Economic Relations [fr]

I. General presentation of the Singaporean economy

A small country, devoid of natural resources and categorized among the four Asian "tigers", Singapore has one of the highest GDP per capita in the world (64 579 USD in 2018 according to the IMF). Singapore took advantage of its strategic location, around the Strait of Malacca, in the heart of Southeast Asia, to develop its commercial activities (2nd largest container port in the world), its industries (21% of GDP in 2019) and its financial sector (5th financial center in the world), and to become a regional hub.

The economic model is based on a strong openness to international trade and foreign investments, with a very attractive business environment. The government’s proactive economic strategy aims to climb up the value chain in industry and services by attracting i) trade (160% of GDP), ii) foreign investment (FDI stock at 410% of GDP) and iii) foreign labor (40% of the working population). Its attractive regulatory and tax framework makes it a prime location for corporate headquarters in the region.

The economy today is mainly based on three sectors: i) financial, insurance and business service activities (29% of GDP in 2019), ii) commerce and logistics activities (24% of GDP), iii) manufacturing industry (21% of GDP), specialized in electronics, biomedical, precision engineering and chemicals - including petrochemicals. Singapore is currently seeking to establish itself as a regional hub in various sectors of the future, notably fintechs, medical technologies and agrifood tech.

Singapore’s growth fell sharply in 2019 (+0.7%, following +3.1% in 2018), and should enter negative territory in 2020 (between –4% and –1% according to government’s forecasts). The slowdown in 2019 is mainly explained by the Sino-American trade tensions, which hindered net exports of goods and services (exports down 2.1%, more than imports, down 1.5%), with in particular, a shrinking manufacturing activity (–1.7% following +7.0% in 2018) and a slowdown in services (+1.1% following +3.4%). In the first quarter of 2020, GDP fell by 2.2% year-on-year (following +0.8% in Q4 2019), especially because pf the impact of public health measures on services (–3.1% in Q1).

The Singaporean government has put in place several economic stimulus packages, and the Monetary Authority of Singapore (MAS) has continued to ease monetary policy. In total, the government has announced nearly SGD 63 billion (USD 45 billion), or 12% of GDP, in measures to support the economy since the outbreak of the epidemic. For its part, the MAS, which steers its policy by the nominal effective exchange rate and not by the interest rate, lowered, at the end of March, the central value of the target interval, and reduced to zero the currency appreciation rate.

Singapore today faces several internal challenges, as well as external risks. The aging of the population leads to the reduction of the active population and weighs on government budget. The Singaporean government is committed to consolidating its budget (announcement of a VAT increase from 7 to 9% before 2025). To respond to the concerns of the population regarding the job market, the government is also reducing the quotas of foreigners in companies’ workforce. It is also seeking to boost productivity by supporting innovation and business transformation. Finally, Singapore’s large dependence on exports of goods (105% of its GDP) makes the country particularly vulnerable to the slowdown in China and the rise in protectionism.

II. France-Singapore bilateral trade

France’s trade with Singapore amounted to EUR 12.1 billion in 2019, a sharp rise from 2018 level (+ 14.7%). This result can be explained by the increase in our exports to the city-state (+ 5.6% yoy), to EUR 8.7 billion, but above all by the substantial increase in our imports (+ 46.9% yoy), to EUR 3.4 billion. Singapore constitutes the second French bilateral trade surplus in 2019, at EUR 5.2 billion (down 11.0%), behind the United Kingdom (EUR 12.4 billion) but ahead of Hong Kong (EUR 5.1 billion).

1. Exports to Singapore up 5.6% in 2019, to EUR 8.7 billion

France’s first partner in Southeast Asia, Singapore ranks 11th among our customers (1.8% of French sales). In 2019, the increase in our sales to Singapore (+5.6%) contrasts with the drop in our exports to the rest of the ASEAN over the same period (−2.6%). However, these data should be interpreted in light of Singapore’s role as a commercial platform. Indeed, both the overall city-state statistics and the information from logisticians indicate that re-exports to Asia account for most of our trade to the city-state.

