Singapore Country Report: PEST Analysis, Trade, and Investment

This report provides an in-depth analysis of Singapore's economy, focusing on its trade policies, foreign direct investment (FDI), and the factors contributing to its competitive advantage. It begins with an overview of Singapore's economic environment, highlighting its strategic location and open economy. The analysis includes a PEST framework, examining political stability, economic vibrancy, socio-cultural influences, and technological advancements. The report further explores Singapore's national resources and factor endowments that create a competitive edge, such as its strategic position, extensive air connectivity, and access to funding. The impact of foreign currency and exchange influences is assessed through an examination of Singapore's import and export activities. The report also addresses existing trade policies, systems, barriers, and incentives, as well as levels of foreign direct investment. Finally, the report concludes with a summary of key findings and recommendations for potential investors, emphasizing Singapore's strengths and opportunities.

Research Paper 1: Country Analysis
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Contents
Executive Summary...................................................................................................................3
Introduction................................................................................................................................4
Political, Economic, Socio-cultural and Technological influences/benefits/ advantages..........6
National resource and factor endowments that create competitive advantage...........................9
Foreign currency and exchange influences..............................................................................11
The countries existing trade policies, systems, barriers and incentives...................................13
Existing levels of Foreign Direct Investment...........................................................................14
Summary and recommendations..............................................................................................15
References................................................................................................................................16
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Executive Summary
The management essay provided below aims at giving the reader an understanding of the
developing economies in the world and what are the opportunities that are presented by these
economies. The assignment will effectively and efficiently help the reader in gaining an
understanding of the general overview of the country. With proceeding further in the
assignment, deeper insights would be developed in the GDP of the country, with a critical
analysis conducted on the political, social, cultural, economic and technological environment
of the country. The assignment also presents a critique of the national resources and FDI
opportunities that are being utilised by the selected country. On the basis of the analysis
conducted, the assignment will also present a recommendation about the investment option in
the country selected by the researcher.
Image Source: Connected to India (2018)
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Introduction
Among the various alternative that was presented to the author, the country that has been
selected for the purpose of completing this assignment is Singapore and the main reason
behind the same is the interesting and lucrative opportunities provided by the economic
environment of the country. Despite having a small geographical area and less dense
population, the country has an open and free economy which rules out the problem of scarcity
of resources faced by the country. The major advantage enjoyed by the nation is of its
strategic location which connects the country to major sea links which is one of the booming
industries of the country and has helped in the growth of the economy of the country. On the
other hand, it has been found that after facing the global crisis the response of the nation in
recovery was much fast in comparison to another Asian country which further makes it an
appealing nation for investment (Ho, 2014). Another reason behind choosing this nation is
the amount of data and information available in order to perform the analysis and complete
the research.
It should be noted that though the geographical conditions of the nation are adverse, it still
enjoys a corruption free and an open environment which is one of the main reason behind
stable prices, higher per capita GDP and low amount of fluctuations that are faced by the
economy. This also makes the country even more appealing than many western nations. The
economic structure of Singapore is effectively operated and controlled by service and
manufacturing sector in which the thriving industry is electronics and chemicals. Apart from
this, unlike other nations that are indulged in the basic activity of import and export,
Singapore is effectively indulged into the activity of entrepot trade in which the country
purchases the goods/ raw materials from other nations and refined them in order to re-export
(Chiu, 2018). This concept will be further explained in the assignment under the import-
export scenario.
The economy of the country highly depends on the export activity especially the exports of
consumer electronics, IT, Pharmacy, and investments in the sector of financial services. Thus
export can be stated as the major contributor to the GDP of the country. Another industry that
has a major contribution to the GDP of the nation is the tourism sector. Tourism sector of
Singapore is counted among developed nations and this is another thriving industry of the
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nation. Thus in the study presented below the trends of economic indicator of the country
would be analysed and the insights on the future of the nation would be provided.
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Political, Economic, Socio-cultural and Technological influences/benefits/
advantages
Over the last decade, the economy of Singapore has developed in an aggressive manner. Due
to this, now the country is being counted among the top economies with high income. There
are several factors that are working behind the growth of nation. These factors have been
effectively analysed and stated below by the help of PEST analysis framework.
Constraints Description
Political From various sources and instances, it has been found that the political risk
in the country is quite low due to democratic structure of the nation. This is
one of the most advantageous situations presented by the country and to
further enhance the same, the country has been classified as the nation with
lowest amount of political risk by Political and Economic Risk Consultancy
(PERC). Being a democratic economy, the representative of the nation is
elected by the people and since the independence; the country has enjoyed
its political stability. This is one of the key reasons behind the better
standard of living and attractive business opportunities being offered by the
country (Ho, 2014). The major implication that is suffered in the political
environment of the nation is the oppression of freedom of speech against the
ruling party. Though this is not generally seen, this fact makes country a
potential target of the political disturbances which might be faced in the
future.
Economic
factors
The economy of the country is a free and vibrant economy and has
identified to be developing at a rapid pace. The openness of the economy is
the major factor behind the highest per capita income of the country in the
ASEAN nations. The business sector is also supported by the corruption-
free environment. The legal and financial stability and laws of the country
are yet another factor which supports the potential of business opportunities
that might be conducted in the nation.
