singapore boasts one of the world’s most reliable electricity supplies. The power grid has an average interruption time of less than one minute per customer per year, surpassing the reliability of cities like Tokyo, London, and New York.
3. A Business-Friendly Ecosystem
Consistently ranked as the most business-friendly country by the World Bank’s Ease of Doing Business index, Singapore provides a hassle-free environment for setting up businesses. It also offers excellent intellectual property protection, infrastructure, and incentives in Asia, as recognized by the World Economic Forum’s Global Competitiveness Reports.
4. Strong Investor Confidence
Singapore has gained a reputation as the least risky country for worldwide investment according to the Euromoney Country Risk Survey. It attracts a significant amount of foreign direct investment (FDI), with more than 10% of total FDI inflows to Asia being channeled into Singapore. The country’s access to global capital and low risk levels instill confidence in businesses for potential growth.
5. A Digitally Ready Economy
Through its Smart Nation drive, Singapore leverages digital technologies to create seamless and tech-driven experiences, aiming to enable business success in the digital era. The government plans to invest $1 billion annually in smart city projects. Singapore has received accolades for its digital transformation environment, ranking as the best in Asia in the Asian Digital Transformation Index and the top-performing smart city in the world according to the Global Smart City Performance Index.
6. A Leading Innovation Center
Singapore consistently ranks among the world’s most innovative cities. It nurtures a vibrant ecosystem that hosts global R&D labs for Fortune 500 companies, over 150 venture capital funds, as well as incubators and accelerators. Many prominent Asian headquarters, including Grab, Sea, Lazada, and Razer, are based in Singapore.
7. Advanced Manufacturing Hub
Singapore, as the world’s fourth-largest exporter of high-tech products, possesses deep engineering and innovation capabilities. The government’s Research, Innovation, and Enterprise 2020 plan involves an investment of over S$3 billion over five years to further enhance Singapore’s advanced manufacturing capabilities.
8. Efficient Business Setup
The Singapore Government has fully digitized business regulations and processes, enabling convenient business registration even from outside Singapore. Registering a company takes just 15 minutes, the quickest in Southeast Asia, and setting up a business takes only one and a half days, 17 times faster than the regional average. Furthermore, the minimum issued capital required to register a new local company is only $1.
9. Availability of Funding
Singapore’s triple-A-rated economy and political stability make it an attractive location for business expansion. The country hosts numerous commercial and merchant banks, capital markets services, and venture capital funds, providing diverse funding options. Initiatives like Startup SG support the thriving start-up ecosystem, connecting over 3,000 start-ups with a global network of 300 investors.
10. Attractive Tax Framework and Extensive Trade Agreements
Singapore has signed over 25 free trade agreements (FTAs) and more than 70 comprehensive avoidance of double tax agreements (DTAs). These agreements facilitate business and trade by minimizing taxation barriers and promoting investment, technical know-how, and expertise. Singapore’s world-class arbitration facility further enhances its appeal for cross-border dispute resolution. With no capital gains or dividends tax and low withholding taxes, Singapore is an ideal destination for company registration. The country offers one of the world’s most attractive corporate tax structures, with a corporate tax rate of 17%.
11. High Quality of Life
Singapore is known for its safety, transparent legal system, reliable police force, and proactive citizens. It ranks at the top for quality of living in Asia according to Mercer’s Quality of Living Ranking and is recognized for its efficient healthcare system and high-quality education. The abundance of parks, nature reserves, and green spaces, including UNESCO Heritage Site Singapore Botanic Gardens and award-winning Gardens by the Bay, contribute to a vibrant and nature-rich environment.
12. Highly Skilled Local Talent Pool
Singapore’s workforce is highly skilled, educated, and internationally recognized for its competitiveness. More than 30% hold a university degree, while another 15% possess diplomas or professional qualifications. The country’s adult literacy rate is 97.5%, and it leads Asia in terms of English proficiency. The Singapore Government has implemented initiatives such as SkillsFuture and TechSkills Accelerator to support skills development and prepare workers for digital and tech roles.
Summary
Singapore’s strategic geographical location, coupled with its diverse industry sectors and business-friendly environment, makes it an attractive investment destination. As a thriving hub for trade and innovation, the city-state provides businesses with access to a dynamic consumer market and a gateway to the broader Southeast Asian region. Whether it is the robust financial sector, the burgeoning tech industry, or other key sectors, Singapore offers immense potential for companies seeking to expand their footprint in Asia. With its stable political environment, strong infrastructure, and supportive government policies, investing in Singapore is a decision that can unlock opportunities for growth and success.
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