Singapore an engine for two-way trade

Singapore’s historical role as a centre for regional trade has been vital in shaping the country, transforming it into a first-world economy in just a few decades.

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The country’s geographical location at the intersection of the East and West has also contributed to its success as a trading hub for the world.

While global affairs, geopolitics and the economic environment continue to rapidly shift and change, what remains a constant is the integral role Singapore plays as an important engine for trade and capital flows not just around the region but for the world at large.

"Singapore has become a choice location for Australian businesses." - David Green, ANZ

As the countries of the Association of South-east Asian Nations (ASEAN) continue to develop and their economies grow, Singapore’s role in the region actually becomes even more significant – well exemplified by its role as chair country for  2018.

Australia – ASEAN connectivity; the significance of Singapore’s role

As ASEAN matures and the appreciation of the sheer size of its potential grows, the bloc is expected to play a more relevant role in global affairs and in driving the liberalisation of trade.

Singapore has said that as ASEAN Chair, it will focus on the themes of 'resilience' and 'innovation'. This includes promoting and upholding the regional order to better deal with emerging security challenges, tapping new ways to manage and mine digital technologies and pushing ahead with regional economic integration, among other issues.

Australia was the inaugural dialogue partner of ASEAN when there were then five member states in 1974. Australia’s growth and resources are complementary with ASEAN – this is increasingly recognised in Australian foreign policy. 

In 2010 the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) was put in place to enhance and facilitate the trade relationship. Since then ties between Australia and many of ASEAN individual member states have deepened and the value of the Australia-ASEAN relationship is being increasingly recognised.

However, as ANZ Research has highlighted, ASEAN’s share of total trade with Australia has largely been stagnant in recent years – and while existing trade in goods and services is strong, much of it is concentrated in four out of the ten ASEAN countries.

Protectionism is an emerging challenge globally but our Head of Asia Research Khoon Goh argues Singapore can help ensure ASEAN continues to move forward in terms of regional integration by bridging the digital divide in the region as a way to boost trade and investment flows. It’s a valuable insight.

  • A logical entry point to and base for ASEAN and hub for regional headquarters

Ranked third in the World Economic Forum’s 2017-2018 Global Competitive Index (after Switzerland and the US) and named world’s second most easy place to do business by the World Bank in 2017, Singapore has become a choice location for Australian businesses to run sophisticated treasury activities.

Singapore features in the ASEAN expansion strategies of many businesses for the same number of factors that has led to its high ratings.

  • Cosmopolitan city, highly skilled workforce

Singapore has a well-educated and highly-skilled workforce. Over 75 per cent of the population have tertiary-level qualification.

While it is a multilingual population, English is the country’s first language. Earlier in March Singapore topped rankings for the most-liveable city for Asian expats in a survey by ECA International for its low crime rates, easy access to good-quality schools and healthcare and low levels of pollution than other regional locations.

  • Trusted and stable, business-friendly environment

Singapore’s strong credit rating and efficient and reliable legal system has attracted many businesses to set up offices here. It is also offers social and political stability that is unrivalled anywhere in Asia.

  • Excellent infrastructure and connectivity

Within just a seven-hour flight radius of half the world’s population, with easy access to major Asian business centres like Jakarta, Mumbai, New Delhi, Beijing, Shanghai, Hong Kong, Tokyo and Seoul. Singapore is also a recognised leader in air and sea connectivity and is the highest-performing logistics hub in the region.

  • Global & regional hub

With more than 200 banks operating in Singapore, it has become a key global centre for commodity trade and where many European and US corporates choose to base their regional headquarters.

Advice for doing business in ASEAN

• The scale of the opportunity is not fully appreciated – businesses should dare to look abroad

• Choose the right markets as an entry point

• Consider Singapore as a gateway

- Singapore has the most-attractive centre for ASEAN business because of its superior infrastructure and services, its status as a logistics and shipping hub and the ease of arranging financing, making payments and dealing with currency risk.

- The Singaporean legal system is based on English law, which is understood by many parties doing business here. Business is conducted in English. It’s a well-trodden path for multinationals with Asian centres.

• Take the time to understand each market

- Businesses need to do their homework and understand the challenges of being in a particular market.

- Leaders need to be there on a regular basis, whether establishing a physical presence or making regular visits to build relationships and understanding.

- Find a local partner that’s right for your business needs; some counter-parties are quite small. If you’re a small Australian business, it’s easier to do business with someone else who’s small because you’re equals. If you’re dealing with large counter-parties, it’s hard to reach their scale expectations for compatibility.

• Think big

- China’s Belt and Road initiative is driving more regional connectivity throughout Asia, particularly in ASEAN. The result is ASEAN will be far more connected to adjacent markets and will be far bigger than itself.

- If a market of 650 million isn’t big enough for you, think of it being even bigger.

- Trade agreements such as the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), Regional Comprehensive Economic Partnership (RCEP) which is under negotiation and the freshly signed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), with the ASEAN Economic Community through its AEC Blueprint 2025 will further regional economic integration.

To read more insights into the ASEAN Special Summit click here.

David Green is CEO Singapore and Head of South East Asia, India & Middle East at ANZ.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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