As a continuation of our series on foreign direct investment (FDI), Globig had the privilege of speaking with FDI expert Yi-Hsen Gian, the Regional President Americas at The Singapore Economic Development Board (EDB). EDB is the official agency for economic development in Singapore. Yi-Hsen offered insight into the exciting opportunities available to companies looking to expand into Singapore. This article will be organized as a Q&A summary of our conversation.
Links to previous FDI articles are below:
Foreign Direct Investment For Fast-Growing Startups and SMBs
How To Implement Foreign Direct Investment Strategies Into Your International Expansion Plans
Foreign Direct Investment In Ireland
How does Singapore see and approach FDI?
Singapore has always placed a big importance on its economic future. It’s stance on FDI is in line with that goal. Even before independence, Singapore encouraged an open economy, pursuing FDI with great earnest.
What makes Singapore attractive to foreign businesses?
“Companies enter Singapore to take advantage of the local market,
and as a launch pad into the Asian market.”
Singapore consistently ranks as a top place to do business. Singapore has adopted pro-business policies and practices. Singapore boasts a modern and comprehensive infrastructure and a highly skilled workforce. Today, more companies are realizing that Singapore isn’t just an Asian manufacturing hub, but it is an important market that should not be ignored. Companies enter Singapore to take advantage of the local market, as well as a launch pad into the Asian market.
What kind of companies is Singapore focused on attracting? Size, stage (startup, multinational corporations), industry? Do any types of companies have an advantage or priority over others?
Singapore is looking to build a vibrant and diversified economy. Because of this, the EDB is focused and organized by industry with that goal in mind. Manufacturing is approximately 20% of the economy, which Singapore is looking to sustain. Right now, Singapore is looking for advanced manufacturing (electronics, biomedical science, energy, chemicals, and aerospace) and exportable services (logistics, infocomm technology, and professional services). EDB works with leaders in each industry to inform and attract top companies.
The size of the company doesn’t matter as much, it’s more about the investment the company can make in Singapore and opportunities they can take advantage of. EDB works with large and small companies.
What type of foreign investment is Singapore interested in getting? Companies to relocate (offices or headquarters), research and development, manufacturing, logistics?
The type of investment varies depending on the specific industry. EDB is looking for companies that will create jobs for locals and companies that provide sustainable, long-term investments in Singapore. Many companies use Singapore as a manufacturing hub. For example, semiconductors are manufactured in Singapore for many different companies. Big electronics companies, such as Dell have large supply chain management functions in Singapore. In the tech space, a lot of companies organize themselves as service hubs out of Singapore, with large data centers. In the professional services sector, companies have located their centers of excellence (innovation and research centers) in Singapore. For example, McKinsey Global Institute has a location in Singapore.
What type of incentives does EDB offer? What criteria are decisions based on? Does that criteria differ depending on the the type of incentive a company seeks, e.g., connections, funding?
As an independent nation, Singapore offers a broad spectrum of incentives. Two broad categories include:
Grants or Financial: EDB can help companies with their R&D operations in Singapore, and can help alleviate some of the risks in R&D. A lot of companies get assistance for their training operations in Singapore. Examples of such training are manufacturing, computer graphics, and cybersecurity. EDB can help share the costs of training with these companies.
Tax: Tax incentives include a reduction in corporate tax rate. Singapore’s corporate tax rate is a low 17%. Depending on the scale of a company’s activities in Singapore, this rate can be reduced even more. EDB also offers deductions for specific activities, such as R&D activities.
Incentive decisions are based on a number of factors that will be discussed with the company, but include the industry, the financial investment, the type of investment, and the number of local jobs that will be created.
Do you see FDI shifting to include more incentives for smaller companies?
“FDI Incentives are appropriate for companies that are ready for internationalization…”
FDI Incentives are appropriate for companies that are ready for internationalization, and not just export sales from their home country. Meaning companies that are starting to think of themselves not as just a single location company, but as a global company. Companies are going abroad much faster today than they used to. In the past companies, even Google, waited to go international much longer.
“Companies are compelled to internationalize faster to capture their market.”
So, appropriate incentives really depend more on the stage of the company, especially in the tech sector. Companies are compelled to internationalize faster to capture their market. Many feel the need to expand quickly, maybe before they are ready, for competitive reasons. If not them, someone else will come first. For example, Uber has substantial operations in SG because they have several competitors.
What does EDB offer to startups and SMBs looking to go to Singapore? What incentives are more appropriate for these smaller companies?
Access and connections to the Singapore business community is a huge incentive for smaller and newer companies. The security, stability, and efficiency of the operating environment is attractive to these companies. Other incentives include: English as the operating language and stable laws and enforcement of those laws.
What does the startup community in Singapore look like?
Singapore also has a growing and relatively vibrant startup community. Many startups tend to gravitate toward BLK71, which was an old industrial building that was converted into an incubator and tech hub. There are a lot of interesting young companies here, some of which have made it big. Startups from other countries, particularly Southeast Asia, are coming to Asia to startup and to grow and globalize their companies. Today, there are a lot of tech startups; medtech is promising now.
How does EDB help companies? What services are offered? Who will EDB help? How do people and companies get in touch with EDB?
EDB is the lead agency for economic development in Singapore. The goal is to bring business into Singapore and to make sure Singapore’s industries are varied. EDB has offices worldwide, including offices in the U.S., the Americas, Europe, and different offices throughout Asia. As a ministry within the Singaporean government, EDB has substantial function and does the long-term policy planning for Singapore.
EDB reaches out to companies globally to educate them about Singapore and inform them of the business opportunities available to them in Singapore. Recently, companies started realizing that Asia isn’t just a low-cost production base, but is a market they can no longer ignore. EDB helps to connect companies within the Singapore community, including vendors and suppliers. EDB assists companies with their work and investment in Singapore, and provides a large spectrum of incentives to companies looking to come into Singapore.
Most often, companies reach out to EDB directly to learn more about Singapore and FDI. People can connect with EDB by calling our office, through email (which can be found on our website, and each person has a LinkedIn profile. EDB works with each company directly. Typically the conversation begins with the determination that the company is in a specific industry Singapore is looking for and what specific investment the company is thinking about making in Singapore.
Do you have any advice for companies coming into Singapore from the EU or US?
“Think about a broader Asian strategy, rather than a country-by-country strategy.”
Think about a broader Asian strategy, rather than a country-by-country strategy. A lot of Asian markets are not substantial enough on their own, so companies need to think about the Asian region as a whole. The US is a large market and so is the EU, but companies can still work from a central location there. This is a good strategy for Asia too. Companies can run their Asian operations from one central location, including Singapore. Singapore is often used as a launch pad for many companies. It is the safest route into Asia. Many US and EU companies come into Asia through Singapore.
Today, foreign direct investment is something all companies, not just large companies, should consider. With stiff competition to bring in great companies, governments are looking for and implementing new ways to attract smaller, fast-growing companies. EDB works with companies from around the world of all sizes.
Resources:
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