Singapore: Investing in Singapore
Global foreign direct investment (FDI) flows in 2021 were USD 1.58 trillion, up 64 per cent from the exceptionally low level in 2020. The recovery showed significant rebound momentum, with booming merger and acquisition (M&A) markets and rapid growth in international project finance because of loose financing conditions and major infrastructure stimulus packages. However, the global environment for international business and cross-border investment changed dramatically in 2022. The war in Ukraine – on top of the lingering effects of the pandemic – is causing a triple food, fuel and finance crisis in many countries around the world. Investor uncertainty could put significant downward pressure on global FDI in 2022. The 2021 growth momentum is unlikely to be sustained. Indeed, world flows in the second quarter of 2022, the latest data available, were down 31% from the first quarter and 7% less than the quarterly average of 2021 (UNCTAD Global Investment Trends Monitor, October 2022). The negative trend reflects a shift in investor sentiment due to the food, fuel and finance crises around the world, the Ukraine war, rising inflation and interest rates, and fears of a coming recession. Expectations for the full year are for a marked slowdown. In developing Asia, despite successive waves of COVID-19, FDI rose to an all-time high for the third consecutive year, reaching $619 billion. Asia is the largest recipient region, accounting for 40 per cent of global FDI. However, inflows remain highly concentrated; six economies account for more than 80 per cent of FDI to the region (UNCTAD, October 2022).
According to UNCTAD's World Investment Report 2022, FDI inflows declined by over 29% from USD 106.32 billion in 2019 to USD 75.43 billion in 2020 before strengthening at 99.09 billion in 2021. In 2020 the stock of FDI was about USD 1.9 trillion and reached 2 trillion in 2021. Singapore is the 7th largest recipient of FDI inflows in the world in 2022. Singapore is also the tenth largest investor abroad, FDI outflows stood at USD 32 billion in 2020 and 47.39 billion in 2021. 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 2021, 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.
The country is ranked 18th on the AT Kearney Foreign Direct Investment Confidence Index 2022 on the most attractive economy for foreign investment. Singapore has based its economic development on a proactive strategy to attract FDI using its trade openness. 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. Since 2019, ealing with construction permits is 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 2022 and 2023.
Foreign Direct Investment | 2020 | 2021 | 2022 |
FDI Inward Flow (million USD) | 72,903 | 131,151 | 141,211 |
FDI Stock (million USD) | 1,985,991 | 2,169,538 | 2,368,396 |
Number of Greenfield Investments* | 307 | 364 | 410 |
Value of Greenfield Investments (million USD) | 6,869 | 13,144 | 16,228 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Singapore | East Asia & Pacific | United States | Germany |
Index of Transaction Transparency* | 10.0 | 5.9 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 9.0 | 5.2 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 9.0 | 6.7 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
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:
Disadvantages for FDI include:
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Latest Update: September 2023