Inversió estrangera directa (IED) a Singapur

FDI in Figures

Global foreign direct investment (FDI) flows in the first half of 2021 reached an estimated USD 852 billion, showing stronger than expected rebound momentum, with an increase of 78% of the partial-year growth rate on the previous year according to UNCTAD’s Investment Trends Monitor released on October 2021. The global FDI outlook for the full year 2021 has also improved from earlier projections. The current momentum and the growth of international project finance are likely to bring FDI flows back beyond pre-pandemic levels. Nevertheless, the duration of the health crisis and the pace of vaccinations, especially in developing countries, as well as the speed of implementation of infrastructure investment stimulus, remain important factors of uncertainty. Other important risk factors, including labour and supply chain bottlenecks, energy prices and inflationary pressures, will also affect final year results. (UNCTAD, October 2021). Covid’s impact on developing markets and shifting investment from China are major trends that will impact foreign investment in 2022.

According to UNCTAD's World Investment Report 2021, FDI inflows declined by 21% from USD 114 billion in 2019 to USD 91 billion in 2020. In the same year, the stock of FDI was about USD 1.9 trillion. Singapore is the fourth largest recipient of FDI inflows in the world, after the US, China and Hong Kong. Singapore is also the tenth largest investor abroad, FDI outflows stood at USD 32 billion in 2020; in recent years it has sought to diversify its investments beyond its traditional target markets in Asia, namely China, India and Vietnam. The main investors in Singapore are the US, Cayman Islands, British Virgin Islands and the Netherlands. Financial and insurance activities are by far the largest recipient of foreign investment, followed by wholesale and retail trade and manufacturing. In 2020, FDI in the three largest recipient industries (finance, wholesale and retail trade, and manufacturing) contracted, but investment in manufacturing declined the most - by more than 80 per cent.

Singapore has based its economic development on a proactive strategy to attract FDI using its trade openness. Since the first publication of the World Bank's Doing Business ranking in 2003, the country has always been in the lead until 2018, when it was overtaken by New Zealand. The country maintained the second position in the last publication of the report in 2021 for the Year 2020. Being favourable for lending to foreign investors, a simple regulatory system, tax incentives, a high-quality industrial real estate park, political stability and the absence of corruption make Singapore an attractive destination for investment. The country has one of the best regulatory systems of the world for paying taxes (it is fast and cheap) and for enforcing contracts. In 2019, dealing with construction permits was facilitated (in terms of improvement of the risk-based approach to inspections, improvement of the public access to soil information and rationalisation of the process of obtaining a building permit).

The latest United Nation Asia-Pacific Trade and Investment Trends Report provides additional information on FDI in Singapore and Asia-Pacific in 2021 and 2022.

What to consider if you invest in Singapore

Strong Points

Singapore has been considered for many years by the World Bank as one of the best countries in the world in terms of the ease of doing business, ranking second in the 2020 Doing Business report. Advantages for FDI include:

• Its workforce is one of the most qualified in the world, and is composed of many expatriates, which by definition makes it diversified, flexible and very open to international functions
• High value-added sectors (such as ICT, finance, chemistry and pharmaceuticals) are very well developed
• Financial infrastructure (solid banking system), telecommunications and transport are excellent (Singapore is a major aerial and maritime transport and trading hub for goods and financial services)
• Its strategic location at the crossroads of shipping routes and close to major emerging markets (in Asia and in the Middle East) makes it an important hub for regional and international trade
• In order to attract more and more FDI, the country is working to maintain an attractive tax regime and offers tax reductions and facilitated loan conditions and other investment incentives
• Transparency and lack of corruption, business-friendly laws and regulations.

Weak Points

Disadvantages for FDI include:

• Voluntarily very open internationally, the national economy is very dependent on exports and is therefore vulnerable to the state of the economies of its main trading partners and to the world economy
• Like all highly industrialised countries, the country is facing an ageing population and "soft" growth, forcing the country to find new growth drivers
• It is becoming increasingly difficult to obtain a work permit in Singapore, while the island state needs manpower for its technology sectors
• The lack of transparency in administrative incentives and the non-internationalisation of the Singaporean dollar are the main obstacles to investment
• Although Singapore is a free port, tariff protection for industrial enterprises is not granted
• Singapore levies high excise taxes on alcohol, tobacco, automobiles and petroleum products
• Limited freedom of speech
• The preponderant role of (semi)-public companies can inhibit investment in certain sectors.

Government Measures to Motivate or Restrict FDI

Singapore is open to foreign investment and offers tax benefits that businesses can enjoy after registering with the Economic Development Board. The government is continuously supplying the national economy with public investments. Examples include transportation infrastructure projects (such as the high-speed train line between the city-state and Kuala Lumpur) or programs encouraging the transfer towards the future economy. The main obstacle to FDI lies in the fact that the country continues to hold a monopoly on certain key sectors (financial services, professional services, media, telecommunications). Government-related enterprises play a dominant role in the domestic economy and, in turn, in investment.
The government actively promotes the country as a R&D and innovation center for businesses by offering tax incentives, research grants, and partnership opportunities with domestic research institutions.
In an effort to increase the ratio of local employees to foreign workers, the government has recently introduced programs that partially subsidize the cost of recruiting, hiring, and training Singaporean workers.

Bilateral investment conventions signed by Singapore

To see the list of investment treaties signed by Singapore, consult UNCTAD's International Investment Agreements Navigator.