Our comprehensive assessment of Singapore's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Singapore, as well as the latest industry developments that could impact Singapore's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Singapore before your competitors.

Country Risk

Singapore Country Risk

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Core Views 

  • Singapore's ongoing restructuring drive continues, with the ruling People's Action Party (PAP) pushing ahead with stricter foreign labour rules despite an increasingly tight labour market. While we believe that the tight labour market is acting as a headwind against economic growth, we do not foresee any easing from the government in the near future.

  • Singapore's real GDP growth accelerated slightly to 2.4% y-o-y in Q314 , but this remains below the government's forecasted range of 2.5-3.5% for 2014.   We retain our below consensus real GDP growth forecast of 2.5% for 2014, and note that risks to our 3.3% growth forecast for 2015 are likely to the downside given domestic and external pressures.

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Singapore Operational Risk Coverage (9)

Singapore Operational Risk

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BMI View: Singapore offers limited operational risks to incoming businesses. Remaining risks include the introduction of minimum wage in certain areas, increasingly stringent regulations governing the number of foreign migrant workers allowed, persistent corruption, and an overreliance on trade partners who are vulnerable to economic slowdowns. In addition, the country suffers from a lack of natural resources: It is forced to import much of its water supplies and fuel and is reliant on its neighbours for much of its energy too. This drives up costs and leaves consumers at the mercy of international tensions.

Moreover, there is limited trade flow growth potential, owing to the small population and comparatively static demand curve. However these risks are minimal in comparison to risks offered by other Asian countries, and Singapore has an overall score of 78.5 in BMI's...

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Singapore Crime & Security

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We see the greatest (albeit still limited) security risk to Singapore coming in the form of piracy on the Straits of Malacca, which would drastically affect the country's position as a global trade and shipping hub. We would also note that risks are heightened somewhat by Singapore's close ties with the US, and the ever-present threat of the expansionist tendencies of the militant terrorist organisation Jemaah Islamiyah. This results in the risk of terrorism being the poorest scoring segment at 68.0, representing the greatest deterrent in this section for potential investors or incoming businesses.

Interstate conflict is the next greatest risk, however due to Singapore's carefully maintained neutrality, this is again relatively limited. Singapore has a highly efficient and advanced police force, one of the best equipped in the region. Despite its comparatively diminutive size, ongoing procurement means it is maintaining its regional supremacy...

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Singapore Labour Market

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Singapore offers limited risks to incoming investors and businesses with regards to the labour market. The key risks are the increasingly stringent regulation surrounding the importation of foreign labour into the country, a limited overall labour participation rate as female participation is still below 60%, and the threat of rising wages and the potential instigation of set minimum wages for certain sectors. However, these risks are outweighed by the significant advantages, which include a 100% urbanised population, extremely flexible labour market and one of the best education systems in the world, resulting in a highly skilled workforce. Overall, the country receives a score of 77.4 out of 100 for Labour Market risks, leaving it in second place behind Hong Kong.

Overall, the labour market is tight with rising participation rates among the working age populace, largely due to an increase in female and elderly workers. This is a positive...

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Singapore Logistics

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The greatest risks to investors stem the fact that the country suffers from a lack of natural resources, and is forced to import much of its water supplies, and fuel, and is reliant on its neighbours for much of its energy too. This drives up costs and leaves consumers at the mercy of international tensions. Moreover, there is limited trade flow growth potential, owing to the small population and comparatively static demand curve. However, this is mitigated somewhat by the fact that Singapore has an enviable position as a regional transport hub, and the government and developers are keenly aware of the importance of the country's transport systems. Despite this awareness, the quality of Singapore's infrastructure has eroded slightly in recent years as infrastructure investment did not keep up with population growth. In spite of this, however, due to the small size of the country, the extent and quality of the networks remain substantially ahead of most of the...

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Singapore Trade & Investment

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We view Singapore as an extremely attractive, low risk destination for investment, and one which offers numerous opportunities with regards to trade. The extensive trade agreements, limited tariffs and vast trade flows due to its key geographic position offer significant advantages. Moreover, the extensive legislation protecting investors, and their intellectual property rights further limit risks. In addition, the government is actively encouraging foreign investment, as the soaring levels of FDI highlight. However, risks remain in the form of persistent corruption, and an overreliance on trade partners who are vulnerable to economic slowdowns. Therefore overall, Singapore receives a Trade and Investment risk score of 81.9, which puts it second in the region and fifth globally.

