SINGAPORE – Singapore is exploring options to manage significant investments into critical entities in the city state, said Trade and Industry Minister Gan Kim Yong on Monday.

The move comes as countries around the world, including the United States and Germany, seek to limit foreign investments to protect national assets and critical industries.

“We will need to strengthen Singapore’s position as a trusted hub for businesses to invest with confidence. And to do that, we will need to make sure that investments into critical entities do not affect Singapore’s economic resilience and our national security interest,” Mr Gan said.

He was speaking to the media on the sidelines of the MTI Economic Dialogue 2023 held at Nanyang Technological University’s alumni house at one-north.

OCBC Bank chief economist Selena Ling said the move is a recognition that the global investment, economic and geopolitical landscape has evolved significantly.

In the US, President Joe Biden has ordered a ban on US tech investments in China in sensitive areas such as computer chips and artificial intelligence (AI).

Britain is considering whether to follow the US by tightening rules on tech investments in China, while the European Commission said it is reviewing its approach to outward foreign investment.

In the latest development, Germany is reported to be looking at tightening restrictions on foreign direct investments in the country’s critical sectors like semiconductors and AI.

Many countries protect critical industries and/or infrastructure, Ms Ling said, but she noted that “at the end of the day, policymakers have to strike a careful balance between medium-term interests to protect national security and economic resilience while continuing to attract foreign investments in the short term”.

She noted that foreign investments create jobs and sustain economic growth and therefore remain critical for a small and open economy like Singapore.

Ms Ling said the key lies in what qualifies as a critical entity and how the limits will be implemented.

“I doubt if they will risk the golden goose in that sense, so this will probably be very calibrated,” she added.

Mr Gan also said in his opening address that Singapore must resist the pressure to turn inwards and become more protectionist.

He added that even as the global trading system becomes more fractured, Singapore can strengthen its role as a gateway to South-east Asia, which is projected to grow faster than the global economy over the next five years.

But to be able to do so, Mr Gan said Singapore must strengthen economic connectivity to access new markets and customers.

“Singapore has always earned its living by remaining open, expanding its economic space, and staying connected to the world,” he added.

Responding to a question from the audience on the US-China tensions over chips, Mr Gan said Singapore’s strategy is to continue to be friends with both sides and continue to do business with China and the US.

“We want to find opportunities to work together so that we will continue to preserve the space for Singapore enterprises to be able to operate between US and China,” he added.

Singapore currently has relatively little restrictions on foreign investments except in a few industries.

In the broadcasting and domestic media space, there are legislative restrictions on foreign direct investments.

Telecommunications, and financial services and banking, are managed through licensing regimes where investors have to seek specific approvals from the relevant regulatory bodies.

Mr Gan said the Government will engage industries and work with them to minimise the impact on businesses and investments.

Mr Ang Yuit, vice-president of the Association of Small and Medium Enterprises (Asme), is hoping the Government will take an ecosystem-wide approach to the measures.

“It is a good recognition that there are entities, and if we generalise, industries and jobs that are critical to the nation,” he said. 

He added that small and medium-sized enterprises (SMEs) form the backbone of Singapore’s economy and likely are part of the supply chain – as suppliers of services or parts – to these “critical entities”.

A vibrant SME economy will form the foundation of the critical entities, industries and jobs, so when the Government manages investments in critical entities, it also needs to consider the whole ecosystem, Mr Ang said.