Foreign direct investment (FDI) in Singapore

FDI in Figures

According to UNCTAD's World Investment Report 2024, FDI inflows to Singapore reached a record-high USD 159.6 billion in 2023, up from USD 141.1 billion one year earlier (+13.1%), making the country the third-largest FDI recipient worldwide after the U.S. and China. At the end of the same period, the total stock of FDI stood at USD 2.63 trillion. Foreign direct equity investment made up 91.1% of the stock, with net inter-company lending contributing the remaining 8.9%. According to data from SingStat, collectively, the top 10 source economies contributed 72.0% of the total FDI stock at the end of 2023, with the United States (24.7% of the total), Japan (6.3%), the United Kingdom (5.5%), and Hong Kong (3.9%) among the leading sources, together with offshore centres such as the Cayman Islands, the British Virgin Islands, and Luxembourg. The vast majority of the stock is directed towards finance & insurance (56.4% of the total), followed by wholesale & retail trade (15.7%), manufacturing (12.3%), professional and administrative & support services (6.7%), transportation & storage (4.3%).

Singapore upholds an open, extensively trade-oriented economy, holding a pivotal position in the global supply chain. Investors consistently highlight the attractiveness of its investment climate, attributing it to factors such as transparency, business-friendly laws, a favourable tax structure, efficient customs facilitation, robust intellectual property protection, and well-established infrastructure. Actively positioning itself as a hub for R&D and innovation, the government encourages businesses through the provision of tax incentives, research grants, and collaboration opportunities with domestic research agencies. Remaining a regional hub for numerous multinational corporations, Singapore continues to be a global leader in dispute resolution, financing, and facilitating projects for regional infrastructure development. On the other end, the country has a small internal market and relies heavily on foreign workers who make up more than one-third of the workforce. In line with the trend observed in other nations that have implemented stricter regulations on foreign investments: on 9 January 2024, Singapore’s Parliament passed the Significant Investments Review Act, establishing an investment regime to protect national security. Critical entities must notify or seek approval for ownership changes, CEO and director appointments, and meet security requirements. The Act also allows the Minister of Trade and Industry to review transactions by non-designated entities posing security risks, applying to both local and foreign investors. The country is ranked 12th on the AT Kearney Foreign Direct Investment Confidence Index 2024 on the most attractive economies for foreign investment. It also ranks 4th among the 133 countries on the Global Innovation Index 2024 and 1st out of 184 on the latest Index of Economic Freedom.

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.