A commitment to a low tax regime and high levels of investment in infrastructure ensure Singapore has a superior business environment not only among its regional...

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Singapore Industry Coverage (20)

Autos

Singapore Autos

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Certificate of entitlement (COE) prices for all vehicle categories rose in the second round of bidding in August 2014 on the back of strong demand, despite an increase in COE quotas over the past three months. We expect this dynamic to continue playing out over the next few years as car owners gradually replace their cars that are nearing their 10 year lifespan, pushing up demand. In view of rising COE quotas, we are revising our vehicle sales growth forecast for 2014 from a contraction of 3.0% to 14.4% growth.

Expect Bumper Crop O f COE Quotas

COE quotas are determined by the number of cars deregistered in the preceding three-month period, and given that the number of cars deregistered monthly has hit a three-year high of 2,724 units in July, we foresee COE quotas continuing on their upward trend in Q414. We believe COE quotas will continue rising...

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Commercial Banking

Singapore Commercial Banking

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Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Singapore Consumer Electronics

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BMI View: We forecast that Singapore's consumer electronics spending will increase 6 . 7 % in US dollar terms in 201 4 to reach USD 4.2 bn , with the withdrawal of official support for XP in April 2014 and the FIFA World Cup in Brazil boosting demand for PCs and TV sets respectively.   We expect market growth to accelerate from 2013 after a squeeze on growth from price erosion in the TV and notebook markets, as well as cannibalisation of digital camera and mp3 player volumes associated with the proliferation of multi-functional smartphone ownership...

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Defence & Security

Singapore Defence & Security

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BMI View:   Defence spending remains a top priority for the Singaporean government which is executing a prudent military procurement agenda with a long-term outlook that will transcend the Singapore Armed Forces (SAF) into a third generation fighting force. In the future, we expect to see sustained levels of weapons imports from American and European arms manufacturers, as well as continued support for domestic defence company, ST Engineering. The key downside risk Singapore's defence expenditure stems from a GDP downturn, but we forecast positive and stable economic growth through to 2018. 

BMI forecasts Singaporean defence expenditure to reach USD11.6bn in 2015 as the Ministry of Defence upholds its commitment to steady and sustained spending policy, which is focused on hi-tech weaponry. This bodes well for domestic and international security and defence firms, which...

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Food & Drink

Singapore Food & Drink

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BMI View: Singapore has one of the highest levels of food consumption in the region, which effectively eliminates the possibility of substantial industry growth in the short or medium term. This is illustrated by our modest sales growth forecasts for a majority of sub-sectors to 2018. Nonetheless, we believe that Singaporean alcoholic drinks market has not reached a saturation point yet and holds significant growth potential over our forecast period.

Headline Industry Data

  • Total food consumption (local currency) growth year-on-year (y-o-y) in 2014: +1.9%; compound annual growth rate (CAGR) to 2018: +2.1%

  • Per capita food consumption (local currency) growth (y-o-y) in 2014: -0.1%; CAGR to 2018: +0.3%

  • Alcoholic drinks sales (local currency) growth (y-o-y) in 2014: +5.8%; CAGR: 6.8%

    ...

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Freight Transport

Singapore Freight Transport

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Singapore's role as a global transhipment hub is both a blessing and a curse. In times such as these, when key markets in Europe and the US are either recessionary or growing sluggishly, it can be hit by depleted freight volumes. In 2014, we forecast growth in both port and airport total tonnage volumes, though it will be sluggish. Both facilities are investing considerably, and we are confident of growth over the medium and long term.

Headline Industry Data

  • 2014 air freight tonnage through Changi International Airport to grow 1.1% after a 0.8% expansion in 2013. Growth over our forecast period (2014-2018) to average 1.2% a year.

  • The Port of Singapore's gross tonnage will grow by 7.2% in 2014, with average annual growth at 5.4% during our forecast period.

  • The country's overall trade will grow by 3.2% in real terms in...

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Information Technology

Singapore Information Technology

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BMI View:   W e have a positive outlook for the growth of Singapore's IT market , which will underperform emerging market growth rates, but is expected to outperform against other developed markets. Strong income growth, exposure to the APAC growth story and government policy will all support IT market growth over the medium term. Growth from the sales of PC and devices will slow as high device penetration in the city state means little prospect for first time sales , but short replacement cycles and strong demand for premium devices will ensure it remains a lucrative market for vendors . Considering the government active push to promote Singapore as a destination for cloud, big data and analytics services, Singapore should be a strong...

