Singapore’s economy is booming, attracting a record-breaking AU$212 billion (US$141 billion) in foreign direct investment (FDI) in 2022. Yet, for many Australian businesses, the Lion City remains somewhat of an untapped opportunity, often overshadowed by larger markets like China and the US. This is despite nearly 60 years of strong bilateral relations between Australia and Singapore.
The savviest Australian investors, however, recognise what Singapore has to offer: a stable government, a thriving economy, and a strategic gateway to the ever-growing Southeast Asian market. Australian investment is therefore quietly but surely surging, with capital flowing into sectors like real estate, technology, and the establishing green economy.
In fact, Australia invested AU$76 billion (US$50.5 billion) into Singapore in 2022, which in part, makes Singapore Australia’s fifth-biggest trading partner. This swell in Australian investment is black-and-white proof of the deep and growing economic relationship between the two nations — but why is this happening?
This article looks at why Singapore is an increasingly attractive destination for Australian investors and the genuine opportunities in the Lion City.
Singapore: An Undeniable Magnet for Global Investment
Singapore ranks ahead of its regional peers when it comes to foreign investment. In fact, Singapore reached a record high US$141.2 billion in 2022, a increase from the previous year’s US$131.1 billion figure. It was the 3rd-largest FDI recipient worldwide after China and the United States and accounted for almost two-thirds of flows to ASEAN countries.
Singapore’s Economic Fundamentals
Singapore’s economic allure goes far beyond its impressive foreign direct investment figures. The Milken Institute’s Global Opportunity Index, a comprehensive assessment of investment attractiveness, ranked Singapore first among its Asian neighbours and 14th globally in 2023.
This ranking is owed to Singapore’s famously strong economic fundamentals, including its confidence-inspiring GDP growth, business-friendly regulations, and world-class infrastructure.
The West’s Gateway to the East
Digging a little deeper, its strategic location at the heart of Southeast Asia makes it a natural gateway to the region’s rapidly expanding markets. Singapore’s political stability, transparent legal system, and strong intellectual property protections offer a secure environment for businesses to operate and invest freely and without worry.
It is also worth noting that the government’s proactive approach to attracting FDI, coupled with its skilled workforce and focus on innovation, go a long way to further enhance Singapore’s attractiveness.
A Secure and Stable Country
It is important to note, however, that Singapore’s success in attracting foreign investment is not just a one-trick pony in its favourable business environment. The out-performing nation has also made important strides in creating a sustainable and inclusive economy.
It ranks highly in categories like “institutional framework,” which assesses the protection of investor rights and asset safety, and “international standards and policy,” which measures economic openness. All of these are cultural values within the “having a fair go” spirit that Australians hold deeply.
The Singapore-Australia Free Trade Agreement (SAFTA)
The Singapore-Australia Free Trade Agreement (SAFTA), enacted in 2003, is the foundation of the modern economic relationship between the two countries. It has been amended six times, most recently in 2020, to adapt to the evolving trade and investment landscape, which is an encouraging sign of ongoing adaptations to changing needs.
SAFTA removes all tariffs on goods traded between the two countries and streamlines customs procedures, making cross-border trade much more efficient and cost-effective for businesses. This has been an important advantage for Australian exporters, giving them easy access to the Singaporean market.
Beyond trade in goods, SAFTA also eases restrictions on trade in services, including key sectors like education, professional services, and telecommunications. This has opened up many new opportunities for Australian service providers to tap into the Singaporean market and vice versa.
The agreement also includes provisions on investment, intellectual property, and competition, providing a broad framework for genuine economic cooperation. The impact of SAFTA on bilateral investment flows has been substantial.
In 2003, at the time of signing, bilateral trade was AU$9.11 billion (US$6.05 billion). In 2022, it was AU$34.35 billion (US$22.88 billion), and it seems things will only get better for both countries going forward.
Australia’s Growing Foreign Direct Investment in Singapore
A Deep-Rooted Economic Relationship
Australia and Singapore have enjoyed a close economic relationship since 1965 when Australia was the world’s second country to support Singapore’s recognition for independence. Today, Singapore is Australia’s fifth-largest trading partner, with bilateral trade reaching AU$52.9 billion (US$35 billion) in 2022.
