Why German consumer businesses should look at Singapore for business expansion
The Association of South East Asian Nations (ASEAN) is an intergovernmental organisation, which was set up to promote cultural, economic and political developments between southeast Asian countries and now represents one of the fastest growing regions worldwide. Thus, it offers a fertile ground for many economic sectors to expand including the retail industry.
Several economical key figures like the growth of GDP, increase of personal income, urbanisation as well as the expansion of the middle-class are important factors for a potential retail market.
The general GDP growth in the region stimulates the overall retail consumption and has helped Singapore to develop into a retail hub for ASEAN. Singapore’s GDP per capita is the highest in the region and therefore, makes it a prime market for luxury retail, such as high-end electronics, jewellery and watches as well as premium lifestyle products.
According to IMF (International Monetary Fund), the GDP per capita is expected to increase by 5.4% per annum. This growth in combination with the low unemployment rates as well as the general increase of salaries within the region enhances consumption in the economy and strengthens the retail sector.
Urbanisation within the region is an important factor for the growth of the consumer market and the demand within the retail sector. While Singapore is already a fully urbanised economy, will the positive development within the rest of the ASEAN region have a positive impact on the consumption and the retail demand?
The sustainability of retail depends on the expansion of the middle class. The expansion of the middle class has been obvious within the ASEAN region and ANZ Bank estimates that the consumption will increase from 62% in 2010 to 75% of the Gross Domestic Product (GDP) by 2025.
Retail industry is a key sector within Singapore’s economy and the operating income within this market is equivalent to 1.4% of the country’s GDP.
Sectors such as lifestyle and homeware, automotive, jewellery and watches, fashion and apparel, pawnbroking and education, are independent of the distribution channels but at the same time, are demand drivers within the Singaporean retail.
Why Singapore for this type of business?
Singapore – City of consumer convenience
One of the main differences between the retail sector in Germany and Singapore is the accessibility. Unlike in Germany, there are more relaxed regulations regarding the opening hours of shops. Beside the fact that shops and shopping malls are open 7 days a week, the closing hours in the evening are also more consumer friendly, with opening hours until 11 p.m. in some cases. In addition to that, there are 24/7 convenience stores, that allow the Singapore society to satisfy their needs 24 hours a day.
Geographical location and potential consumer market
Singapore is part of the founding members of ASEAN. It is the most developed country within the region and became the natural leader because of its advanced levels of development, technology, education as well as its global networks.
Thanks to its geographical location within the heart of Asia, Singapore is the best placed gateway to Southeast Asia, with a current population of 660 million people, and to East Asia, with a population of 1.6 billion people.
East Asia is also home to one of the largest economies worldwide, China - the nation of buyers. Almost 88% of the East Asian population (1,4 billion) does live here and the connection between the Singapore retail market and China has always been very strong.
German business would have access to a very strong consumer market with a total of 2.26 billion people and therefore almost 30% of the world’s population.
ASEAN as manufacturing site
A business based in Singapore will have better access to some of the best manufacturing and sourcing jurisdictions like Vietnam, Thailand and Malaysia.
Vietnam is one of the fastest growing economies in the region. When it comes to manufacturing, Vietnam has focused on more labour-intensive industries such as food processing, agribusiness, clothing and shoes. The government has the intention to push towards more sophisticated sectors like IT and technology and support this through incentives and the easing of policies and regulations.
Thailand is the second largest economy in Southeast Asia and offers not only a developed manufacturing market but also a strong domestic consumer market. The main sectors currently are electronic appliances, jewellery, automobiles and petrochemical. The Thai government is also trying to shift the industry to more valuable sectors like Information and Communication Technologies (ICT), high-end electronics and eco-friendly automobiles.
Malaysia is a manufacturing hub within the region and is counted as one of the most mature and transparent markets within ASEAN region. Their main manufacturing sectors are machinery, ICT, electrical and electronics as well as petroleum product.
China’s Belt and Road Initiative (BRI): ASEAN and Singapore’s Role
The initiative was announced in 2013 and is a development strategy of the Chinese government to strengthen China’s connectivity with the rest of the world and to enhance global supply chains. This will be enabled by investing in strategic infrastructure projects abroad, including the development of economic ties along the old Silk Road to Europe as well as the establishment of maritime links in and around Asia and Africa.
The volume of bilateral trade between ASEAN and China was USD 514.8 billion in 2017. The plan is to double their trade value to USD 1 trillion by the end of 2020 and the BRI will be a key factor to achieve this target.
The ASEAN region will be placed perfectly within the centre of the global value chain and Singapore will have a significant role within this environment.
One of the results of the formation of the ASEAN Economic Community was, that several Southeast Asian economies were brought together and formed a single market and production base. The Belt and Road Initiative will allow further integration by developing physical infrastructure and a robust trade regime.
BRI will create new opportunities for foreign companies that are interested in expanding to Asia. Singapore will be the ideal place for those who are keen to participate in BRI projects regarding infrastructure, trade, professional service, e-commerce, consumer goods, technology and other internationalising sectors.