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Infrastructure

Singapore Infrastructure

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BMI View: We continue to expect construction and infrastructure growth in Singapore to moderate over the 2014-2020 period. Real growth for the construction sector is forecast to slow from 5.9% in 2014 to 3.0% in 2019, while real growth for the infrastructure sector is expected to fall from 12.7% in 2014 to 4.0% in 2019. This moderation is primarily due to declining housing demand, longer construction periods for planned infrastructure projects and a poor export outlook, which could curb investment in non-residential buildings.

Key Trends And Developments

  • In September 2014, Singapore's Land Transit Authority (LTA) announced that Phase 2 of the Mass Rapid Transit (MRT) system's Downtown Line would open ahead of schedule in Q116. The project had previously been delayed by financial troubles at one of its key contractors, and was expected...

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Insurance

Singapore Insurance

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BMI View :  As of the end of 2014 both the non-life and life segments have performed well confirming our view that Singapore's insurance industry is expansive, dynamic and well developed. In particular life insurance seems to growing at a faster rate with weighed single premium products growing at double digit rates for the first half of 2014. In terms of the non-life market while it was not as successful, improving economic conditions auger well for the prospects of the sector. In summary we still maintain our view that the insurance industry as a whole will grow at single digit figures through the forecast period .

By most metrics Singapore has a very well developed insurance sector both in the life and non life sectors with future growth in premiums expected to be in the mid to high single figure range. There are a few key reasons why we feel...

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Medical Devices

Singapore Medical Devices

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BMI Industry View: One of the richest markets in the Asian region, Singapore's medical device market continues to grow strongly, with growth at over 10% per annum. The large biomedical production industry continues to be a major sector in Singapore's total manufacturing output and the country continues to serve as a distribution hub for the region.

Headline Industry Forecasts

  • The Singaporean medical device market, in US dollar terms, is expected to grow by a CAGR of 14.3% which should take it from US$465.5mn in 2013 to US$908.3mn in 2018. By individual product area, performance is expected to range from 6.2% for patient aids to 17.1% for other medical devices.

  • As Singapore acts as a trading hub for the region, the majority of imports are re-exported. In US dollar terms, imports grew by 18.2% to reach US$3,550.5mn in 2013....

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Oil & Gas

Singapore Oil & Gas

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BMI View:   Singapore will remain a key oil hub and will likely emerge as the region's gas trade hub over our 10 -year forecast period given aggressive investments into new facilities.   LNG will also overtake pipeline gas imports from Indonesia and Malaysia as Singapore's dominant source of gas. While it will remain a significant refining country, it faces growing competition from emerging markets for the regional oil products market.

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Headline Forecasts (Singapore 2012-2018)
  2012 2013...

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Petrochemicals

Singapore Petrochemicals

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BMI View: Singapore is ideally placed to capitalise on the expansion in demand in Asia over the long term. Segments such as aromatics and synthetic rubber, in which Singapore is intensifying investment, are likely to be key growth areas. However, the market could become more challenging as China works to improve the polyester supply chain, while demand growth remains slower in historical terms.

Petrochemicals have grown strongly over the past two years amid capacity growth, with output in 2013 rising by around 3.5% while overall chemicals output rose 0.5%. Petrochemicals production grew as ExxonMobil's second petrochemicals complex at Jurong Island , completed in 2012, ramped up to full capacity with 1mn tonnes per annum (tpa) of ethylene, 650,000tpa of polyethylene (PE), 450,000tpa of polypropylene (PP) and 300,000tpa of speciality elastomers, as well as an aromatics extraction unit and an oxo...

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Pharmaceuticals & Healthcare

Singapore Pharmaceuticals & Healthcare

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BMI View:   Driven by a rapidly ageing population and growing government health expenditure, Singapore's pharmaceutical sales will continue its steady growth over the next decade. This growth is only constrained by its small population. The country's high levels of education, strong patent protection and good infrastructure also makes it a highly competitive location for international pharmaceutical companies to establish research and development and manufacturing facilities as the region integrates closer with the ASEAN Economic Community.

