The title of this article is the headline of a June 7, 2006 piece in The Straits Times, a Singaporean newspaper. According to a recent survey by the American Chamber of Commerce in Singapore, senior U.S. executives within the six-nation Asean bloc are reported to be “positively exuberant” about operating within southeast Asia, they are “optimistic about their growth and profit prospects this year and in 2007,” and three-quarters of them indicate that their “company’s business will grow in the next two years. No one expects a reduction in business.”

The Advantages

Despite concerns about “corruption and dissatisfaction with local customs, taxation and revenue authorities” (except in Singapore), the executives point to the strength of economic recovery within the region, the increasing importance of southeast Asia’s 500 million residents to their company’s global operations, improvements in the region’s infrastructure, and limited opportunities in other regions.

Standing out among the Asean countries is Singapore, which AmCham members rate as having an excellent infrastructure, stable government and reliable local government institutions. Other advantages of Singapore also are noteworthy when companies are considering launching or expanding operations in Asia. For example:

  • Singapore is already a favored international location for developing a regional base within the Asian marketplace. Currently, 1,500 US companies have regional offices there, and some 7,000 multinational companies have investments in the country. The Economist Intelligence Unit ranks Singapore as No. 4 in the world in terms of its business-friendly environment (the U.S. and China are ranked No. 8 and No. 50, respectively).

This reflects the use of the British commercial code, a strong legal system, the predominance of the English language, and an educated workforce.

  • The Singaporean economy is expected to expand by 5-7 percent in 2006, and it closely mirrors interest rate fluctuations in the U.S. economy. The job market reached a 10-year high in March, with some 45,000 jobs added since January (28,000 of which are in services).
  • The country also has a diverse industrial base. While 25 percent of the country’s GDP is derived from traditional manufacturing activities (e.g., electronics, petroleum and chemical products, aircraft repair and maintenance, shipbuilding, and pharmaceutical products), recent government efforts are designed to expand the services sectors, with special emphasis on tourism and integrated-resort developments, bio-medical research, financial services, and international education and health care.
  • Singapore has the world’s largest container port and is the world’s busiest transshipment hub. In addition, the Changi Airport, with its new Logistics Park and free trade zone, the country’s own e-commerce platform and forwarding company (Cargo Community Network), and the shipping company APL as the No. 6 ranked container company carrying U.S. export trade together make Singapore a major transportation and logistics hub in East Asia.

Of note, Motorola announced in June its new $60 million facility in Singapore that will manage its global supply-chain activities, worth some $10 billion annually.

This strategic function of Singapore will likely intensify as trade between eastern North America and Asian markets depends increasingly upon the new post-Panamax container ships and the Suez Canal.

  • The term often used to describe Singapore is “Asia light,” which means that for the 17,000 Americans residing in Singapore, the Asian nation has comparable Western amenities and living conditions for expatriates and their families (e.g., a safe and clean environment, educational facilities, and a modern communication infrastructure). Also noteworthy is the smoking ban in air-conditioned restaurants which has been in effect since 1989, and, effective July 1, smoking also is prohibited at outdoors eateries.
  • Singapore also has formal trade ties to the 500 million people residing in the Asean bloc, and it is the only Asian nation to have a bilateral trade agreement with the U.S. The 2004 U.S.-Singapore FTA affords special trade, tax, e-commerce, and intellectual property privileges to American companies, with special attention on liberalizing trade and investments in service sectors.

For example, beginning in mid-2007, U.S. Qualifying Full Banks will be permitted to negotiate access to the ATM network of local banks, and, by 2008, these banks will be able to operate as branch banks.

Weigh Decisions Carefully

While the above factors portray a very favorable business environment in Singapore, several other concerns may need to be considered by companies when deciding upon the best location for overseas operations.

For example, the Economist Intelligence Unit ranks Singapore as the ninth most expensive city in the world for expatriate business people, after Tokyo, London and Hong Kong, and more expensive than New York. In addition, property consultancy CB Richard Ellis (CBRE) reports that, compared to 173 world cities, Singapore is the 43rd most expensive place to rent office space (averaging $42 per square foot, which is still much lower than the $130.05 in Tokyo and $101.67 in Hong Kong). Nevertheless, Singapore continues to be a very strategic location, and, according to the latest report by Merrill Lynch, Singapore and the Asia-Pacific region as a whole have just surpassed Europe as the second most popular destination for investments by wealthy individuals.

Moreover, with much of the world’s foreign direct investment flowing into China, Singapore’s direct investment linkages with China, its cultural and language connections, and its expertise in a variety of service-related sectors (e.g., education, construction, engineering consultancy, business services, transport, and logistics) are expected to enable the island nation to benefit directly from market opening and business-investment expansion in China.

This article appeared in Impact Analysis, September-October 2006.

James McConnell
About The Author James McConnell
Jim McConnell is a Professor Emeritus at SUNY at Buffalo.

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