The recent investment by the government has been made in the
diversification and for the same; new industries are being called in. This is
the major reason behind the flourishing new industries such as tourism and
pharmacy. The success of the country is also determined by the strategic
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location which links the nation to major sea routes. This helps in facilitating
of smooth and hassle free trade. The competition is the nation is open and
intensive. This is further strengthened by the motivated and educated
workforce. In the development of the economy, the role played by the
government of the country is interactive. Availability of cheap labour from
the neighbour countries helps n saving a lot of costs (Tremewan, 2016).
Though there is the various advantageous situation, the major economic
implications faced by the economy are stated below as follows:
 Shortage of labour
 Rising costs of labour
 The decline in the productivity
Socio-
cultural
environment
Socially the country is like other eastern countries and considers tradition
seriously. Though this factor is seen in the old generation while the new and
young generation has identified to be inclined towards the western culture.
The desire of materialism has identified to be prevailing in the cultural
environment of the country and this urge to do well is one of the major
reasons behind increment in the productivity of the users. Thus this
presented an advantageous situation for the businesses operating or planning
to operate in the Singaporean industry as due to the high purchasing power
of the people can account for high and rigorous sales (Tremewan, 2016).
The industry has been identified to be having a negative perception towards
blue collar jobs i.e. construction.
The literacy rate of the country is also high. The major languages used in the
nation are English and Chinese. This culture helps in attracting international
trade and foreign investments.
Technological
factors
Technology is one of the major reasons behind the change in lifestyle and
quality of living in Singapore. The main reason behind the development of
the country is played by internet which has helped in increasing connectivity
and communication. This has helped in decreasing the time required in order
to conduct the business. The IT infrastructure of the country is praised by
many and the penetration rate of technology among the householders is
around 72% which places the country well ahead of many developed
western nations. Due to this, there is a major scope in the development of
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eB2C models. This widespread network of IT services across the overall
geographical location is the major reason behind many It companies
operating in the Singaporean environment (Chiu, 2018). The government is
also aiming towards further digitalisation of services.
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National resource and factor endowments that create competitive
advantage
It has been found that Singapore has a unique convergence of east and west which is due to
the strategic location of the nation. The social fabric of the nation is inclusive of the Asian,
European and American culture which makes the nation friendly and attractive location for
the businesses to expand into. Being a former province of Britain the country is endowed
with the European culture and resources which has helped in the strategic development of the
nation. Major brands and MNCs have expanded their organisation in the country. This has
helped the country to be counted in one of the emerging and developing nations in relation to
various factors. Various surveys have been conducted in order to determine the position of
the nation. This has been stated below with the help of an image as follows:
Image: Ranking status of Singaporean Economy
Image Source: Rikvin (2018)
There are various factors which help in the creation of a competitive advantage for the
company. These factors have been stated below as follows:
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 Strategic position and a network of trade arrangements: The country is one of the
top players in the global industry and this advantage has been levitated to the nation
by the geographical location and its surroundings Singapore is surrounded by the
emerging and potential markets and its networking with other Asian destinations as
well. The air travel is also frequent with inbound and outbound flights which help in
facilitation of effective and efficient trade. This is the major factor behind creation of
competitive average for the country (Harzing & Giroud, 2014).
 Extensive air connectivity: The trade network of Singapore as stated above is well
efficient and the major role played in the same is the well-developed supply chain
management and logistics infrastructure which is well supported by the air
connectivity of the country. The Changi International Airport situated in the country
is served around 320 cities and provides connection to around 100 countries
(Heracleous & Wirtz, 2012). This is also the home to many logistics firms such as
UPS and FedEx.
 Affordable access to funding: The Singaporean economy is the nerve center of
around 124 commercial banks and 531 capital markets service license holders. The
country not only acts as a hub of wealth management and investments in the Asian
region but also is the fourth largest forex trading center (Lazzarini, 2015). As a result,
the country is a market of opportunities for the entrepreneurs such that it is easy for
them to gait h access to the private as well as public banking services in order to
expand and initiate their business. The rates have been identified to be as low as 1%.
These are the factors enjoyed by the economy of Singapore which can help the economy in
the creation of competitive position in the market.
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Foreign currency and exchange influences
According to Ariff & Hill (2012), in order to identify the exchange influences in the nation
the exports and imports criteria of the country will be considered and analysed in order to
further provide details to the reader. The economy of Singapore is successful though at times
it faces the issue of lack of resources as it is the smallest nation in the South East region. This
factor does not trouble much and as a result, the economy is one of the most business-friendly
economies in the world. The strategic location of the country helps in facilitating the
international trade which is one of the major reasons behind the exports and imports in the
nation (Ariff & Hill, 2012). The contribution of the export sector of the industry has a
massive contribution of around $515 Billion and the key exports include consumer
electronics, petroleum products, technology products and pharmaceuticals. The country is the
leading producer of computer disk drives and these electronic products account for 60% of
the total exports. In the exports in the industry, the major contributors are Hong Kong and
Malaysia with a share of 11.6% and 11.5% respectively (Singstat.gov.sg, 2018). Apart from
this, the US contributes around 11.2% while on the other hand, the contribution of Indonesia
stands around 9.7%. This is another facilitator of the foreign income in the nation.
On the other hand, the imports in the industry are seen in the case of crude oil, electronic
components, foods and beverages, industrial machinery etc. which stood around $452.1
Billion. From the example of Singapore, it is evident that the nation is an avid supporter of
entrepot trade where the country purchases raw materials and furnishes them in order to re-
export.
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Image: Import and exports stats of Singapore
Image Source: Singstat.gov.sg. (2018)
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