Headline Expenditure Projections

  • Pharmaceuticals : SGD990mn (USD790mn) in 2013 to SGD1.04bn (USD830mn) in 2014; +5.5% in local currency...

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Power

Singapore Power

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BMI View:   While other thermal sources - mainly oil - play a role, mo st of Singapore's electricity is generated from natural ga s. From this perspective it should be noted that the country plan to fuel additional capacity with LNG.     Similarly, Singapore is one of the leader in renewable energy in the region. Yet f eedstock constraints weigh on the overall development of renewable...

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Real Estate

Singapore Real Estate

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BMI View: The Singapore an commercial real estate market is experiencing a slowdown in growth as the market adapts to a set of changing market conditions, including a higher interest rate environment and ongoing structural changes in the country's economy. That said, the market offers some of the strongest fundamentals of any real estate sector in the Asia Pacific region, a fact attested to by its continued ability to attract high volumes of foreign direct investment (FDI).

Demand remains strong in retail real estate, and although we do see some potential in the short term for declines in office rental rates, in the longer term the sub-sector will remain supported by strong demand from local and international businesses alike. Likewise, we see long-term...

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Retail

Singapore Retail

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BMI View:   The Singapore economy will continue to face headwinds owing to both domestic (particularly the ongoing economic restructuring) and external issues, including the slowdown in the Chinese economy. Nevertheless, the retail sector will continue to grow over the next few years on the back of a low unemployment rate, rising disposable income and a strong tourism industry. Singapore's online retail market is also expected to grow faster than other countries', according to an independent report. In terms of bricks and mortar retail sales, we expect areas such as he alth, education, and recreation and culture to attract increasing amounts of household spending, with co mmunications and personal care and insurance also forecast to grow steadily. However, we expect the highest proportion of the household budget to be spent on...

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Shipping

Singapore Shipping

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BMI View: Our outlook for the port of Singapore for 201 4 is that it will not overtake the port of Shanghai for the crown of the world's largest container port. We now see such a scenario as unlikely to fall out, and we believe that Shanghai will increase its lead over Singapore, not only this year but over our medium-term forecast period to 201 8 .

Nevertheless, growth in Singapore will remain positive, buoyed by a return to growth (albeit tentative and uneven) in Europe, and the ongoing recovery in the US.

Headline Industry Data

  • Port of Singapore's gross tonnage will grow by 7.2% in 2014 and will expand an average 5.4% over our medium-term forecast period to 2018.

    ...

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Telecommunications

Singapore Telecommunications

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BMI View : Singapore's telecommunications industry remains one of the best performers in Asia, exceeding regional average in areas such as mobile penetration rate and blended average revenue per user (ARPU). However, owing to a largely saturated domestic market, the sector's data ARPU and five-year compounded subscription growth rate have come under pressure. That said, continued plans to roll out new products and services, such as the impending launch of the Rich Communication Services (RCS) application by StarHub should help create new revenue streams for the industry.

Key Data:

  • We forecast Singapore's mobile sector will grow by only 1.2% annually between 2013 and 2018, owing to the high penetration and a shift in operators' strategies.

  • The fixed-line market has started to...

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Tourism

Singapore Tourism

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BMI's Singapore tourism report examines a range of key indicators in this flourishing Asia Pacific market, including the expected increases in both inbound and outbound travel, hotel industry developments and the wider investment environment. With strong regional and international travel connections and a rising global profile as a holiday destination in its own right, Singapore is emerging as a major tourism market in the competitive Asia Pacific region.

Singapore has long been established as a key air and sea travel hub, providing a range of connections both regionally and internationally. Changi International Airport is one of the busiest airports in the world, serving more than 100 international airlines with routes to around 70 countries worldwide, and a range of investments mean the airport is well placed to keep up with the expected increases in demand. We are forecasting robust growth in arrivals to Singapore,...

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Water

Singapore Water

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BMI View:   Although w e maintain our overall positive outlook on the Singaporean water industry, as i nvestment continues to flow into the sector, with a range of projects recently introduced, both by the Public Utilities Board ( PUB ) and under Public-Private Partnerships (PPPS , we do reiterate concerns about the country's overreliance on Malaysian water and rainwater - as the recent drought and threats of water shortages show, this puts it in a vulnerable position.

The government has made water availability, water technologies and environmental conservation the key areas of focus over the past few years, and this...

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