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Singapore holds the distinction of not only being the freest economy on the planet, but it’s also the world’s second-most connected country. Those are wonderful accolades to be sure, but for those looking from abroad, what does that actually mean? How does Singapore maintain its open economy and strong business connections with the outside world, and why is that so important for outside investors?
The answers are as simple as they are enticing, but they are based on decades of forward-thinking policymaking that have turned the city-state into an economic powerhouse. Let’s drill down on some of the key reasons why Singapore is so well-connected, and how those connections will benefit both local businesses and foreign investors for years to come.
Singapore’s Free Trade Agreements
Singapore has 26 free trade agreements (FTAs) in place with countries around the world. FTAs provide businesses operating in Singapore with preferential access to those markets, through lower tariffs and easier customs procedures. This makes it easier and cheaper for businesses to export their goods and services to these countries and helps to create a level playing field for them to compete in those markets.
The FTAs also provide greater clarity and certainty for businesses, by setting out clear rules and standards that they can rely on. This helps businesses to plan their operations more effectively and reduces the risk of doing business in these countries.
Compared to the economic minefields of some other developed markets, Singapore offers a haven of sorts for businesses, with a well-regulated environment and a government that supports enterprise. The city-state has been consistently ranked as one of the easiest places to do business in the world, and its FTAs are a big part of that.
Digital Economic Connections with Singapore
In a world where data has quickly become the most valuable commodity, it’s no surprise that Singapore’s famous foresight has put itself at the forefront of digital economic agreements. These are agreements between countries that aim to standardize and facilitate the flow of data across borders while ensuring a high level of protection for users’ personal data.
The benefits of these digital agreements are three-fold. Firstly, they provide greater certainty and clarity for businesses, by setting out clear rules on how data can be used and shared. Secondly, they allow businesses to operate more efficiently by making it easier for them to transfer data between countries. Thirdly, it encourages the growth of new technologies such as AI and big data, which can be used to drive innovation and economic growth.
As the world becomes increasingly digitized, these digital agreements will become even more important. They are a key part of Singapore’s strategy to stay connected with the rest of the world and to position itself as a leader in the global economy.
ASEAN Economic Community
Set to be the world’s fourth-largest economy by 2030, being an integral part of the ASEAN economic community might just be the ace up Singapore’s already well-equipped sleeve.
The ASEAN economic community positions itself as a single market and production base, with free movement of investment and capital, skilled labor, goods, and services. It aims to create a seamless regional economy, with greater opportunities for businesses and consumers alike.
For Singapore, being part of the ASEAN economic community means having preferential access to a market of over 600 million people. It also provides a platform for Singaporean businesses to deepen their regional integration, and tap into the region’s growing middle class, which is set to reach 396 million by 2030.
The ASEAN economic community is an important part of Singapore’s strategy to stay connected with the world. It provides a platform for the city-state to deepen its engagement with the region, and strengthen its position as a global hub of investment and innovation for years to come.
Free Trade Zones
A free trade zone (FTZ) is an area in which goods can be imported and exported without the need for customs clearance. First established in 1969, Singapore now has nine FTZs, which are operated by three FTZ authorities.
There are two main benefits to Singapore’s FTZs. Firstly, they provide a cost-effective way for businesses to import and export goods. If Singapore were to not have these FTZs, businesses would have to incur the cost of customs clearance for every shipment that they make. This would add up to a significant amount of money, and would make doing business in Singapore much more expensive.
Secondly, FTZs provide a one-stop service for businesses, with a range of government agencies located within the zones. This makes it easier for businesses to get the approvals and licenses that they need, as well as to access a range of other government services.
The FTZs are an important part of Singapore’s trade infrastructure and are a key reason why the city-state is one of the most attractive places in the world to do business.
GST Suspension Schemes
In yet another piece of innovative policymaking, Singapore’s Good and Services Tax (GST) suspension schemes such as the Zero-GST Warehouse Scheme and Licensed Warehouse Scheme allow qualifying businesses to import and store goods without paying GST.
The schemes are designed to provide businesses with a cost-effective way to manage their inventory and to free up working capital that would otherwise be tied up in GST payments.
They are also an important part of Singapore’s strategy to position itself as a regional hub for the storage and distribution of goods in what is a gateway from West to East.
As mentioned, it took decades of work and planning to get Singapore to where it is today. And it’s not just the government that has been doing the work — businesses and citizens alike have played a role in making Singapore the global hub that it is.
But one thing is for sure: Singapore’s commitment to staying connected with the world is as strong as ever. With a suite of trade programmes and forward-thinking policy-making in place, the city-state is well-positioned to continue deepening its engagement with the region and the world for decades to come.
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- Singapore has a very pro-business environment, currently ranked 2nd in the World Bank Group’s Doing business 2020 Report.
- Singapore is one of the world’s most connected countries, strategically located along the world’s major trade, shipping and aviation routes.
- Singapore’s imports are largely composed of electronic components, machinery, chemicals, and manufactured goods. The country exports high-value-added products such as electronics, fuels, and chemicals its main Import partners are China, Malaysia, the United States, South Korea, Japan, and Indonesia.