The answer is because we do not manufacture most of the exports. We are what most people call “entrepot” trading. You ship the goods to Singapore and re-export it from there. Other types of export could include shipping most of the assembled parts into Singapore for the final assembly and packaging stage, which is then exported through Singapore. A lot of MNCs use Singapore as trading “hub” if they want to get their goods from say, the Eastern part of the world to the West. The hub and spoke model for trading is made possible because we are well connected to most parts of the world from a geography perspective. One must remember even in this day and age, it is sometimes still economically more feasible to ship something than to fly something.

To capitalise on this geographical advantage, there are also a few tax incentives in place for international conglomerates who use Singapore for this hub and spoke type of trading activities. The tax rates could be as low as 5%.