Three factors that have made Singapore a global logistics hub
When it gained independence in 1965, Singapore was a low-income country with limited natural resources that lacked basic infrastructure, investment and jobs.
A few decades later, the picture couldn’t be more different. Singapore has become one of Asia’s wealthiest nations, due in large part to its emergence as the highest-performing logistics hub in the region (see World Bank Logistics Performance Index).
The numbers speak for themselves. Today, the small city-state is home to the world’s largest transshipment container port, linked to over 600 ports worldwide. Singapore Changi airport is voted the best internationally, and is served by about 6,800 weekly flights to 330 cities. Finally, the island nation’s trade value amounts to 3.5 times its GDP.
Singapore’s achievements did not happen by chance. They result from a combination of forward-looking public policy and extensive private sector engagement. This experience could provide some lessons to any developing country seeking to improve its logistics network. Let us look at three key factors of success:
Compared to other major transport hubs, Singapore’s local market is relatively small. Developing high-frequency connections to hundreds of destinations across the globe was not a given, and is the outcome of a proactive expansion policy.
As part of these efforts, the Civil Aviation Authority of Singapore has concluded Air Services Agreements (ASAs) with other 130 States and Territories to increase the number of flight connections. Likewise, the port has worked closely with shipping lines to build one of the world’s densest maritime transport networks. Singapore has an extensive network of Free Trade Agreements with more than 30 trading partners to enhance its access to major markets. This encourages companies across the logistics chain to operate from Singapore, as they know they can count on frequent and reliable connections to reach global markets quickly. In fact, high-frequency connections sometimes allow goods to reach their destination faster via Singapore than they would through direct shipments!
Innovative Infrastructure and Processes
Over time, Singapore’s logistics sector has built world-class infrastructure and processes. The country is always thinking ahead, and several initiatives build for the future in every part of the logistics chain.
Upon completion of the Next Generation Port 2030, the Singapore port will be able to process the equivalent of 65 million standard shipping containers, making it the largest integrated facility in the world. It is exploring driverless automated guided vehicles, leveraging smart sensors to detect shipping anomalies such as piracy, and data analytics to predict traffic congestion spots.
In the aviation sector, there are plans to double the capacity of the airport. Air cargo is encouraged to use Singapore via specialized infrastructure and processes. There is the Airport Logistics Park for time-sensitive cargo, the cold-chain centers for perishables, and regional express facilities to accommodate burgeoning e-commerce activity. Staff are also provided with regular training to ensure they can keep up with the new technologies and have the right skills to process different cargo types. For example, one of the airport’s cold-chain centers was the first in the world to be awarded the IATA CEIV Pharma Certification for handling pharmaceutical cargo.
To facilitate trade, Singapore launched the world’s first National Single Window in 1989, which digitized and streamlined trade permit approval processes. With over 35 government agencies on this platform, this required the entire government to change its mindset from “controlling trade” to “facilitating trade”. Today, permits could be approved electronically using one e-document, within minutes. However, each shipment can involve many more parties and documents in the whole supply chain, from manufacturers to logistics companies, trade finance companies, and consumers. An enhanced National Single Window is currently in the works, in order to also integrate as many Business-to-Business transactions as possible into one single digital platform.
Encouraging Private Sector Participation
The government recognizes the importance of including the private sector in policy decisions. Over time, port and airport operators were corporatized, to ensure they remain responsive to the needs of the industry. Since corporatization, cargo volumes for port operator PSA have multiplied, and the company has invested in some 40 terminals around the world. Increasing private sector competition has encouraged industry players to be commercially nimble, and helped make Singapore’s logistics sector more efficient.
The government has also attracted investors to Singapore by ensuring a conducive investment climate and developing the right incentives for private sector participation. Today, 20 of the world’s top 25 logistics companies manage their global or regional operations from Singapore. Having so many heavy hitters here motivates local companies to emulate international standards.
Extensive consultation with the private sector is also encouraged before public investment is approved, to ensure that the infrastructure built will be meeting realistic business needs. Furthermore, the government encourages the private sector to invest in complementary infrastructure. For example, private sector operators such as SATS and FedEx have invested in air cargo facilities like the cold chain centers and regional express cargo facilities, with the government helping to build the business case for such investments. Challenges are resolved together, so that the investment would make commercial sense to the private sector. Strong private sector partnership ensures that initiatives are commercially sustainable for the long-term, and do not become a burden on public funds.
These three factors–connectivity, infrastructure and processes, and private sector participation–create an integrated ecosystem that allows logistics to thrive. Singapore’s success shows that, with a forward-thinking vision and much determination, a developing country with few resources can become a leading logistics hub. We hope the Singapore story will also inspire other emerging economies!