Singapore Attracts SGD 22.5B Worth of Investments in 2022, Outpaces Prior year

The Economic Development Board (EDB) reported that Singapore attracted a record high of S$22.5 billion in fixed asset investments last year, which is expected to create more than 17,000 jobs in the coming years (Feb 9).

Singapore received S$11.8 billion in investments in 2021, down from S$17.2 billion committed in 2020.

Last year's performance was driven by the electronics sector, which accounted for roughly two-thirds of total fixed asset investment commitments.

"This outperformance relative to our goals was due to the exceptional influx of large manufacturing projects to meet the surge in global semiconductor demand, particularly during the first half of 2022," said EDB managing director Jacqueline Poh at a media briefing.

A company's incremental capital investment in facilities, equipment, and machinery is referred to as fixed asset investments. Last year's fixed asset investments far exceeded the EDB's medium to long-term target of S$8 billion to S$10 billion per year.

"We are now at the end of this semiconductor supercycle and we are seeing chip demand soften. So I would like to reiterate we don't expect this level of investments to persist in the near term," she said.

The EDB also warned of a difficult business outlook in the coming months.

When the new projects are fully implemented in the coming years, they will create 17,113 new jobs and contribute S$20.6 billion to the Singapore economy each year.

The majority of new jobs will be in hub and business services, with advanced manufacturing accounting for 27% and innovation accounting for the remaining 12%.

In addition, Singapore secured S$6.2 billion in total business expenditure last year, up from S$5.2 billion in 2021. Both figures fall within the EDB's target range of $5 billion to $7 billion.

Around half of total business expenditure, which refers to a company's incremental annual operating expenditure in Singapore, was spent on headquarters and professional services.

Infocommunications and media made the next biggest commitments in total business expenditure, representing more than 20 per cent of last year’s figures.

"More global businesses clearly use Singapore as a hub to build resilience in their operations, as well as to access regional and global markets," Ms Poh said.

Looking ahead, the EDB stated that it does not expect the same level of investment this year due to global macroeconomic uncertainties, increased competition for investments, and a sharp slowdown in semiconductor demand.

Higher interest rates, according to EDB chairman Beh Swan Gin, will dampen demand and raise the cost of capital.

"The two together will make many companies be more tentative about moving ahead with sizeable investments," he said.

Additionally, many developed economies have introduced "very aggressive policies".

"The US, for instance, introduced the Chips Act, they introduced the Inflation Reduction Act. And these are very attractive incentives that will compete for the same sorts of investments that Singapore would be interested in," he said.

Singapore's own commitment to decarbonisation implies that it must be more selective in attracting energy-intensive investments.

Having said that, the EDB sees opportunities in high-growth, high-value-added sectors like agri-food and advanced manufacturing for electronics, healthcare, and aerospace.

Singapore is also improving its capabilities as a supply chain control tower, according to the agency.

According to Dr. Beh, Singapore still has many advantages, such as stability and trust in the country.

"How we conducted ourselves through COVID-19 has only reinforced this reputation for stability," he said.

Singapore's economic fundamentals and reputation for being reliable and neutral helped to capture "quality investments from diverse sources", EDB said.

Last year, the United States accounted for 50.6 percent of all investment commitments, with Europe accounting for 21.2 percent.

The location of Singapore in Southeast Asia is also a "huge advantage," according to Dr. Beh. "We are in the midst of a developing area."

According to EDB, the agency has seen an increase in interest from businesses in China and other northeast Asian economies looking to expand into South and Southeast Asia.