This post is also available in: 简体中文 (Chinese (Simplified))
Singapore’s Economy: Most Advanced in Southeast Asia
Singapore’s economy is indubitably one of the most advanced in the world. Even though it is small in size and very limited in natural resources, the state has successfully established itself as an economic powerhouse in the Southeast Asian region. Likewise, it is also the most open economy in the world according to the World Economic Forum. Singapore tax rate is low, making it one of the most attractive countries to start a business. Similarly, the gross domestic product per capita is very high even when compared to other developed countries. Furthermore, a highly advanced education system and a strong commitment to talent development have led to a very low unemployment rate.
History of Singapore’s Economy
The economic history of Singapore dates back to the 1800s when it was designed as a seaport hub. During the last quarter of the 19th century, the volume of trade taking place in this region had increased dramatically. However, the evolution of Singapore into a modern, world-class free-market economy is fairly recent. After the independence from Malaysia in 1965, Singapore’s economy faced several challenges. For one, a large chunk of the population was unemployed and illiterate. Furthermore, it had a very small domestic market and also had limited access to international markets.
Worse, the lack of natural resources also posed a great difficulty for this island nation. Corruption was rampant and social unrest and race riots occurred as a result of poor economic conditions.
However, things have changed for the better after the election of former Prime Minister Lee Kuan Yew. It was the starting point for Singapore’s accelerated development in the latter half of the 20th century and until today. His major focus lied on nurturing and advancing the human capital of Singapore through world-class education and training. Likewise, he understood the importance of well-developed infrastructure.
During the start of the 1960s, Singapore made significant efforts to attract foreign investment. Within 5 years of Lee’s election, Singapore’s GDP growth was over 10% until 1973. Likewise, unemployment levels decreased massively, and a large population advanced from low-income to middle-income status. Furthermore, Singapore also improved its financial service sector to control inflation and widen areas of investment and growth.
Key Drivers of Singapore’s Economy
The manufacturing sector is the key driver of the Singaporean economy and it accounts for about one-fourth of the total GDP. Electronics and biomedical are the key sectors inside the manufacturing industry and they have grown continuously as a result of high demand. Likewise, chemical and petroleum products manufacturing is also fueled by the presence of more than 100 multinational companies.
The manufacturing industry of Singapore has constantly been driven by innovation. As of today, it is making great strides in modernizing industrial processes and technologies. Investments in robotics, additive manufacturing, the internet of things, and artificial intelligence have grown significantly. Similarly, its progress in building modern manufacturing infrastructure will ensure its position as one of the leaders in the world.
In addition to large multinationals, the startups and small businesses scene in Singapore is also very encouraging. Singapore has been voted as one of the best countries in the world for starting a new business. Likewise, the government has increased spending on research and development in the most disruptive technologies of tomorrow. Similarly, it has kept a sharp focus on preparing skilled manpower who will drive the future of Singapore and the whole world.
The financial services industry of Singapore is the second key player in its prosperous present and future. Singapore features one of the strongest banking industries in the world. The astounding success and growth of these industries are based on several factors. First, Singapore has a very stable political environment which means there is a very low risk of domestic and international conflicts. Second, it has allowed liberalization of the banking sector which supported its growth and competition in the region.
It also helps that there is a favourable environment for international banks to enter and operate in the region. Similarly, its tax-friendly policies make it an attractive destination for the expansion and growth of multinationals.
Like the manufacturing sector, the financial services sector is also being modernized with new technologies. The fintech scene is developing at a rapid rate which means Singapore is likely to be one of the world leaders in the industry. The growth and development of fintech startups have been supported by both internal and external funding. Furthermore, finance-based technologies have been adopted by major institutions to remain competitive in the market. Currently, the demand for fintech has increased in the wake of COVID-19 and it is set to remain the same for the coming future.
Energy and Chemicals
Singapore boasts one of the most developed energy infrastructures in the world. Its strategic location coupled with world-class processing and storage facilities makes it one of the top players in the region. It also has an abundance of highly skilled personnel who possess world-class competence in the industry. The government has made significant efforts to develop and maintain sustainable and renewable energy sources.