The relationship has been kind to both countries, with ties only deepening over the last six decades. It is important to see here that the intangibles count towards a long and fruitful relationship — both countries respect transparency, fairness, and a desire to keep the Indo-Pacific region free from corruption.
The Digital Economy: New Collaborations
The digital economy is a still-fresh sector attracting new Australian investment. The Singapore-Australia Digital Economy Agreement (DEA), signed in 2020, has played a large role in generating greater cooperation in areas such as artificial intelligence (AI) and e-commerce.
Australian businesses with expertise in areas like fintech, cybersecurity, and data analytics can therefore definitely find a receptive market in Singapore. The ongoing development of digital infrastructure, such as 5G networks and smart city solutions, also presents real opportunities for Australian companies looking to provide cutting-edge technology and services.
The Green Economy: A Shared Commitment to Sustainability
The transition towards a green economy is another area of enormous potential for Australian investment in Singapore. Singapore’s commitment to sustainability and its goal of achieving net-zero emissions by 2050 align with Australia’s own sustainability plans. This shared vision is driving collaboration on renewable energy projects, green finance initiatives, and the development of sustainable technologies.
Australian companies with expertise in these areas are very likely to find a welcoming environment in Singapore, with government support and a growing demand for green solutions. The Singapore-Australia Green Economy Agreement (GEA) sets the legal foundation for this commitment, encouraging ground-level collaboration on environmental goods and services, green growth sectors, and sustainable technologies.
Food Security and Agricultural Trade
Singapore’s focus on food security is another area of growing interest for Australian investors. As Singapore imports over 90% of its agricultural needs, Australia, a trusted and reliable food partner, is well-positioned to meet this demand. The ongoing negotiations for a “Food Pact” between the two countries aim to further increase the flow of Australian food products to Singapore, reinforcing its position as a regional food hub.
| Singapore Imports from Australia of Dairy products, eggs, honey, edible products | Value | Year |
|---|---|---|
| Milk and cream, concentrated or sweetened | $39.85M | 2022 |
| Cheese and curd | $36.82M | 2022 |
| Milk and cream, not concentrated or sweetened | $34.32M | 2022 |
| Buttermilk, yogurt, kephir, flavoured or not | $18.91M | 2022 |
| Whey and milk products not specified elsewhere, flavoured or not | $16.62M | 2022 |
| Butter and other fats and oils derived from milk | $10.69M | 2022 |
| Honey, natural | $4.02M | 2022 |
| Birds’ eggs, in the shell, fresh, preserved or cooked | $3.41M | 2022 |
Source: https://tradingeconomics.com/singapore/imports/australia/milk-cream-concentrated-sweetened
Resources: A Key Sector for Collaboration
Singapore’s focus on food security is another area of growing interest for Australian investors. As Singapore imports over 90% of its agricultural needs, Australia, a trusted and reliable food partner, is well-positioned to meet this demand. The ongoing negotiations for a “Food Pact” between the two countries aim to further increase the flow of Australian food products to Singapore, reinforcing its position as a regional food hub.
Where to Next With InCorp
Singapore presents a thriving opportunity for Australian investors with its stable economy, strategic location, and strong bilateral agreements. The collaborative efforts between the two nations, evident in the Singapore-Australia Free Trade Agreement (SAFTA), the Digital Economy Agreement (DEA), and the Green Economy Agreement (GEA), highlight genuine potential in sectors such as technology, green energy, and food security.
For those paying attention, Australian businesses stand to benefit immensely by investing in Singapore. For expert guidance on how to capitalise on these opportunities, reach out to InCorp today. Our team provides a personalised approach, tailoring our services to meet your specific business needs.
Whether you are exploring new markets, navigating regulatory landscapes, or seeking strategic advice, we offer comprehensive support to ensure your investment in Singapore is successful. Contact us to discuss how we can help your business thrive in Singapore.
FAQs about Singapore FDI Inflows
- Singapore's stable government, strong economy, and strategic location offer Australian businesses a secure and advantageous environment for investment, particularly in Southeast Asia.
- SAFTA facilitates trade by eliminating tariffs and streamlining customs procedures, providing Australian businesses with efficient access to Singapore's market.
- As Singapore imports over 90% of its food, Australian agricultural products are in high demand, making this a lucrative market for Australian businesses.
Find out more about investing into Singapore!
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