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Asia – Africa Trade Relations and why Singapore is an Economic Benchmark

Asia – Africa trade engagement remains a major economic force in the modern world amid US-China tiff.

Noteworthy, Asia is home to a number of the most powerful and advanced markets, including China – the world’s second-largest economy after the United States.

Investors from across the world relish establishing businesses in Asian countries such as China, Singapore, Malaysia, India, and Hong Kong.

For years now, cargo shipments along the Middle Corridor shot up, albeit from a very low base.

Middle Corridor, the Trans-Caspian International Transport Route (TITR), is a multilateral institutional development linking the containerized rail freight transport networks of the People’s Republic of China (PRC) and the European Union through the economies of Central Asia, the Caucasus, Turkey, and Eastern Europe.

Furthermore, volumes of goods along the corridor grew from roughly 350,000 tons to 530,000 tons between 2020 and 2021. But what boosted the corridor’s use was when Russia invaded Ukraine in 2022 and the West’s subsequent economic sanctions on Moscow.

The Central Asian countries remained neutral in the conflict, leveraging opportunities in having an alternative to the Russian-dominated Northern Corridor, not to mention better infrastructure to support greater intra-regional trade.

What’s more, cargo shipments along the Middle Corridor jumped to 3.2 million tons in 2022. Some now anticipate that the Middle Corridor’s capacity will skyrocket to 10 million tons, with Turkey’s completion of the Marmaray railway under the Bosporus Strait. This will enable rail cargo from Central Asia to move directly into the heart of Europe, with European shipping companies taking notice.

In the Asian states, however, Singapore stands out. It has proved a convincing convergence of the East and West.

Why Singapore?

According to the Asian Development Bank, Singapore comprises a mix of Asian, European, and American influences making it attractive and friendly to the international business community.

The World Bank in its Human Capital Index ranked Singapore first in the world in achieving human capital (knowledge, skills, and health). It was also ranked second in the world for economic freedom by the Heritage Foundation.

The country is a former British colony with its legal and financial structures bearing a close resemblance to the US and the UK.

Singapore’s economic freedom score is 84.4, making its economy the freest in the 2022 Index. It is first among 39 countries in the Asia–Pacific region, and its overall score is above the regional and world averages.

“Trade freedom is strong, and well-secured property rights promote entrepreneurship and innovation effectively. The overall rule of law is undergirded by a high degree of transparency and government accountability says the Heritage Foundation in its 2022 index of economic freedom report.

Major international banks, multinational organizations, and financial institutions all over the world have established their branches in Singapore, often making the country their regional hub. Singapore is called the “Lion City” because of its strong currency and infrastructure which in turn makes it the best place to set up an overseas corporation.

Ease of Doing Business in Singapore

According to World Bank’s Doing Business 2019 report, Singapore remained the world’s best place to do business in the World Bank’s annual survey of 189 economies around the world.

Compared to many business hubs, it is easier and quicker to register a company in Singapore as the process takes only one day.

Foreign Income Exemption

Another benefit is that companies in Singapore can repatriate dividends from their foreign subsidiaries to Singapore free of Singapore tax.

Those whose foreign subsidiaries engage in substantive economic activities but are unable to meet the qualifying conditions for this tax exemption may apply for a specific exemption.

Attractive Corporate Tax Rates

Besides its vast network of free trade and tax treaties, Singapore also offers one of the most attractive corporate tax structures in the world.

For the first three years, the taxable income of non-resident corporations is free from taxes as is a “zero tax” jurisdiction.

Singapore’s business-friendly legal and tax structure, reliable infrastructure, and dependable regulatory processes provide a positive commercial environment. The government tightened restrictions on foreign labor in 2020.

In 2021, the International Monetary Fund (IMF), estimated that government subsidies, grants, subventions, and capital injections to businesses and other organizations consume about 17 percent of the Gross Domestic Product (GDP) which currently stands at $397 billion.

Singapore at the centre of Asia – Africa trade

Singapore is a key player in actualizing Asia – Africa trade and a role model to many African economies.

To facilitate growing business interest, Enterprise Singapore officially launched its first Overseas Centre in Johannesburg, South Africa in January 2013, its first office in Sub-Saharan Africa.

In addition, it opened a second office was in Accra, Ghana in July 2013, and a third in Nairobi, Kenya in June 2018.

On June 12, 2018, the country signed a Double Tax Avoidance Agreement (DTA) with Kenya to provide relief from double taxation in the situation where income is subject to tax for both countries.

The provisions of the DTA apply to persons who are residents of one or both of the Contracting States.

Besides DTA, the two also signed the Bilateral Investment Treaty (BIT) to promote greater investment flows between Singapore and Kenya by protecting the interests of Singaporean and Kenyan investors.

In this context, Singapore investors are granted protection such as non-discriminatory treatment compared with other foreign investments, protection from illegal seizure of property, and the freedom to transfer capital and returns in and out of the country.