Located in South East Asia, Singapore is a highly developed and successful free market economy which enjoys an open and corruption-free environment, stable prices, a low tax regime and a per capita GDP equal to that of most parts of Western Europe.
A Brief History of Singapore
Although most probably think of Singapore the city, the Republic of Singapore is actually a 700 square kilometre island sandwiched between Indonesia and the tip of the Malay peninsula. The city was founded as a British trading colony in 1819 and formed an important strategic trading and naval post within the British Empire in the 19th and early 20th centuries.
After the Second World War, decolonisation meant that Singapore gravitated towards the Malaysian Federation, which it joined in 1963. However, this was a short-lived phase of the country’s history, and, two years later, Singapore become an independent republic. Subsequently, it has become one of the world’s most prosperous countries with strong international trading links and one of the busiest international ports.
Since independence, Singapore has been a parliamentary republic with a directly elected unicameral parliament. As a legacy of its association with the former British Empire, Singapore’s legal system is based on English common law. Also, English is one of the four official languages spoken on the island, alongside Chinese, Malay and Tamil.
Approximately three-quarters of Singapore’s population of 5.3m are of Chinese origin but there are significant minorities of Malaysians and Indians, while the presence of the major global multinationals in the city also ensures a sizeable army of expats from Europe, North America and elsewhere around the globe. Singapore’s currency is the Singapore dollar, which has been appreciating against the US dollar. In June 2012, USD1 was worth SGD1.27.
Economy of Singapore
Singapore’s economy has been heavily dependent on exports, particularly in electronics and manufacturing and it was hard hit by the slump in the technology sector at the turn of the century. An outbreak of Severe Acute Respiratory Syndrome in 2003 hampered its recovery by curbing tourism and consumer spending. However, fiscal stimulus, combined with low interest rates, a surge in exports, and internal flexibility led to vigorous recovery in 2004, with real GDP rising by 8%, the economy’s best performance since 2000. Real GDP growth averaged 7% between 2004 and 2007, but fell to 1.2% in 2008. The 2.1% contraction in GDP in 2009 was less than had been expected, and there was a strong rebound in 2010, when the economy grew at 14.5%, according to the Monetary Authority of Singapore (MAS). Growth slowed to 5% in 2011 due partly to the spike in oil prices and the after effects of the natural disasters in Japan, and economic activity in Singapore is likely to remain restrained in 2012 due to external factors.
The government, led by Prime Minister Lee Hsien Loong has been actively putting in place investor-friendly reforms in order to diversify the economy and better insulate it against future troughs. It is the government’s ambition to elevate Singapore to the position of South East Asia’s main financial services and investment hub. Therefore, there are a series of tax incentives in place targeting a wide range of industries and services, while other tax breaks are aimed specifically at helping small firms to grow.
Singapore’s proximity to regional markets and connectivity to global markets make it an ideal place for global enterprises to set up an Asian base. Within just 7 hours of flight time westwards, Singapore businesses have access to 1.2 billion consumers in India. 7 hours northwards would see Singapore businesses tap 1.3 billion consumers in China, and within that circumference, 593 million consumers in Southeast Asia. In total, Singapore has access to markets totalling 3.1 billion people in India, China and Southeast Asia. The collective GDP of these countries registered over US$10.6 trillion in 2010.
So, in conclusion, Singapore maintains its reputation as a culturally diverse, democratic and business-friendly location which welcomes input from investors from around the globe. An established trading and financial centre, Singapore is also a rising star in the world of alternative investment, and is quickly becoming the regional location of choice for new hedge fund start-ups, while Islamic banking and wealth management are also making their mark upon the city.