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How Singapore Became An International Logistics Hub

Singapore’s rapid rise as a logistics powerhouse can be attributed to its strategic location at the crossroads of global trade, excellent regional and international connectivity, and ease of doing business. It is a truly remarkable story. From a tiny nation devoid of natural resources and facing economic crises to the Southeast Asian powerhouse it is today – it’s an incredible journey that continues at an impressive growth rate.

Singapore’s rise to become Asia’s logistics powerhouse isn’t by chance. This success results from a well-planned strategy to develop its connectivity, infrastructure, business environment, and the skilled talent pool needed for today’s digital economy.

As the leader of one of Asia’s fastest-growing economies, Singapore is more than a match for China, India, and Indonesia. Moreover, since achieving independence in 1965, Singapore has achieved remarkable success as a trading hub, profiting from its excellent location at the heart of Southeast Asia, one of the most sought-after regions in the world for international trade and economic growth.

Singapore Boasts an Excellent Port System.

Singapore’s excellent port system is a major contributing factor to its success. Singapore Port Authority (PSA) has a reputation for being one of the most efficient in the world. As a result, it holds the world record for the most significant number of containerized cargo shipments handled by a single port operator. It has an annual capacity of 50 million TEU (twenty-foot equivalent units) and can hold 12,000 TEU vessels.

With the second-highest port container throughput globally and ranks 4th in the world in freight tonnage handled, it is no wonder why multinational corporations have made the small city-state their regional headquarters.

The key to Singapore’s success has been its ability to leverage its strategic location on shipping routes between Europe and Japan and China by investing heavily in an excellent port system that can handle more than 100 million shipping containers annually.

The port has also leveraged new technology such as automated container cranes, automated stacking systems, and radio frequency identification tags to track individual containers. In addition, given the city-state’s relatively small landmass (about 270 square miles), Singapore has had to build upwards rather than outwards, with several massive skyscrapers dedicated to logistics operations. This has allowed companies to save space by storing inventory offsite.

Singapore has also invested significantly in developing human capital. To maintain its competitive advantage, Singapore’s workforce must be skilled at high value-added tasks such as maintaining sophisticated port machinery, supply chain management, and other specialised logistics services.

Singapore's Strategic Location Facilitates Trade.

Singapore’s strategic location facilitates trade and enables companies to reach out to other regional markets. In addition, it has one of the world’s busiest container ports and is a central transshipment hub for cargo moving around Southeast Asia.

In addition to its large port, Singapore also has a robust airfreight sector. The country’s Changi Airport is the seventh busiest air cargo gateway globally and second-busiest in Asia, with over 2 million tons of goods moved through it in 2016 alone.

This geographic advantage allows temperature-controlled transport operations in Singapore to offer attractive pricing for shipments that pass through the country to other countries in the region.

Singapore is a Highly Connected Country.

Singapore is a highly connected country. It is centrally located in the heart of Southeast Asia, with a well-developed infrastructure and a stable political climate that makes it an ideal hub for businesses. The rise of food e-commerce logistics and digital commerce platforms has allowed companies to develop closer relationships with customers, bringing them ever closer to their consumers. As the economy grows and evolves, businesses need to keep pace with these changes.

Singapore has a Competitive Cost Advantage.

Singapore is one of the most expensive cities, but this doesn’t tell the whole story. Singapore has a fiercely competitive labour market, meaning that employers must offer higher salaries to attract talent. However, this has not affected Singapore’s competitiveness as a logistics hub because of its superior infrastructure and efficiency.

Singapore’s port, Changi Airport, and business-friendly regulations are world-class — and it benefits from free trade agreements with many countries. Moreover, subsidies like PIC (Productivity and Innovation Credit) help businesses invest in productivity improvements that help lower costs further. As a result, overall logistics costs in Singapore are relatively low compared to other regional hubs like Kuala Lumpur or Bangkok.

Singapore Continues to Innovate Infrastructures and Processes.

Singapore has heavily invested in infrastructure to support its position as a logistics hub. The government’s Plan for Modernisation and Integration of Infrastructure (PMII) is a S$20 billion initiative that aims to reduce transport time and increase connectivity between different modes of transport. Some examples include:

The Tuas Port is Singapore’s next-generation port that will open in 2021 to 2040. It will have four berths with a total capacity of 65 million TEUs (20-foot equivalent units), making it one of the largest ports in the world, more than double the current capacity of the existing port at Pasir Panjang Terminal. In addition, the Tuas Mega Port will be fully automated with zero manual intervention at all stages.

The first phase of Changi Airport’s Terminal 5 (T5) will be operational by 2030, handling 50 million passengers each year, while T4 will be expanded to handle 30 million passengers annually. In addition, the planned Seletar Airport passenger terminal building will also be able to take 5 million passengers per year upon completion in 2027.

The future of Singapore as a logistics hub is not assured, but it would be an understatement to say that its rise has been remarkable. If history is any indication, Singapore will continue its upward trajectory. While logistics development in Singapore has always been an advantage to merchants’ and customers’ needs, this advantage will continue to be felt now that it has become so deeply interconnected with other countries globally. This can only mean good things for Singapore, Asia, and the world.

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