Jonathan Sim and Amjad Suleman from Asia Financial Consulting (Asia FC) believe the results have created an extremely favourable opportunity for investors. They tell BRIC Plus News why for international investors looking to diversify and increase their stable long-term returns, Singapore is the best bet.
A strong mandate
In September, the People’s Action Party (PAP) emerged victorious. With a landslide victory of 69.9% of the popular vote, this translated into 83 out of 89 seats in parliament. Key members of the party’s economic team performed well in their districts. The Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam scored the highest among all candidates, winning 79.3% of the votes. Prime Minister Lee Hsen Long also performed very well, polling second with 78.6% of votes.
These strong results bode well for policy continuity, and are a powerful demonstration of Singapore’s political stability. Asia FC feel that this outcome is excellent news for the investment community. The PAP is known as investor-friendly. With their strong mandate, they will be able to pass economic policies that live up to this reputation. Singapore has probably the most investor-oriented government in the world, but public pressure forced it to ease off in recent years, and to introduce some limited curbs on foreign investments and immigration. Even then, Singapore still remained one of the top investor-friendly locations.
The strong results will empower the PAP government to continue its investor-friendly policies, and allow it to roll back some of the curbs placed on foreign investors since the previous general election. We expect these less-unfriendly measures to be removed or substantially reduced in the near future.
Best-placed for cross-border investments
Investors diversify and put their money into new markets for many reasons – to earn higher returns, lower their cost, decrease their risk, and smooth out their peaks and troughs. Singapore offers these in a convenient package. A well-governed economy with stable institutions, decent to high returns, and a liquid market with a large investment ecosystem and diversified offerings make Singapore the ideal.
Even at the height of the government’s pacification of popular discontent, Singapore provided a warm welcome for foreign investment. Spearheaded by the Economic Development Board (EDB), and supported by the government’s generous incentive schemes and assistance programmes, Singapore has maintained its competitiveness. Income tax is capped at a maximum of 20%, and there is no tax levied on dividend income. There is also no capital gains tax, no estate duty, and no capital controls or limits on moving funds across borders. The stability of the Singapore dollar helps to lower the cost and uncertainty of cross-border investment.
Singapore has a number of factors in its favour. It’s wealthy, English-speaking, and cosmopolitan. Its geographical location and business-friendly environment make it the perfect platform for investors and businesses to make their entry into the Asia-Pacific – and beyond. The lack of capital controls are not the only factor working in favour of cross-border investors. Singapore enjoys membership of the most extensive network of free trade agreements in Asia. With a large network of investment guarantee agreements, and double-taxation treaties with regional states and major financial centres, Singapore is ideal. Important treaty partners include BRIC economies, the United Kingdom, the United States, ASEAN countries, and many other emerging markets.
Many foreign investors are already receptive to these advantages. In the year leading to June 30th 2015, nearly $5bn was poured into the region by Singapore-based institutional and individual investors. Singapore is also the 3rd largest investor in North America. The upcoming ASEAN Economic Community (AEC) will further open up opportunities for investors and businesses who are based in Singapore. An integrated market of 600 million people will be created through the liberalisation of trade in goods and services, labour movement, and investment. The AEC has a combined GDP of US$2.4 trillion in 2013 and has projected average annual growth of 5.4% from 2014 to 2018. It will be Asia’s third largest growth engine after China and India.
Strong reputation, good governance, cost-effective
[via Feecha]
Singapore’s reputation for clean government, reliability, integrity, discipline, and efficiency and effectiveness creates a wow factor for any Singapore-based business or investor in other markets. Ranked the least corrupt in Asia, and the most transparent in the world, Singapore’s government is instrumental in ensuring its enduring strength as an investment centre. The business environment is ranked the best in the world by the Economist Intelligence Unit, and Singapore is assessed to have the second most free economy in the world by the Wall Street Journal and Heritage Foundation.
The government has also sculpted a business-friendly immigration policy. With top class infrastructure, great connectivity and ease of movement, and world-class workforce and labour relations, Singapore has proven its salt as a great place to work. Its response to the 2008 Global Financial Crisis is commendable. By slashing costs and reducing red tape and bureaucracy, Singapore was able to emerge an even better investment destination. Investors do not want too much complexity and risk in the process of diversification. A simple but effective global strategy would be focusing on a few key financial centres. Singapore is crucial for access to the rest of Asia, and the Pacific region.
