Would Singapore be able to move past its contracting economy?
It is expected to attract more FDIs, according to Tricor Group CEO Lennard Yong.
Even though Singapore’s economy is being dragged by the manufacturing sector, its attractiveness for multinationals is not expected to falter for 2020. The country is also looking to strengthen new technology sectors such as biomedical manufacturing.
Tricor Group’s “Global Trade Analysis, APAC Investment Outlook & IPO Guide” forecasts Singapore’s 2019 GDP growth to likely moderate at 2.3% from 3.2% in 2018. Then, it is set to slightly recover to 2.4% in 2020.
In an interview with Singapore Business Review, Tricor Group CEO Lennard Yong spoke about the investment hotspots driving economic growth and key strategies for luring investors.
What are your expectations for Singapore's FDI flow in 2020?
For 2019, the FDI value attracted got smaller. But if you break it down into regions of US, Europe and Asia, you would have seen that Asia actually increased 4%. Now that may not look like a very big number but then when you contrast that against the decline in US and Europe, it then becomes quite a significant number. In 2018, the number of FDI flow in Asia is US$512b, which is a fast 4% YoY from foreign direct investments inflow. And 65% of that inflow went to three jurisdiction: Mainland China, Hong Kong and Singapore. For Singapore in 2019, we see [its FDI flow] continuing to pick up the same trend.
And I would expect that whilst there is a lot of turbulence because of global trade, trade tensions and so on, 2020 will still be, reasonably, along the same trend of growth because the global trade flows are all relative. When one region of the world is down, the money has got to flow to another region. That's why even though there are some headwinds in terms of the trade tensions here in Asia, investments come to Asia as investments in the rest of the world is slightly down.
What countries will be the biggest contributors to Singapore's FDI?
From a Singapore perspective, obviously, it has a very attractive economy, financial services, and has a very vibrant population that is highly educated and so on. But in general, it's a small economy. But it can also be big in terms of GDP per capita.
What we find is a lot of investment coming to Singapore is basically being held as investments in Vietnam and Indonesia. Effectively, Singapore is like a regional arm for the HoCo, meaning holding company. And that is a very good sign for Singapore's economy, and status as well. And so therefore, a lot of the contributors of this will depend on businesses multinationals investments that will come from Asian multinationals and international multinationals that actually want to invest in Singapore, rest of ASEAN. So that's really one of the drivers for a lot of these things, and that could come in the form of the real estate sector, property development, trade, industrial (because of factory developments).
What sectors are clinching the most investments?
In general, when you look at the stock market and the private equity, all the capital coming in has traditionally benefited from a lot of the core sectors like the real estate, the financial services and the consumer goods sector. More recently, I think, because of very favourable government policies in encouraging startups. I would say that technology and the startup sector is really catching on.
Based on the figures in the report, Singapore's real GDP will go from 3.2% in 2019 to 2.3% in 2019. So what do you think have caused this contraction?
The government has clearly put out an early warning signal that the economy's softening here in Singapore. I think the main drivers of the lower economy the bond is mainly driven by the manufacturing sector which contracted. Singapore is a major engineering industry, but I think much of this has been offset by some of the new tech sectors, as well as biomedical manufacturing.
So there's been a bit of an offsetting trend where you've got a decrease in the manufacturing a little bit, and in the wholesale retail sector, but then making some improvements in the new tech sectors. But overall I think the trade sentiment has somewhat in general affected the overall economy.