Singapore – The Lion of Asia (Part I/II)

Editor’s Note: In April 2020, Singapore instituted a “circuit-breaker” to reduce the contagion of a global pandemic wreaking havoc on humanity’s health and livelihood. While our magnificent city-state stares down this scourge, the following is an attempt to provide insight while the world endures global quarantines in this century’s ultimate victory for humankind.

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According to Encyclopedia Britannica, Singapore started life as a nondescript swampy island named Tumasik (modern-day Temasek) off the southern tip of today’s peninsular Malaysia. Chanced upon by Indian empires, Chinese traders, Javanese rulers, the British East India Company more than 200 years ago, and the Dutch, it was nevertheless occupied initially by local inhabitants and pirates. Its geographic position along the strategic waterway known as the Straits of Malacca and nestled between Malaysia to its North and West, and Indonesia to its South, West, and East, and both narrow entry to the Indian Ocean means Singapore retains access to the major shipping conduit between East Asia and all of India, Africa, and Europe.

Fast forward to the 20th century, unlike other major cities such as Tokyo and later Hong Kong, Singapore emerged with its independence, not as the de-facto business capital of Asia. Rather, it was through hard work and determination that it rose to prominence following British colonial rule. Today, Singapore has reoriented itself to fast-becoming the de-facto business capital of Asia due to a variety of endemic and exogenous factors

Singapore serves as a gateway for Emerging Asia including India.

Singapore – The Lion of Asia

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Singapore has many endemic qualities that make it a force to embrace including a predominantly English-speaking, peace-loving population that has first-world socio-economic strength. Singapore‘s strength as an investment opportunity lies both in its high savings rate as well as its gateway to Emerging Asia.

Singapore is a spectacular place based on its strength, history, culture, economy, geography, and people.

Yet no simple article could do Singapore justice with one stroke and broadly describe the economic opportunity inherent to Private Equity and other investors.

Part I & Part II

Therefore, this discussion is also broken into two parts.

Join us as we venture through Singapore‘s economic profile in this volume!

Singapore – Population

Singapore, unlike most countries with a relatively large abundance of land, is physically situated on an island and constrained by the oceans and circumstance. While the island nation can minimally increase its land size, it is understandably not able to support the same burgeoning population sizes as much larger nations (or cities) in Asia, Africa, Europe, Oceania, and the Americas.

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As a result, Singapore is strategic in expanding its population. During the past several years, its population has grown primarily due to immigration and significant increases in life expectancy, partially offset by declines in the birth rate. In fact, as Singapore has adjusted to the new reality of wealth and economic development, its birth rate has been low similar to Europe and Japan, at 1.14 per family.

A bright spot in Singapore is the access to medical care which has led to an increase of 3 years of additional life expectancy between 2007 and 2018 for citizens. Few other nations have accomplished that feat in such a short period of time.

English Intimacy

As a vestige of British colonial rule first and subsequently the farsightedness of Singapore‘s government, English is considered to be an important and necessary language for all inhabitants of Singapore coupled with a native language (called a ‘mother tongue’). As a result, virtually the entire population speaks English in addition to a substantial majority as bilingual speakers of oftentimes Mandarin Chinese, Bahasa (the language of Indonesia and Malaysia), or Tamil (the language of one of the southern provinces in India). For Western business interests that primarily operate on the lingua franca of English, this presents Singapore as an easy place to do business within Asia.

Singapore – Gross Domestic Product

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Singapore has shown significant productive strength in the face of global crises such as the Financial Crisis of 2008 caused by Wall Street, even continuing to grow in both 2008 and 2009. Growth in the face of major macroeconomic upheaval was likely due to the nation’s ability to react quickly to external crises and develop strategic policies that support the economy.

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Over the past twelve years between 2007 immediately preceding the Financial Crisis, until 2018, Singapore has roughly doubled GDP by growing at an astonishing annual rate of +6.6%.

Understated in recent economic statistics was Singapore‘s past affliction from the Asian Financial Crisis (“AFC”) in 1997 which originated in Thailand. Like many nations in Asia, Singapore has strengthened its economy significantly following the AFC.

GDP / Capita

Likewise to overall GDP growth, GDP per Capita, which represents productivity on an individual basis, has seen major growth as well.

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GDP per Capita has grown on average +4.6% per year between 2007 and 2018, consistent with the growing economy and partially offset by a slightly higher population.

In 2007, the average GDP per Capita was $39,000 in US Dollars, and while very good for modern-day Asia, still lagged measurably behind America, Europe, and Japan. In 2018, Singapore‘s GDP per Capita almost doubled to $65,000 rivaling, and in some cases surpassing, wealthy nations.

Singapore – Stock Market Capitalization

Stock Market Capitalization shows the value of traded shares and is a proxy for investment liquidity. When measured against GDP, it can show the ability to monetize investments.

