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Does the Singapore Government Encourage Foreign Direct Investments Overseas for Locals?

6 min read|Last Updated: November 18, 2022|
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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 effects 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 reduction & incentives– investing in countries with low taxes or high tax incentives mean higher profit

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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.

Business Grants for Overseas Investment

To encourage more local investors and business owners to set up and expand overseas, the Singapore government has initiated the Market Readiness Assistance (MRA) Grant to assist with the internationalisation of companies.

Under this grant, local companies with at least 30% local shareholding and revenue of less than S$100 million can get up to 70% of funding for eligible costs under 3 categories – overseas market promotion, overseas business development, and overseas market setup.

Companies in Singapore can use the grant as many times as they wish for expansion into different countries. Through this grant, the government hope to deliver on its promise to push local brands into the overseas market to spur FDI overseas.

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FAQs

How do I start a company overseas?2021-09-15T12:58:04+08:00

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.

Which are the common types of FDI?2021-08-21T17:34:27+08:00

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).

Should I invest locally or overseas?2021-08-21T17:33:51+08:00

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.

What are Foreign Direct Investments (FDI)?2021-08-21T17:33:14+08:00

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.

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