Foreign direct investment (FDI) in Singapore (2024)

FDI in Figures

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).

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.

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.