Doing Business in Singapore
Market Overview
- Foreign investments, combined with investments through government-linked corporations, underpin Singapore's open, heavily trade-dependent economy. In 2010, the Singapore economy rebounded with an exceptional performance, expanding by 14.5% to become the second fastest growing economy in the world. GDP is expected to moderate in 2011 with the Singapore Government forecasting a more sustainable growth rate of 4-6%. Inflation grew 2.8% in 2010 and is projected to rise to 3.0-4.0% in 2011. Analysts expect the Singapore currency to strengthen as the Singapore Government uses monetary policy to fight inflation.
- In 2010, Singapore was the United States’ 10th largest export market (up from 11th place in 2009) and remained the 13th largest trading partner. The city state is a major entrepot and was the second busiest container port in the world in 2010. The top supplier of imported goods to Singapore was Malaysia, followed by the United States, China, Japan, Taiwan, South Korea, Indonesia, Saudi Arabia, Thailand, and India respectively. "The Global Enabling Trade Report 2010" by the World Economic Forum ranked Singapore first for having the most open economy for international trade and investment.
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Market Challenges
- Singapore is generally a free port; more than 99% of all imports enter Singapore duty-free. For social and/or environmental reasons, it levies high excise taxes on distilled spirits and wine, tobacco products, motor vehicles, and gasoline. The main challenge for American companies is strong competition from both foreign and local suppliers. Despite its liberal trading regime, foreign companies face barriers in certain service sectors such as telecommunications, media, financial and professional services, and energy. Details can be found in the USTR Report on Foreign Trade Barriers that is available on-line at http://www.ustr.gov/sites/default/files/uploads/reports/2010/NTE/2010_NTE_Singapore_final.pdf
- In March 2010, the Media Development Authority (MDA) introduced new measures that will require pay TV companies to cross carry content subject to exclusive carriage provisions. A pay TV company with an exclusive contract for a channel would be required to share that content with other pay TV companies at their request. Content providers consider the measures an unnecessary interference in a competitive market that would deny content holders the ability to negotiate freely in the marketplace, and interferes with their ability to manage and protect their intellectual property. MDA plans to implement the measures in mid-2011.
- The U.S. Commercial Service has received multiple complaints from U.S. merchants reporting fraudulent credit card transactions committed by companies/individuals purporting to be in Singapore. Investigation of the fraudulent transactions has revealed that the shipments are actually being sent to freight forwarders in Singapore and diverted to unknown consignees in neighboring countries. Exporters should be wary of orders paid by credit card and requiring immediate shipment. More information can be found at http://www.buyusa.gov/singapore/en/warning_credit_card_fraud.html
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Market Opportunities
- Singapore is a sophisticated and modern economy that offers excellent opportunities for U.S. firms interested in penetrating the Asian market. The World Bank's "Doing Business 2010" report ranked Singapore as the easiest country in which to do business. Singapore’s market appeal is its free port status, straightforward, English-speaking, U.S. style of doing business, strong intellectual property protection with virtually no corruption. The country is a major trading hub, importing and exporting all kinds of products from consumer goods to high technology and industrial goods for re-export to third countries. Best prospects for U.S. companies include: electronics, oil and gas equipment, aircraft and parts, pollution control equipment, computer hardware and software, telecommunications equipment, laboratory and scientific instruments, medical devices, university education services and franchises.
- The Singapore government and private industry are expected to invest in several major projects including:
− construction of US$300 million motor sports hub to be ready of end 2011;
− construction of US$47 million new air cargo hub at Singapore Changi Airport to be completed by first half of 2012;
− construction of a second desalination plant to be ready by 2013;
− construction of US$1 billion LNG terminal that will start operations in mid 2013;
− construction of a US$530 million underground oil storage facility;
− construction of a public hospital with an allocated budget of over US$700 million scheduled to be ready by 2014;
− construction of a private sector 350-bed hospital costing between US$207 and US$345 million to be built by 2012 while another private healthcare group will spend between $61.5 million and US$77 million to expand their flagship hospital scheduled for completion by 2012;
− Singapore’s second largest telecom services provider together with regional telcos will jointly build and operate a US$430 million submarine cable connecting East Asia’s major business hubs;
− Construction of new Mass Rapid Transit (MRT) rail lines costing over US$30 billion that will double Singapore’s MRT network from 138km today to 278km in 2020.
− Singapore government investments of US$5 billion by 2013 to foster research and high-end production in industries such as precision engineering and life sciences.
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Market Entry Strategy
- Using agents or distributors is a common and effective way to serve the Singapore market and, from here, other countries in Southeast Asia. Singapore firms are aggressive when it comes to representing new products and typically respond enthusiastically to new opportunities. Because of the relatively small size of the Singapore market, potential partners often ask to cover regional territories. It is important for U.S. firms to visit their representatives, maintain a good relationship with them and respond quickly to inquiries. Prospective exporters to Singapore should be aware that competition is high and that buyers expect good after-sales service. Most American companies that use the U.S. Commercial Service (CS) Singapore matchmaking and promotion services in Singapore find several interested agents or distributors. When business warrants, many companies have found it useful and sometimes necessary to set up offices in Singapore. Singapore is home to over 1,500 American firms, most of which serve the regional market.
