Singapore targets capital-intensive growth as small market limits scale

Strategic footholds are being sought in frontier sectors including space innovation and deep tech.

Singapore firms are being encouraged to strengthen global linkages and expand overseas to capture new growth opportunities.

In its mid-term update, the Economic Strategy Review (ESR) Committees said that providing stronger backing for such ventures, particularly projects requiring significant capital and risk-taking, would allow firms to secure strategic footholds, generate additional revenue, and create higher-value jobs for Singaporeans both locally and overseas.

“With our small domestic market, many opportunities lie beyond Singapore's shores,” the report said. “Our continued growth therefore relies on our ability to strengthen linkages with the world and secure access to global markets, value chains, and ideas.”

The committees noted that companies looking to grow abroad often face higher risks and intense competition from established local players in foreign markets.

According to a KPMG and Singapore Institute of Directors (SID) survey, the biggest challenges for Singapore businesses seeking overseas expansion are higher business costs at 51%, limited access to finance at 26%, supply chain issues at 25%, higher tariffs at 22%, and unfamiliarity with new markets at 22%.

The push for internationalisation comes against the backdrop of Singapore’s small domestic market, which limits growth opportunities at home.

The ESR Committees recommended strengthening trade links, participating more fully in global value chains, and investing in transport hubs and logistics networks to capture new supply chain opportunities.

Whilst international expansion takes centre stage, the Committees also outlined complementary measures.

The report said that Singapore should cement its position in industries such as semiconductors, healthcare, specialty chemicals, and aerospace by investing in AI, automation, and sustainable manufacturing.

Investments in quantum computing, decarbonisation technologies, and space innovations can also drive new economic frontiers, alongside nurturing globally competitive startups in AI, deep tech, and fintech.

“We need new ways of identifying, attracting, and supporting these emerging champions to use Singapore as their home base, and help them scale their innovations to capture greater value for Singapore,” it said.

Additionally, the committees recommended positioning Singapore as a leading hub for AI innovation and adoption. Measures include closer government–industry collaboration, shared data and computing resources, regulatory sandboxes, and targeted support to help small and medium-sized enterprises deploy AI solutions.

“AI will revolutionise economies and industries the same way electricity and the internet had,” the report said. “Singapore must stay ahead of the curve to capture the transformative power of AI and put ourselves on a different growth trajectory.”

Small businesses in Singapore are entering 2026 focused on technology adoption, brand credibility, and professional networks, according to LinkedIn’s Work Change Report. These areas are driving how small businesses scale and compete, though gaps remain in AI adoption and literacy.

AI is increasingly used for automation, data-driven decisions, and marketing, but only 26% of professionals use it for advanced tasks like strategy or data analysis, and fewer than half use it consistently in daily work.

The report also stressed the need to ensure growth remains inclusive by broadening the range of quality jobs, including in skilled trades, care services and social sectors.

It noted that workers would be supported through expanded lifelong learning pathways, a national AI workforce strategy, and stronger career transition programmes in partnership with tripartite partners.

Moreover, companies must be enabled to assess operations, plan transitions, and pivot to new opportunities in a changing economic landscape.

The government is expected to respond to the ESR Committees’ recommendations in the coming months.

Engagements with stakeholders will continue, and a full report detailing the final proposals is slated for publication in mid-2026.

The update sets out seven recommendations to secure long-term growth and create good jobs for Singaporeans in an increasingly volatile global environment. The proposals were shaped by more than 60 engagements, events and company visits involving businesses, trade associations, chambers and unions.