Singapore is one of the countries that has a great deal of foreign investments and company incorporations because of its stable and positive business environment. Likewise, the government encourages Singaporean investors to return the favour, especially in the Asia-Pacific (APAC) region – here’s why.
Why the Singapore Government Encourages Investment in Other Countries
There are a few reasons why the government is pushing for Singaporean investors to invest abroad:
Guarding against the effect of recession
Recession will bring about negative or low economic growth thus the Singapore government highly favours Singapore investors who invest in APAC countries that are not likely to experience a recession.
The investment in these countries who are experiencing economic growth can in turn brought into Singapore and help to mitigate the effects of a recession.
Relationship-building with other countries
By encouraging its citizens to invest overseas, it is a relationship-building technique to maintain or bolster the nation’s relations with these countries to strengthen its economic ties.
This helps the Singapore government to have an ally whenever they embark on any important international venture.
Types of Foreign Direct Investments
There are 3 types of Foreign Direct Investments (FDI), namely:
Horizontal FDI – investing in the same industry abroad
Vertical FDI – investing within the supply chain, however not in the same industry
Conglomerate FDI – investing in an entirely new industry
Advantages of Foreign Direct Investments
Not only the country benefits from FDIs, Singaporean investors also can tap on these advantages when investing abroad:
Business diversification – reduces risk by increasing exposure
Lower costs – some countries have much lower operating and labour costs as compared to Singapore
Tax incentives – investing in countries with low taxes or high tax incentives mean higher profit
How Singaporean Investors Invest in Other Countries
FDI within the APAC region are most common among Singaporean investors. Here are some interesting statistics about how they are investing abroad:
In 2017, 6 of the 10 leading independent nations which received FDI from Singapore were in the APAC region
Top 10 receivers of FDI from Singapore in 2017 includes, totaling to almost S$700 billion:
- China (including Hong Kong)
- The United Kingdom
- Indonesia
- Australia
- India
- Malaysia
- The United States
- Luxembourg
- The Netherlands
- Thailand
270% increase in total amount of FDI invested from 2006-2017
With FDI to other countries, not only does it benefit the investor, it also helps the government and economy in the long-run.
Reach out to us to find out more starting new businesses, getting your visas, and tax compliance!
FAQs
To start a company overseas as a Singaporean, you will need to understand the incorporation process. If you plan to incorporate in Malaysia, Indonesia, Vietnam, and Hong Kong, reach out to us and we can kickstart your incorporation journey.
Horizontal and vertical FDIs are most common as most investors would be more interested in the industry that already have knowledge in (horizontal FDI) or helps them to achieve better performance for their existing investments (vertical FDI).
Investing locally or overseas has its pros and cons. For instance, if you are a Singaporean investor looking to set up a new company and deciding between Singapore and Malaysia, you are more aware of the Singapore business environment, but the cost of labour is higher here than in Malaysia, and vice versa.
FDI is an investment by a firm or individual from one country into another country, engaging in diverse business interests such as mergers, acquisitions, retail, services, logistics, manufacturing, and more.
