Singapore's economy is in full swing. The small Asian tiger, hardly affected by the global financial crisis, was the fastest-growing economy last year, with GDP growth of 14.5 per cent in 2010, according to a February review by the country's trade ministry.
Being a highly developed and diversified market, Singapore has a lot of economic pillars to rest on, including import and exports, electronic manufacturing, refining, finance, currency trade, shipping and tourism. With one of the highest GDPs in Asia, the country has been ranked the world's fourth largest financial centre behind London, New York and Hong Kong and the second largest in Asia behind Hong Kong by London-based think tank Z/Yen Group in its reputed annual Global Financial Centres Report for 2010. "Singapore, along with the other four centres, continues to show stable long-term competitiveness as world-leading in the rankings," Z/Yen researchers concluded.
The World Bank's Doing Business 2011 Report puts Singapore's economy at number one for being the easiest to do business in worldwide,based on a combination of findings. Among these is the fact that Singapore is seen as the most open and liberal economy for international trade with one of the best investment potentials globally and a significantly low corruption.
Philip Yeo, expert for the country's economic development and chairman of the government's business marketing agency Spring Singapore, says the main economic drivers in the future are, besides trade, financial and business services, a knowledge-driven industry in the fields of manufacturing, chemicals and biotech. "Leveraging its trading hub status, Singapore built up a robust manufacturing base through attracting foreign direct investments," says Yeo.
The country now aims to establish itself as a business gateway to Asia by "supporting Asia's growth needs," as Yeo puts it. This includes financing for international companies and their growing trade flows, risk management for commodity trading in Asia and financing for the maritime sector. In 2010, Singapore was the second busiest port in the world behind Shanghai and ahead of Hong Kong in terms of shipping tonnage.
"There is a structural shift of global trade flows," says Teo Eng Cheong, CEO of International Enterprise Singapore. "By 2020, Asia is expected to account for about 60 per cent of global trade flows, replacing Europe and North America as the current centres of global trade." Cheong says that Singapore also has plenty to offer the oil and gas business. The large oil store capacity of the port, currently around nine million cubic metres, is a major feature, as well as the "good critical mass of oil companies" located in Singapore and the accompanying petroleum trading businesses.
This makes Singapore economically important for the Middle East. In 2008, the country signed a free trade agreement with the Gulf Cooperation Council, the first of its kind. Trade ties are particularly developed in the field of food exports from Singapore to the GCC, and more and more Singaporean companies choose GCC countries as their hub for business in the Middle East.
Companies from the Middle East
Middle Eastern investment into the island state is also flourishing. According to the Singapore Economic Development Board, more than 300 Middle Eastern companies have chosen the city state to set up a regional base there. Among them are Dubai Drydocks, which has its Southeast Asian headquarters and shipyard operations in the Singapore, as well as construction, logistic and trading group Al Jaber from Abu Dhabi. The UAE's oil major Enoc owns a huge storage facility in Singapore, and Abu Dhabi's Mubadala has invested into electronics manufacturing. Other examples are Kuwait's Agility Logistics, Saudi Basic Industries Corporation (Sabic), and Qatar Petroleum. "EDB continues to see growing interest from UAE companies looking to establish a presence in Singapore. Leading UAE companies such as Drydocks World and Borouge have located their regional or global headquarters in Singapore to explore business opportunities and collaborative partnerships, and to manage their Pan-Asian operation," said Lee Eng Keat, International Director (Asia-Pacific), Singapore Economic Development Board. "Moving forward, we would like to encourage more UAE companies to leverage our multilingual capabilities, sound business infrastructure as well as excellent connectivity to Asia's markets, to capitaliseon the emergence of Asia."
Banking hub
Singapore has also established itself as a favoured Asian destination for the Middle East's banking industry, with regional banks such as Emirates NBD and First Gulf Bank opening branches there.
The increasing level of trade and investments between the GCC and the Asia Pacific region and the growth of the Asian economies led the Emirates NBD Group to develop a presence in that region, said its CEO Rick Pudner. After opening a representative office in 2006, the bank subsequently realised the potential for a larger presence. "As such, in July 2010 we upgraded our office to a wholesale branch, which carries out wholesale banking activities specialising in both trade finance and syndicated lending focusing on GCC and Asia Pacific trade, as well as the burgeoning intra-Asian trade."
Emirates NBD has also established a private banking unit in Singapore and offers Shariah-compliant private banking, Pudner said.
First Gulf Bank opened its international office in Singapore as early as 2007. "Singapore's sound macroeconomic fundamentals, political stability, transparent judicial framework and high standards of financial sector regulation coupled with its geographic positioning will enable us to access the growth potential of the wider Asian market," says Andre Sayegh, CEO, First Gulf Bank.
And although Lee Kuan Yew, who led the island from UK rule and was premier until 1990, stepped down after the recent elections, investors have so far signalled little concern, confident that the foundation has been laid for long-term stability and growth.
Yuan Trade
Singapore in its role as a major financial hub in South East Asia is preparing to become the second largest centre for China's yuan currency trading in the region behind Hong Kong, the Wall Street Journal reported in April this year. It said that the Money Authority of Singapore is in talks with the People's Bank of China to become a market for trading the yuan.
Singapore is already the second largest currency trading centre in Asia after Japan and is expected to get a boost by a possible yuan trade, which is estimated at a total trading volume of about $1 billion daily (Dh3.6 billion).
Singapore's Strait Times newspaper last month quoted the country's senior minister Goh Chok Tong as saying, "Singapore is not trying to rival Hong Kong as a yuan trading hub but will focus on yuan trade settlements for Asian businesses."
