In June of this year, the International Institute for Management Development (IMD) in Lausanne, Switzerland, released its “World Competitiveness Yearbook 2024,” ranking Singapore as the world’s most competitive economy. Furthermore, Singapore also ranked first globally in areas such as labor market, attitudes and values, and technological infrastructure. This marks the first time since 2020 that Singapore has ranked first among 67 economies. What are the secrets to Singapore’s success as a small, resource-poor city-state?
Singapore’s unique geographical location is a crucial foundation for its economic development. Situated at the eastern entrance of the Strait of Malacca, controlling the shipping routes between the Pacific and Indian Oceans, Singapore has become a trade hub and transshipment center for goods in Southeast Asia. This advantageous geographical location provides Singapore with unparalleled conditions for developing its shipping industry and foreign trade. If we consider this as the “hardware” of Singapore’s competitiveness, then this “hardware” gives Singapore three absolute advantages.
First, Singapore, located at the southern tip of the Malay Peninsula, not only boasts a world-renowned natural deep-water harbor but also serves as a crucial hub for international ocean shipping routes, connecting the Pacific and Indian Oceans. It plays a vital role in maritime transport between Europe, Asia, Africa, and Oceania, and has long been considered the shipping center of Southeast Asia. Due to its highly convenient transportation, Singapore’s port handles over 100 million tons of cargo annually, ranking among the world’s top ports. PSA International announced that in 2023, it handled a record 94.8 million TEUs.
Second, leveraging its convenient transportation and substantial port trade, Singapore imports large quantities of various primary products from neighboring countries. These are then consolidated, graded, and packaged before being exported, forming a unique economic model centered on entrepot trade and shipping. In recent years, Singapore has further expanded its domestic processing and electronics industries, creating an “incubation” and expansion effect for other industries. It has vigorously developed television fax equipment, push-button telephones, fiber optic cables, and computerized train control systems, all of which are now among the world’s most advanced industries.
Thirdly, Singapore’s advantageous geographical location, convenient and rapid communication, long-term political stability, and generally high level of national education have attracted major global financial institutions, including banks from various countries, making it the world’s fourth largest financial center. Its international air passenger traffic ranks fifth globally, after the US, UK, France, and Japan.
Singapore’s status as one of the world’s most competitive economies is the result of multiple factors, not something achieved overnight.
Efficient government governance, a highly internationalized policy system, and a first-class business-friendly environment are key factors. Singapore is renowned for its long-term political and economic stability, transparent tax policies, highly open financial markets, practical and convenient policies, and a sound legal and judicial system.
On the one hand, Singapore boasts a highly convenient and transparent online government. Its scientific and efficient governance ensures the convenience, equality, and legality of companies and enterprises from registration to operation, a crucial reason why countless multinational giants flock to the country. For example, starting a new company in Singapore typically takes only about 15 minutes through online registration, after which it can begin operations—a speed unmatched by most other countries. Behind Singapore’s high salaries for government officials to maintain integrity is a stringent legal system, including caning, ensuring they dare not overstep boundaries in their daily handling of foreign investment cases, such as project approvals and policy implementation. This eliminates the common practices in some countries of demanding bribes and refusing to perform duties without incentives, and also prevents any complacency or laissez-faire attitudes. These factors naturally contribute to a favorable business environment, making Singapore a leading and increasingly attractive country in Southeast Asia.
On the other hand, Singapore strictly implements internationally aligned regulatory standards, and its legal system is consistent with that of developed countries worldwide, reducing the social operating costs for multinational corporations and businesses of all sizes. Furthermore, Singapore boasts a comprehensive network of multinational financial, legal, and tax experts, which greatly facilitates multinational companies and makes Singapore a leading global center for cross-border asset management. In addition, the Singapore government offers a variety of tax incentives, offered as packages for clients to choose from. For example, Singapore recently announced plans to implement two tax incentives starting in 2025, one of which is to bring the effective tax rate for multinational corporations to the global minimum of 15%, in line with the global trend against base erosion and profit shifting (BEPS 2.0). Within free trade ports, companies can also enjoy exemptions from quota restrictions and Goods and Services Tax (GST), port taxes, and maritime welfare fees.
