Singapore has a vibrant free-market economy, developing rapidly. It has a high per-capita income, sustained and strengthened by an educated workforce, an environment free of corruption and a stable financial and legal business framework. The Singapore economy is in a continuous change and development.
A large number of major initiatives of redevelopment are taken in industries such as tourism, property, retail, leisure or construction. Recently, a lot of importance is given to the Singapore service sector. Singapore is an export-led economy. The main exported goods are consumer electrics, semiconductors and other high-tech products. Recently, the government has made great investments in order to diversify the economy. This way the tourism, pharmaceutical, education, retail, medicinal technology and multimedia industries have grown considerably.
The rich population of Singapore was made even wealthier in 2007. Prices on properties rose with more than 29 per cent, the fastest rising prices in the world. Adding thousands of millionaires to the population. The gambling industry is growing in Asia. Macau even overtook Las Vegas as the world’s biggest casino center in 2007. The Singapore government approved the construction of the first two resorts granted in the republic, with casino licenses: Marina Bay Sands – an integrated resort focused on business, which will draw investments of $5 billion, opening in 2009 – and Resorts World at Sentosa, which is more family oriented and is due to open in 2011.
Many other events, such as the first Formula 1 night race, hosted by Singapore in 2007 or the first Youth Olympic Games in the world in 2010 will boost the Singaporean economy. The Singapore government invests its large reserves in the development of sectors like technology and education. More and more investments are being made outside the country through Temasek Holdings and the Government Investment Corporation of Singapore (GIC), two sovereign wealth funds. Singapore’s financial rising is also helped by the favorable geographic location. Its huge seaport which is crucial for the country’s development, as it is used for both export and import activities.
Singapore has steady real growth rates, due to the country’s successful economic strategy. Singapore absorbed three economic shocks: recession in the United States and European Union countries, SARS and an economic slump, all of these between 2000 and 2003. In spite of that, it recovered quickly, thanks to a sound economic structure and strategy, great infrastructure, some foreign investments and a capable workforce. Corporations connected to the government have also played an important role in the economic development. Singapore has positioned itself to gain from the forces of globalization, and indeed to be a hub for international business and trade.
The Singapore economy is strong, and its prospects look stronger than ever.
Singapore Economy and Franchise Industry
At a Glance
Singapore’s economy is expected to grow by around 3.5% in 2014 aided by healthy domestic demand and a strong services sector. Economic growth is expected to gather momentum from 2015 to 2018 as external demand strengthens.
Singapore is an open friendly economy. For the 9th continuous year the World Bank ranked Singapore #1 for ease of doing business. It is a forward country with solid supply chains and a developed infrastructure. The franchise industry is very well controlled and transparent so there are few regulatory hurdles compared to its Asian neighbours. Due to the trusted system there is a certain peace of mind when dealing with potential Singapore partners.
According to McKinsey, Singapore is ranked as the 4th most connected country in the world so offers a good hub for your regional headquarters and a springboard to expand across Asia. There are around 7,000 multinational corporations with more than half of them using Singapore as their regional headquarters.
Of 20 private economists surveyed by the Monetary Authority of Singapore (MAS) expected GDP growth for 2014 is 3.8% and this is forecast to increasingly grow over the next 5 years.
Despite comparatively slower Asian growth, retail sales were up 5.5% in July 2014 (Singapore Department of Statistics) and are forecast to increase by nearly 20% from 2014-2016 (PwC).
The food and beverage industry contributed approximately 3.2% to GDP in 2013 with Singapore having the highest per capita food consumption in Southeast Asia (Research and Markets). The retail and wholesale trade sector accounted for 16% of GDP, up 5% from the previous year; the financial services sector grew 10.6% and business services rose 5.1% (1-IKTDC). The service sector is by far the biggest employer and adds around 60% to GDP.
The government has a very global attitude and is reliant on global business and imported goods. There are a raft of global and regional free trade agreements with hardly any tariffs on most agri-food products. Franchise information (including financial incentives) can be found through the following government backed organisations:
SPRING-Standards, Productivity and Innovation Board.
International Enterprise (IE) Singapore.
Singapore has a very multi-cultural, globally aware population and is therefore a great test marketing location before committing to a regional launch. The population is small and predominately urban but has an enviably low unemployment rate. As a result, it is one of Asia’s richest countries in terms of consumers, the level of per capita wealth is one of the highest in the region and has risen consistently over previous years.
The average monthly household income of Singaporeans rose from $8,110 in 2007/08 to $10,500 in 2012/13 with households spending an average of $4,720 a month on goods and services. Total consumer expenditure is forecast to grow by CAGR 5% from 2011-2016 and 36% of Singaporeans feel the next 12 months would be a good time to buy the things they need or want (Nielsen 2014).
Food is the 2nd biggest expenditure behind housing and, interestingly, private education accounts for a high percentage of spend-equivalent to university education expenditure (Singapore Department of Statistics).
Given the higher income, the average consumer is well traveled and is very brand savvy. They have a good level of sophistication and are very receptive to foreign products and services. The generally higher affluence means there is a less price resistant market-a useful point for premium brand companies to bear in mind.
The franchise business in Singapore is healthy; there are over 600 concepts with more than 35,000 franchisees. Franchising and licensing accounts for 18% of total domestic retail sales volume and generates a turnover of about $6 billion. Franchisors from a range of countries are present, across a range of sectors. The majority of brands are from America though Singapore remains the most popular Asia destination for Australian franchisors.
Singaporeans are keen to find new franchise opportunities and are adept in dealing with foreign franchisors. They not only have a good understanding of their domestic market but also the regional market. This, combined with the strategic location creates openings for foreign brands to partner with knowledgeable Singapore companies in order to extend their brand across the region.
A successful foreign concept proven in the Singapore market has the possibility to be taken on by the domestic partner and developed across the region, therefore significantly mitigating the risk and cost to the foreign company.