Aeronautics sales fell 9.3% yoy, but represented 25% of our total exports, at EUR 2.2 billion. They constitute the bulk of our exports of transport equipment, the total of which fell by 8.7% yoy to reach EUR 2.3 billion.

Sales of luxury goods drive exports of manufactured goods, which posted growth of 18.7% yoy (at EUR 3.9 billion). Sales of textiles and leather goods increased by 19.8% (to EUR 1.4 billion, or 17% of our exports) and those of perfumes and cosmetics by 16.2% (to EUR 1.3 billion, or 15% of exports). Among the other major components of this category, exports of pharmaceutical products increased (+31.2%, to EUR 509 million), while those of chemical products decreased (–3.2%, to EUR 356 million).

Our beverage exports – 99% of alcohol and wine – increased by 2.4% to EUR 956 million, or 11% of our total exports. They constitute the bulk of our sales of agrifood products, which increased by 1.9% yoy. (to EUR 1.1 billion). Sales in the food sub-category contracted by 2.3% (to EUR 109 million).

Computer, electronic and optical products account for 10% of our exports. These increased by 6.6%, to EUR 872 million in 2019. Two thirds are components and electronic cards.

2. Imports from Singapore up 46.9%, to EUR 3.4 billion

The city-state is the 32nd France’s supplier in the world (0.6% of purchases), and the 2nd in ASEAN (18% of French purchases in the area), behind Vietnam (30%).

Aeronautical products become our main import category and account for 33% of total imports (compared to 12% in 2019). Our purchases are up sharply (+304%), and amount to EUR 1.1 billion. They are in all likelihood made up of spare parts made in the area (notably Malaysia) and which pass through the city-state.

Our purchases of refined petroleum products represent 24% of our imports. They reached EUR 820 million, an increase of 67.2%, which is explained in particular by higher oil prices in 2019 than in 2018.

Pharmaceutical products account for 16% of our total imports. Our purchases increased slightly, by 2.0%, to EUR 560 million. Imports of basic pharmaceutical products increased by 33.9% to EUR 455 million, while those of pharmaceutical preparations decreased by 49.8% to EUR 105 million.

Our purchases of IT products are down and represent 14% of the total, at EUR 494 million (–17.1%). This decline can be explained in particular by the slowdown in global electronics trade in 2019, in a context of Sino-American trade tensions.

3. France’s trade surplus with Singapore down 11.0%, to EUR 5.2 billion

Our trade surplus with the city-state contracted in 2019, to EUR 5.2 billion (after EUR 5.9 billion in 2018), the increase in imports having been greater than that in exports. The decline puts an end to four years of trade surplus growth (which has more than doubled since 2014), which remains our 2nd global surplus, and which continues to reflect Singapore’s role as a regional trading platform. Our exports to Singapore have also experienced continuous growth since 2014, in a dynamic region whose economic growth has been above 5% on average annually since 2000. After the developments in the Sino-American trade crisis which adversely affected Singapore’s logistics hub activities in 2019, the coronavirus crisis will also impact Singapore’s trade in 2020. One should not therefore expect a significant increase in trade between France and Singapore before 2021.

III. Bilateral investments and French presence in Singapore

1. Singapore attracts the bulk of French investments in Southeast Asia, despite a decline for the third consecutive year in 2018

Singapore concentrates more than two thirds of French investments in Southeast Asia with a FDI stock of EUR 9.0 billion in 2018, down 5.4% compared to 2017, and almost 20% since the record of 2015 (EUR 11.1 billion). French investment in Singapore, however, remains much higher than in other ASEAN countries, for instance in Malaysia (EUR 1.1 billion), Thailand (EUR 762 million) and Vietnam (EUR 671 million). According to the Singaporean Department of Statistics, France is the 22nd investor country in Singapore and the 8th European investor, representing 1.0% of the FDI stock in 2017.