Against the backdrop of some major Western powers pursuing deglobalization and reviving Cold War thinking, the Singapore government, benefiting from international trade dividends, has consistently upheld the principles of globalization and free trade, resolutely opposing any form of “decoupling” and firmly upholding the authority of the United Nations in its foreign policy, maintaining a balanced strategy in the great power game. Statistics show that Singapore has signed 15 bilateral free trade agreements and 14 regional free trade agreements with countries and regions around the world. At the UN’s “Small States Forum,” then-Prime Minister Lee Hsien Loong stated, “Singapore looks forward to cooperating with all countries to make our voices heard louder.”
Technological innovation is given prominence, with the government placing great emphasis on R&D investment and information technology transformation, focusing on building a smart nation and striving to be at the forefront of the Fourth Industrial Revolution. Due to its scarcity of natural resources, the Singaporean government has always prioritized competitiveness in the technology sector, addressing current and future regional and international competition through technological innovation, and investing heavily in this area. For example, the Singaporean government launched the “Enterprise Research Incentive Scheme” to encourage and fund companies, groups, and institutions registered in Singapore to establish their own R&D and innovation centers, stimulating strategic R&D vitality and capabilities within enterprises, thereby strengthening long-term planning and product competitiveness. This contrasts sharply with the short-sighted practices of some other Southeast Asian countries. In some Southeast Asian countries, the relationship between government agencies and enterprises is one of enterprise profits and government tax collection; once revenue falls short, the enterprise declares bankruptcy and disintegration, with little support or funding for enterprise R&D and innovation, let alone foreign-invested enterprises. In recent years, Singapore has shifted its development focus to the construction of new technology parks, vigorously cultivating scientific and technological talent and developing cutting-edge technologies to adapt to the needs of industrial restructuring and technological innovation. Singapore has released its “Research, Innovation and Enterprise 2025” (RIE2025) plan for seven consecutive years, demonstrating its strong emphasis on technological innovation. The World Intellectual Property Organization’s annual report shows that Singapore rose two places to fifth in the 2023 Global Innovation Index (from seventh in 2022), ranking first in Asia. The report also points out that Singapore ranks first globally in innovation investment. This is clearly a high affirmation of Singapore’s commitment to technological innovation.
Core industries have long been the main engine of Singapore’s economy, showing renewed vitality amidst the global energy crisis. As a port city surrounded by the sea, Singapore’s two distinctive core industries—oil refining and shipbuilding—have endured and are considered globally significant, demonstrating the development path of port cities and providing valuable insights for port cities worldwide. For many years, Singapore has held a pivotal international position in oil refining and export. Despite its small land area, Singapore has five major oil refineries with an annual processing capacity of 42.9 million tons, ranking among the top exporters of refined oil products. It’s worth noting that Singapore, with its advanced oil refining technology, is one of the few countries with pricing power over oil. Shipbuilding, related to the port economy, is another traditional strength of Singapore. Currently, Singapore’s large shipyards can not only build and repair various complex commercial vessels, tankers, and private luxury yachts, but are also one of the world’s major production bases for offshore oil drilling platforms. Amidst the escalating energy crisis caused by the Ukraine crisis and the Red Sea crisis, the global demand for offshore oil drilling platforms is booming, naturally revitalizing this traditional pillar industry.
From the digital economy to smart government, Singapore continues to lead global trends. The Singaporean government highly values the digital economy, having developed a top-level design and meticulous planning early on. Today, Singapore is widely benefiting from the digital economy, and a “smart nation” is taking shape on this foundation. In early 2018, the Singaporean government launched the “Digital Economy Framework Action Plan,” aiming to make Singapore a global leader in the digital economy. In June 2018, Singapore released the “Digital Readiness Blueprint,” outlining four strategic goals and outlining a development blueprint for the digital economy in four key areas. In the manufacturing sector, Singapore is actively promoting the digitalization of manufacturing, such as launching the Industry 4.0 Human Capital Scheme to help companies adopt Industry 4.0 solutions such as automation and robotics. According to the “Global Digital Economy Development Index Report (TIMG 2023)” released by relevant Chinese departments, Singapore ranks second globally in digital infrastructure, first in digital governance, and sixth in digital technology. Now, in this new digital era, the Singaporean government is taking it a step further, innovating its “Smart Nation” strategy. For example, it has launched an upgraded “Smart Nation 2025” plan, determined to vigorously develop the information and communication and media industries, and to comprehensively build a “Smart Nation Platform” to serve the public and meet people’s aspirations for a better life.