What Makes Singapore One of Asia’s Largest Trading Hubs?

According to the United Nations, Singapore only commands 0.1% of the Asian population. However, the ‘Lion City’ has quietly become one of the continent’s substantial trading hubs and a global force.

Ultimately, Singapore boasts a highly developed market economy and is part of the so-called ‘Four Asian Tigers.’ Let’s learn more about the nation’s continued economic success in Asia and worldwide. 

Strategic Geographic Location

Favorable geography is usually a key contributing factor for any prosperous country. Singapore is one of the world’s most connected nations, positioned strategically along major global trade, shipping, and aviation paths. These are a few of the consequences:

• The Port of Singapore is among the busiest seaports globally, connected to over 600 ports in more than 120 nations.
• Singapore possesses what many consider the best airport in the world, Changi Airport. The former serves over 100 airlines flying to roughly 100 countries. 

The country’s geography also benefits the ASEAN (Association of SouthEast Asian Nations) bloc. Its location at the tip of the Malay Peninsula brings it closer to the ASEAN countries, which can capitalize on Singapore’s seaport, logistics, shipping, travel, and overall trade prominence.

Forex Dominance

The latest Global Financial Centres Index places Singapore third as the top financial center after New York City and London. Thanks to excellent regulatory, tax, and business-friendly systems, Singapore remains one of the go-to forex trading hubs. 

Let’s not forget the nation’s inherent world-class economy, currently boasting the highest Gross Domestic Product (GDP) per capita. Consequently, it’s an attractive destination for forex brokers, liquidity providers, investors, and other entities. Meanwhile, ordinary Singaporeans can trade the world’s most liquid financial market using supercharged charting platforms like TradingView. 

While the Singaporean dollar is a thinly traded currency globally, traders in the region can earn favorable rates by investing it against higher-yielding currencies like the US dollar, the British pound, and others in the G20. 

Singapore’s central bank and primary financial regulator, the Monetary Authority of Singapore (MAS), has many policies and initiatives that foster a secure forex environment.

Finally, it’s worth mentioning the financial services sector in Singapore. It’s one of the region’s primary economic contributors. The latter is home to more than 200 banks, and many financial services firms are increasingly setting up shop there.

Singapore is often regarded as the ‘Switzerland of Asia.’ Besides the presence of Credit Suisse, it shares many traits with Switzerland, such as political stability, low tax rates, and a highly educated workforce.

Manufacturing and Oil Refining Power

Financial services contributed only 14% to Singapore’s nominal GDP, according to the latest economic stats from the Department of Statistics Singapore. In first place is manufacturing at 18.6%, with industry clusters including machinery, electronics, logistics, transport, and biomedical sciences.

Singapore is part of Southeast Asia’s rise as an emerging manufacturing hub, attracting massive global investment. Yet, it’s worth highlighting the former’s individual achievements and future projections in this industry, according to Statista.

• The value added in Singapore’s manufacturing market is expected to be $68.76 billion in 2024, with a compound annual growth rate (CAGR) of 2.30% until 2028.
• The number of businesses in the manufacturing market is expected to reach at least 8,590 in 2024, with a CAGR of 0.23% until 2024.

Singapore’s major imports and exports aren’t limited to manufacturing. Oil refining is another notable economic driver. Many view the ‘Lion City’ as ‘the undisputed oil hub in Asia,’ boasting cutting-edge facilities and petroleum companies like Lanxess and Exxon Mobil. This is despite oil being a minor GDP contributor to Singapore and having lower production than China and India.

Ease of Doing Business

Singapore has become a place where business has been smooth in the last decade. Again, such a narrative reaffirms the country’s position as the go-to region for foreigners. The latest Ease of Doing Business rankings by The World Bank shows Singapore in second place after New Zealand.

The findings highlight Singapore as having the second-most conducive environment for operating a local enterprise. In simpler terms, the time and costs to set up a business in the nation are small compared to others. Consequently, thousands of new international companies are working in the territory.

Another distinct advantage of Singapore is that it uses English as a primary language, which appeals to nearly all foreign businesses.  

Furthermore, Singapore possesses one of the most business-friendly tax regions. It offers several tax incentives that reduce a company’s tax rate, meaning more profits in a thriving, first-world nation.

Bright Future Ahead for Singapore

Singapore is proof that dynamite does indeed come in small packages. Thanks to a combination of favorable geography, prominence as a financial center, manufacturing, and ease of doing business, Singapore remains the place to be.

The nation has only scratched the surface of its potential. The future is unsurprisingly prosperous, with several industrial, commercial, residential, educational, healthcare, and security developments in the pipeline.