Singapore

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March 2017

Singapore outperforms the majority of advanced economies on measures of incomes per capita, economic growth, creditworthiness and business climate. Singapore is among the select group of Asian economies that have transitioned from low income to high income over the last fifty years. Singapore’s transformation is even more remarkable given its small population and lack of natural resources; but its strategic location, good institutions and focus on creativity have supported strong development.

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Economic outlook

Singapore’s highly trade exposed economy has traditionally been tightly correlated with global demand. Growth averaged 6.5% p.a from 2000 to 2008 driven by strong global demand and a large influx of foreign workers—which caused the population to rise 34%. But recent growth has struggled to reach the levels seen in the lead up to the global financial crisis.

The IMF expect growth will average 2% over the next five years as recovery in global demand supports electronics manufacturing and financial services. The emergence of a strong pharmaceuticals industry is also reducing Singapore’s reliance on manufacturing and the global business cycle.

Over the medium term, policymakers are focused on promoting higher value added manufacturing and services, while reducing the reliance on foreign workers. Singapore understands it must carve out a niche in higher value added production, especially as traditional low-cost manufacturing centres like China and India progress up the value chain. An aging population and tight labour market also pose risks to the outlook.

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Singaporeans have among the highest incomes per capita globally, but this belies a large degree of inequality across the city-state. Policymakers have responded by strengthening the social safety net and implementing fiscal measures to mitigate wage disparities.

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Business climate

Singapore enjoys an investment credit rating. This suggests a relatively very low likelihood that it will be unable or unwilling to meet its external debt obligations in a systemic sense (though, needless to say, individual debtors can and do default).

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Singapore’s business climate is the second best amongst the 190 economies on the World Bank’s ease of doing business gauge—which measures regulation and red tape relevant to a domestic small to mid-sized firm. Singapore’s strong emphasis on free markets and investor friendly policies are behind the impressive ease of doing business scores.

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Singapore scores in the top 90% in most areas of governance, but performs poorly on voice and accountability.

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Bilateral relations

Singapore is Australia’s seventh largest trading partner. A free trade agreement was signed in 2003—Australia’s first since the CER with New Zealand in 1983.

Export receipts of goods and services from the city-state were worth US$9.8b in 2015-2016 made up mainly of gold, petroleum, animal oils and fats. Australian imports from Singapore were valued at US$13b consisting mainly of refined petroleum, food and computers.

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Australian service exports to Singapore were worth A$4.3b in 2015-2016, made up predominantly of professional, technical and financial services. Singapore is our fifth largest source of foreign visitor arrivals, with numbers up 6% in 2015.

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Singaporean students studying in Australia have fallen from 9,000 p.a. in 2012 to just over 8,000 in 2015. Singapore is our 19th largest market for foreign student enrolments.

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Singapore's direct investment in Australia was valued at A$98b in 2015, equivalent to 3% of total foreign investment in Australia. Investment has traditionally been concentrated in real estate, but has become more diversified. For example, Singapore Power's investment in the Victorian and South Australian electricity distribution networks in 2004; Singapore Investment Corporation's acquisition of the Mayne Group's portfolio of private hospitals in 2003; and the SingTel acquisition of Optus in 2001. The Singapore Investment Corporation also has stakes in Myer Melbourne and Westfield Parramatta.

Australian investment in Singapore was worth A$67b in 2015 or 3% of Australia’s total investment portfolio. Major businesses invested in Singapore include Australia's major banks; engineering design and construction firms including Lend Lease Asia Holding and Leighton Asia Ltd and logistics groups such as Toll Holdings.

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Useful links

Department of Foreign Affairs
Country brief

Austrade
Market Profile

Asialink Business
Market profile