Singapore-centric capital flows: why is the rest of the world missing out?

Why in the News ?

A notable but worrying trend was observed in Southeast Asia's startup landscape in the first half of 2025. Singapore alone accounted for approximately 92% of total startup funding raised in this region of approximately 700 million people. The fintech sector accounted for 88% of this share, while by January 2026, Singapore was attracting over 96% of the regional monthly venture funding.

Why has Singapore become investors' first choice ?

• Singapore's greatest strength is its reliable institutional framework. A strong legal system, transparent accounting system, and clear regulatory framework provide a sense of security to global investors.
• When investors from New York, London, or Abu Dhabi seek opportunities in Southeast Asia, they often choose to invest through Singapore because the risks here are considered relatively low and the governance system is more reliable.
• Thus, Singapore has become an important gateway for regional capital.

But is this success actually a warning ?

• The importance of any financial center is determined by how much capital flows through it to surrounding markets.
• If capital is limited to Singapore and not to markets like Indonesia, Vietnam, Thailand, or the Philippines, it could hamper the growth of the entire region.
• Indonesia attracted 42% of Southeast Asia's total startup funding in 2021. However, its share declined to just 8% in the first half of 2025. Vietnam's share remained around 6% during the same period.
• This indicates that regional investment activity is becoming increasingly Singapore-centric.

The Risk of 'Empty Houses'

• Singapore's success has been based on its link to the growth of Southeast Asia as a whole. Jakarta's large consumer market, Vietnam's manufacturing capabilities, and the digital economies of other countries in the region make Singapore an effective financial hub.
• But if capital cannot access these markets, it will be difficult for startups to grow. Many enterprises will either remain small, sell prematurely, or cease to exist.
• In such a situation, Singapore could become an expensive financial hub with a weakened economic ecosystem surrounding it.

Why is investor confidence declining?

• The general perception is that global investors are turning to Singapore to avoid risk. However, the real problem is not just risk, but uncertainty about the commercial capability of businesses.
• Southeast Asia has no shortage of talented engineers, innovation, and huge markets. The challenge is that very few companies can prove they can convert their products into sustainable revenue and profitable businesses.
• Investors invest only if they are confident that a company can convert its opportunities into real earnings.

The Crisis of Confidence and Its Impact

• In recent years, some of the region's most high-profile startup scams and false financial claims have damaged investor confidence.
• When the reliability of financial data is questioned, capital naturally moves to markets with greater transparency.
• The growing investment in Singapore is a result of this trust-based trend.

Are more funds or incentive schemes the solution ?

• At the policy level, it is often suggested that more investment funds, incentive schemes, and special programs be launched in other countries. However, simply providing capital will not solve the problem.
• If companies do not have developed business capabilities and sustainable revenue models, additional capital will only exacerbate losses.
• The real solution is to create companies that investors can confidently finance, regardless of their location.

What capabilities does Southeast Asia need to develop ?

• Regional startups need to improve in the following areas:
  • Develop clear and sustainable revenue models.
  • Create products that customers truly need.
  • Adopt strong corporate governance.
  • Ensure transparent financial reporting.
  • Present reliable and verifiable data to investors.
• When companies in cities like Jakarta, Surabaya, Ho Chi Minh City, or Danang demonstrate this capability, capital will automatically flow to them.

The Biggest Challenge for Singapore

• This isn't just a problem for Indonesia, Vietnam, or Thailand. Singapore's long-term prosperity also depends on how quickly other countries in the region develop.
• Every successful Indonesian, Vietnamese, or Thai startup adds more value to Singapore's financial network.
• Therefore, it is in Singapore's interest not only to attract capital but also to foster business capacity building across the region.

Conclusion: Will Singapore remain just a 'door' ?

• If over 90% of Southeast Asia's startup funding remains concentrated in Singapore in the coming years, it will not be a sign of success but rather a sign of declining regional investment potential.
• Singapore has established itself as a gateway to the region over the past several decades. The next challenge now is to ensure that markets and companies exist beyond that door, offering real opportunities for investors.
• Otherwise, Singapore could become the world's richest room, but in a house that is slowly becoming empty.