As of today, more than 90% of electricity generated in Singapore comes from natural gas. However, the prospect of solar power generation is very encouraging and it is set to be a key provider in the near future. Furthermore, it is adopting and testing new technologies for efficient power generation and consumption.
In addition to the energy sector, the chemicals industry is also a key player in Singapore’s economy. Likewise, pharmaceuticals accounted for the largest share in the country’s manufacturing output which was worth over 80 billion US Dollars.
Tourism is also one of the major pillars of the Singaporean economy. Before the coronavirus pandemic, Singapore brought in nearly 20 million tourists, which is three times its own population. Despite being one of the smallest countries in the world, there is a lot to do and a lot to explore in this country.
There are several reasons why Singapore has a prosperous tourism industry. First, it has strong air connectivity and its flag carrier is one of the largest airlines in the world. Singapore Airlines operates on five continents connecting major cities of Asia, Europe, North America, Africa, the Middle East, and Australia. Second, travelling in Singapore is easy as it has a well-developed transportation system that allows visitors to visit the most notable landmarks and destinations.
Likewise, it possesses a number of tourist attractions like zoos, aquariums, and natural sightseeing. There are also several cultural landmarks and museums with rich historical values. Furthermore, if you are a fan of shopping and trying out new food, Singapore has magnificent diversity.
Singapore’s Economy: Key Indicators
Gross Domestic Product
The nominal Gross Domestic Product (GDP) of Singapore is nearly 380 billion US Dollars which is the 38th largest in the world. Additionally, its nominal GDP per capita is nearly 65000 US Dollars which makes it the 4th largest in the world. Due to the coronavirus pandemic, the GDP has slightly shrunk but it is expected to bounce back in the coming years. Manufacturing, service, and trade are the key contributors to Singapore’s GDP.
The overall unemployment rate of Singapore lied just above 3 percent during the start of 2021. Similarly, the citizen unemployment rate stood at about 4.5 % whereas the resident unemployment rate lied at about 4.3 %. As COVID restrictions are eased and work becomes flexible, we can predict even lower levels of unemployment.
A Business-Friendly Economy
Singapore has been voted as one of the most business-friendly economies in the world. Therefore, if you are looking to start a new business or expand an existing one overseas, Singapore can be a great option. There are several factors that contribute to the business-friendly nature of Singapore’s economy. We will discuss some of these factors now.
Political Stability and Strong Legal Environment
Political stability and a strong legal environment are primary reasons why operating a business in Singapore will be safer. Moreover, it adopts a strong intolerance towards corruption which results in a sound environment for competition. Similarly, it boasts one of the strongest protections against intellectual property theft in the whole of Asia. Furthermore, it also features a well-developed environment for conflict resolution should they occur.
Tax Benefits and Government Assistance
The government of Singapore is very welcoming to new businesses and it also supports their operation with suitable tax benefits. The corporate tax rate is at 17%, which is very low compared to other countries of the world. Likewise, it also features a very low personal income tax which may range from 0 to 22 percent.
One of the major reasons why Singapore is a great choice for new business is its well-developed infrastructure. The island nation features some of the most advanced education and healthcare facilities in the world. Likewise, public transport is in abundance and well connected to all the major regions.
Constant Technological Innovation
Innovation has always been key to Singapore’s past and present success. Likewise, it has put great importance on training new manpower for driving such innovation. Similarly, the government has always supported new startups to create disruptive innovations in a diverse array of fields. Furthermore, there are a lot of large, multinational tech companies collaborating with the technologically sound manpower of the country to solve the problems of tomorrow.
Jumpstart Your New Business with 3E Accounting
Hence, from this article, we have learned various aspects of Singapore’s economy. Likewise, we have understood why it is one of the best places to start a new business or expand an existing one. If you are looking for a trusted partner who can help you set up a business in Singapore, 3E Accounting is the best option. Our world-class professionals have decades of expertise in this field and hence understand the business ecosystem. Furthermore, our services are very affordable which means you do not have to stretch your budget and hence can focus on other parts of your business.
Contact us if you have further inquiries about Singapore’s economic landscape. Our corporate team is more than enthusiastic to help you with accurate information and expert advice as you kickstart your business in Singapore.