Singapore and UAE: Complementary hubs for businesses
Both countries provide a gateway to regions that are growing at higher-than-average rates, thanks to the redirection of global trade and capital flows.
Originally published in The Business Times.
A flight departs from Singapore’s Changi Airport every 80 seconds. Within six hours, that plane could reach any country in South-east Asia. Add an extra hour of flight time, and you get access to a population of over four billion people across Asia.
This connectivity is one reason Singapore is a popular spot for companies to situate the headquarters of their Asean operations. Other attractions include highly developed physical infrastructure and sophisticated financial infrastructure. It is easy to do business in Singapore, and companies can tap into a wide range of financing options.
Now that many manufacturers, supply chain operators as well as technology developers are pursuing a “China Plus One” strategy and diversifying their operations across Asean’s member states, Singapore is having its moment in the sun.
In 2023, Singapore recorded a 10 per cent increase in foreign direct investments (FDI), going from SGD195 billion to SGD214 billion.
Meanwhile, roughly 5,900 kilometres away, a similar story is playing out in the United Arab Emirates (UAE). Much like Singapore, the UAE is a connector for the Middle East and Africa regions.
The country is home to the three largest Middle Eastern carriers, and its airports are well positioned as hubs between the West and the East. Saudi Arabia and the UAE, in particular, have become homes for multinational corporations, billionaires and investment institutions looking for investment and business opportunities.
The country’s FDI rose 35 per cent in 2023, to USD30.7 from USD22.7 billion.
Despite the wide expanse of land and sea that separate them, Singapore and the UAE are developing into twin hubs, and important capital corridors, that will be essential to the plans of any company with international ambitions.
Both countries provide a gateway to regions that are growing at higher-than-average rates, thanks to the redirection of global trade and capital flows. Although they are often seen as competing with each other for those flows, they are in fact complementary to any company’s expansion strategy.
Climate capital
One of the biggest economic growth opportunities that has emerged in the last decade is the transition to lower-carbon sources of energy. According to the International Energy Agency, emerging market and developing economies will need about USD2 trillion annually by 2030 to achieve net-zero transition by 2050, with the majority of that funding flowing into the energy industry. The International Monetary Fund projects that the private sector will need to supply about 80 per cent of the required investment.
Both Singapore and the UAE also have much to offer their neighbours when it comes to helping facilitate the energy transition.
In a recent study, the UAE emerged as the second-largest issuer of green bonds in emerging markets, after China. It issued USD8.7 billion worth of green bonds in 2023, equivalent to 1.7 per cent of its GDP and 3 per cent of overall fixed income issuance.
Singapore, for its part, can be said to have set the Asean agenda for sustainable finance.
The country’s Green Finance Industry Taskforce, convened by the Monetary Authority of Singapore, has developed the Singapore-Asia Taxonomy for Sustainable Finance. This taxonomy sets out how financiers can define what activities qualify for green financing, what activities should not qualify for financing at all, and what activities facilitate significant emissions reductions.
Both nations are also playing host to the development of technologies necessary to the decarbonisation of the global energy supply chain. The UAE is best placed when it comes to utilising solar power potential in the world. More than 90 per cent of the country’s land mass has the capability to produce solar energy.
Today, the UAE is among the top 10 countries in the world with the highest installed solar per capita.
In fact, many Middle Eastern countries lie within the so-called sun belt – receiving the necessary direct sunlight to efficiently produce solar energy – and have the potential to become net exporters. They will require new technologies, infrastructure and knowhow to store energy and transmit it, possibly over long distances.
Singapore, which lacks the resources to produce sufficient renewable energy for domestic use, is developing the capabilities to import it from across the Asean region – capabilities that it will subsequently be able to export as demand for renewables increases.
Knowledge transfer
The climate story is just one example of the many opportunities arising for Singapore-based companies to share knowledge with, invest in and work with other countries. Similar possibilities exist in the fields of maritime, logistics, flood management, urban planning and indeed finance.
The UAE, a major financial hub in the Middle East, for instance, has significant potential when it comes to fostering an ecosystem for all-digital banks to the extent that Singapore does. For companies based in Singapore, expansion to the UAE carries the promise of access to a burgeoning market in the Middle East and Africa.
The same is true for companies based in the UAE that are contemplating a footprint in Asean, which is why Standard Chartered has been welcoming more delegations from the UAE of late. Our Singapore-UAE cross-border business registered a double-digit growth in the first half of 2024.
As an international bank with a presence in all 10 Asean markets, and with a history of over 65 years in the UAE, we are well-positioned to develop these hubs and their respective regions. By channelling capital into these trade corridors, we are able to help corporates, institutions and wealth clients alike capitalise on the opportunities for future growth.
As launch points for businesses in Asean, the Middle East and Africa, Singapore and the UAE possess critical mass advantages unique to geographical hubs. This is a rich ecosystem that includes partners and stakeholders in a variety of industries.
Rather than thinking of these two hubs as competitors for investment, it would be wise to think of Singapore and the UAE as complementary to any strategy. For they hold much promise for significant growth for Asean, the Middle East and Africa.
Source: The Business Times © Singapore Press Holdings Limited. Permission required for reproduction.
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