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The metric of ‘Singapore‘s Stock Capitalization to GDP’ has shown strong liquidity available to investors. At well over 100% for the past several years (much like India), it rivals major developed economies such as America and surpasses that of Japan.

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One factor not clearly shown in the data is Singapore‘s prominence as the de-facto business capital of Southeast Asia. Many local and regional companies find compelling reasons (legal, monetary, financial, etc.) to monetize their investments in Singapore. and even restructure themselves as Singapore companies. As a result, the value of Singapore‘s stock market capitalization will include quite a few multinational companies listed in Singapore (which factors into the numerator). But since Singapore’s GDP does not always include these multinational and regional companies’ productivity (particularly if not restructured as Singapore entities), thus skewing the results (as their economic productivity is excluded from the denominator).

Few nations are able to attract external companies to their national exchanges. The notable leaders are America, the United Kingdom, and Hong Kong, with a limited appetite also including Australia.

Singapore is among these excellent few in a demonstrable leadership position.

Singapore – Fixed Capital Formation

Fixed capital formation demonstrates the amount of capital invested in an economy.

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Singapore has seen significant capital invested from 2007 to 2018 growing annually at +6.5%, doubling from $44 billion to $88 billion in US Dollars, during the time period.

Singapore, as a de-facto business capital of Southeast Asia, also sees a lot of fixed capital formation not only going directly into Singapore but also going via Singapore into the surrounding region.

Singapore – GDP / Fixed Capital Investment

Singapore has a high productive value from fixed capital formation, at 4.1x for 2018’s ‘GDP / Fixed Capital’ metric.

GDP / Fixed Capital investment represents the productive value of each invested currency unit. Singapore at a 4-handle rivals that of other Emerging Asian nations, and Southeast Asian partners, such as Vietnam and Thailand. Likewise, as before, some of the investment into Singapore is also structured into further investments into these Southeast Asian partners.

Singapore – Gross Savings

‘Gross Savings’ represents all incomes minus consumption expenses. It represents the monetary income that the nation’s citizens, in aggregate, have decided to save (for potential future investment), as opposed to immediate consumption.

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Singapore‘s annual Gross Savings per Capita shows how much citizens save on average. Average Annual Gross Savings per Capita has increased by +3.8% per year between 2007 and 2018. Today, Singaporeans stockpile almost $30,000 in US Dollars as annual savings and potentially for future investment. This Annual Savings represents approximately 46% of GDP / Capita and demonstrates the resilience of Singaporeans and the wealth that the nation has generated.

Few wealthy nations can match Singapore on the savings rate; this demonstrates the strength of this particular nation.

Conclusion to Singapore Part I – The Lion

Singapore has developed itself from a swampy island with limited natural resources into a wealthy nation increasingly at the center of Asian business, commerce, and trade. Whether analyzed on metrics of:

  • wealth,
  • population,
  • savings, or
  • investment,

the country has developed itself into a first-world rich nation within Asia. Perhaps remarkable is that similar to Emerging Asia, Singapore has strengthened its financial position.

Perhaps even more remarkable is that Singapore rivals the world’s wealthiest on many economic factors.

Volume XVI: Singapore (Part II/II)

Volume XVI-Part II discusses Singapore and its strategic opportunity with respect to Emerging Asia, particularly for Private Equity & Venture Capital.

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Facts and figures sourced from the World Bank’s World Development Indicators resource.

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Note: the above reflects compiled work and neither represents the views nor perspective of any entity. In addition, all views are subject to change based on the changing economic landscape and additional inputs. Finally, this does not represent any solicitation to act in any market. Should you wish to take an action in any arranged or un-arranged market, consult your adviser.

This article was originally published on:

  1. https://www.linkedin.com/pulse/volume-xv-singapore-lion-asia-part-iii-anupum-khaitan

2.https://medium.com/@pandemics_capitalism/singapore-the-lion-of-asia-part-i-ii-9d6b56b6648c

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Anupum

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Anupum joined Symphony Asia in 2013 and is based in Singapore. He is involved in all aspects of Symphony’s investments including origination, deal structuring and execution, board governance, and divestments. Symphony invests in private equity and venture capital, with sector exposure to: logistics, hospitals, hospitality, and education- primarily across Southeast Asia and India. Anupum serves as Non-Executive Director on the Boards of Desaru Peace Hldgs and Chanintr Living Ltd, and as an Observer to the Board at Indo Trans Logistics Corp. Indo Trans Logistics is Vietnam’s largest privately-held integrated logistics company and serves the Indochina region. Desaru Peace is developing a beachfront resort and private villas on the south-eastern coast of peninsular Malaysia that will be branded and managed by One & Only. Chanintr Living is a luxury hospitality company which primarily sells several high-end US and European furniture brands and is based in Thailand. Anupum also serves on the Boards of the Singapore Venture Capital & Private Equity Association (SVCA), Yale Club of Singapore, and the Oxford & Cambridge Society of Singapore.