SINGAPORE – Singapore is the most attractive country in the region for foreign investments, but it falls behind some advanced economies in terms of environmentally friendly and socially inclusive growth, according to a new index.

The Milken Institute’s Global Opportunity Index ranked Singapore first among its Asian neighbours in 2023, and 14th among the 130 countries studied globally – up four places from 2022. 

Hong Kong at 15th and Japan at one spot below were the other two Asian economies in the top 20 globally. 

Denmark came in first globally, with Sweden dropping to second, followed by Finland in third. The United States moved up one spot to fourth. 

Dr Maggie Switek, the Milken Institute’s senior director and the report’s lead author, told The Straits Times that Singapore’s climb up the league table was due to relatively strong economic growth.

Its high position was also driven mainly by its strength in “business perception”, which measures the ease of doing business and the regulatory framework facilitating contract enforcement and dispute resolution.

It also fared well in the “institutional framework” category, which assesses the extent to which a country’s institutions safeguard the rights of investors and the safety of their assets. The country led the way in the subcategories of investor rights and transparency.

“It means that overall investment conditions remain strong, which is also reflected in Singapore’s capital inflows. The strength of investor rights coupled with its relatively low business constraints mean that investors should feel comfortable operating in Singapore,” Dr Switek said.

Foreign direct investment (FDI) inflows to Singapore reached a record high of US$141.2 billion (S$189 billion) in 2022, up from US$131.1 billion in 2021, noted a United Nations report.

This made the country the third-largest FDI recipient worldwide after the US and China. Singapore also accounted for almost two-thirds of flows to Asean countries. 

“However, the country could do better on its indicators related to environmentally friendly and socially inclusive growth, which are reflected in its relatively low ranking in ‘future environment for growth’,” said Dr Switek.

Singapore scored below the average of advanced economies in the “economic fundamentals” category, which captured macroeconomic performance, workforce talent and efforts to create a resilient and sustainable economy and society.

This was largely due to its relatively weak performance in the “future environment for growth” sub-category, which includes measures such as air pollution and the proportion of women in government. 

Dr Switek said Singapore also ranked below some of its regional competitors such as Japan and South Korea in this area. 

The Milken index is based on 100 indicators classified into five categories – business perception; economic fundamentals; financial services; institutional framework; and international standards and policy. 

The variables within the five categories measure all angles of a country’s investment potential, including economic openness and performance, business constraints and workforce talent and diversity. Data sources include the World Bank, the International Monetary Fund and the United Nations.

Malaysia offered the best investment conditions among emerging and developing Asian economies. It ranked 27th globally, ahead of Thailand at 37th and 39th-placed China, which lost some appeal to investors due to rising geopolitical tensions with the US. 

The report noted a continued shift in investor sentiment in favour of Latin American countries as capital inflows to China turned negative in 2022 for the first time since 2015.

Since then, Latin America has experienced a surge in investment inflows, with Mexico and Brazil jointly accounting for more than 60 per cent of foreign direct investment in the region. 

However, it noted a strong momentum behind China’s innovation economy that could rival the US and other advanced economies. The mainland surpassed the US in the annual number of scientific publications for the first time in 2019, and since then the gap has widened, it said.