More than 800 subsidiaries of French companies are located in Singapore, the city-state benefiting from its position at the heart of the ASEAN and from one of the best business environments in the world. Singapore has state-of-the-art infrastructure, favorable taxation, a stable legal and political framework. Its geographic location also makes it a natural anchor for businesses, which can then reach out to the region’s markets. Among the French enterprises in Singapore, there are large companies, mid-caps, SMEs, branches and representative offices. The majority of large French groups are represented, like ST Microelectronics (1st French employer in Singapore with around 5000 employees), Thalès–Gemalto (around 2100 employees), CMA-CGM (which bought the Singaporean shipping company NOL in 2016 for EUR 2.2 billion), Dassault Systèmes, BNP Paribas, Essilor or AccorHotels. French companies thus cover all activity sectors with important activity in aeronautics, electronics, finance and insurance and business services. In addition to their commercial activities, some companies rely on Singapore innovation ecosystem to develop R&D centers (Engie, Airbus, Thalès). The city-state also attracts French entrepreneurs, estimated at 400 in 2018, including a “French Tech”-labeled community.

The development of French businesses is accompanied by an increase in the number of French in the city-state. The French population in Singapore, estimated at about 20,000 people, has more than doubled since 2008. Singapore attracts in particular many young people for a first job, an internship or an international voluntary service abroad (Volontariat international en entreprise, VIE). The French population registered in Singapore represents about a quarter of the total French population registered in ASEAN and the 250 VIE nearly 50% of all VIE in the region.

2. Singaporean investments in France are considerable, mainly via financial assets held by its sovereign wealth funds

Due to a structural current account surplus (18% of GDP in 2018), Singapore accumulates large amounts of foreign currencies each year, reinvested in particular by its sovereign wealth funds. Singaporean sovereign wealth funds, GIC and Temasek, are the 6th and 8th largest sovereign wealth funds in the world in terms of assets under management. In particular, they manage the savings of Singaporeans, and are among the main Singaporean investors in France, directly or through the many companies in their portfolio.

To date, GIC could hold between 15 and 18 billion USD of investments in France, mainly via financial assets (shares of CAC 40 companies), sovereign securities and real estate investments. At the end of 2018, GIC acquired, for example, the Ariane office tower in “La Défense” district, for EUR 465 million. It had already bought, via a subsidiary, 25% of the listed property CeGeReal in April 2016 (high-end offices in Paris) for around 120 M EUR. In 2018, the fund also acquired 55% of the shares in AccorInvest, the property company of the AccorHotels group, with a group of investors (including Amundi and Crédit Agricole Assurances) for a total of EUR 4.4 billion. GIC also holds 32% (around EUR 800 million) of the capital of TIGF, Total’s gas distribution subsidiary. The sovereign wealth fund is also a historic investor in treasury bills, and is a member of the strategic committee of Agence France Trésor.

Temasek’s activities in France are mainly composed of its 39% stake in the CapitaLand group, parent company of The Ascott (28 residences under the Citadines brand in France, employing between 600 and 700 people). In 2016, Temasek acquired a 5% stake in the holding company of the French investment fund Tikehau (based in Singapore) (around EUR 60 million), and participated in a new fundraising of EUR 300 million in 2019. In 2018, the fund sold its 10.4% share (around EUR 215 million) in the French company Gaztransport & Technigaz (GTT), acquired in 2014. Temasek also holds shares in the French veterinary group Ceva Santé Animale since 2014.

Singapore’s FDI stock in France thus amounted to EUR 1.6 billion in 2018 (after EUR 1.7 billion in 2017 and 2016). These investments represent around 40 firms and more than 1,500 jobs in France, mainly in the hospitality and real estate sectors (CapitaLand, Millennium Hotels, Frasers Centrepoint), advanced technologies (ST Engineering), chemicals (Wilmar international) and services (International SOS). Several innovative start-ups also established a subsidiary in France (H3 Dynamics, Novade, Upskills, Obike).

-* Business France

Dernière modification : 13/05/2020

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