The digital consumer – Singapore’s support for e-commerce and e-selling
Singapore’s government is supporting and developing the e-commerce sector with various initiatives and grants, in preparation to become a global e-commerce hub.
The revenue in the Singapore e-commerce market in 2018 totalled US$4,089 million (S$5,546 million). The growth rate in this sector is expected to have an annual increase (CAGR 2019-2023) of 14.7% which will result in a total market volume of US$8,639 million (S$11,717 million) by 2023. The Electronics and Media sector has been the largest sector in 2018 and generated US$1,065 million revenue.
This market is strongly influenced by factors like new and innovative digital technologies, overseas market opportunities and the expansion of distribution logistics. According to the 2020 vision of the Retail Industry Transformation Map (ITM) Singapore is going to have a dynamic and booming retail industry with a mix of local brand owners with an international presence and highly productive omni-channel retailers.
One of Singapore’s initiatives for supporting e-commerce is cooperation between the Economic Development Board (EDB), the Infocomm Media Development Authority (IMDA) and the industry to define and implement common IT standards to improve the seamless B2B documents exchange among companies.
There are five main issues concerning the spread of e-commerce in Singapore, namely the development of an internationally connected infrastructure, establishing Singapore as an e-commerce hub, strengthening its strategic usage by businesses, fostering its usage by the public and unifying cross border e-commerce laws and policies.
What you need to consider when choosing an outsourcing partner in Asia?
Southeast Asia is not only a new and high-potential market for your consumer business it is also different when it comes to its business culture. Therefore, it is important to have a strong partner that is experienced in this diverse business culture and may provide you with a wide range of services for your future business success.
Hawksford has a track record for providing high quality corporate services in key growth markets across Asia. Our role is to take on the burden of regulatory, financial and tax compliance, and corporate governance so you can focus on managing your business interests.
We understand that our clients look for flexible and exceptional client servicing. Our dedicated on-the-ground teams across Asia are always up-to-date on local developments so that we can help you meet your contractual obligations and deadlines. We blend experience and expertise with enthusiasm and entrepreneurialism, ensuring our clients have confidence in our capability and trust in our team.
From our office in Singapore we provide the following services:
- Business Establishment
We facilitate businesses worldwide to tap into the Asia markets providing company formation and ensuring that statutory and regulatory compliance is met. We have expertise in providing risk, corporate governance and ongoing administration services as well as various advisory services to help you establish and expand your business in Asia.
- Tax & Accounting
We provide ongoing business support with services and expertise in tax compliance, bookkeeping and preparation of year-end financial statements, payroll, establishing leave and claims management and social contributions schemes, corporate tax return preparation and filing as well as personal tax filing.
- Immigration Advisory & Applications
We help entrepreneurs, business owners and foreign firms navigate Asia’s immigration regulation with various visa applications and renewals as well as permanent residence under various schemes including, citizenship, permanent residence, mployment pass, dependent pass, entrepreneur pass and other work passes.
There are several aspects that should be kept in mind and taken into consideration when choosing your partner for outsourcing your services to Asia.
- Language barriers
With many different languages within the ASEAN region, it is a big advantage to incorporate your company in Singapore, as the official business language is English. Besides that, Hawksford also has several German-speaking employees who understand the German business culture, tax and legal framework, based in Singapore, Hong Kong and China to offer assistance in German.
One of the most important aspects when moving a company to a foreign country is the relocation and immigration of staff. Therefore, it is essential to work with an experienced service provider that can proof a successful track record. Hawksford engages a first-class immigration team with former MOM (Ministry of Manpower) officers, who knows and understand the requirements of the Singaporean government.
- Recruitment and temporary staff
A very important service for your young business will be the recruitment of employees, as a company is just as good as its staff. We are either happy to help you to find the right person for the job or we can offer the possibility to engage our temporary staff. This may help to bridge the early stage of your business operations in Asia and helps you to get started properly. Hawksford can provide you e.g. with a Temporary CFO. That means, that we act as a Temporary CFO for your business providing all the capabilities of an accounting department at a fraction of the cost of an in-house solution. Some of the key benefits are a better understanding of company financials that gives you les surprises and more control, improved decision making-capabilities, high-quality budget preparation and monitoring, tax saving strategies and many more.
- Data Privacy and Data Protection
Data privacy and data protection are import factors that must be taken into consideration when setting up a business. Due to different laws and regulations in foreign countries, you must be very careful to fulfil the legal requirements. We work together with a professional partner to advice you on your data processing procedures to ensure you are compliant to Singapore’s Personal Data Protection Act.
- Concierge Service
We understand our duty to provide an all-in-one solution for our clients. That’s why we expand our service line and partners’ network constantly.
Beside the relocation and immigration for your staff, we also assist with the relocation and immigration of your whole family. We take care of all the visa and work pass applications for partners and children.
Another very import factor for families, that needs to be considered is the education of the children. That is why we are happy to offer you assistance and resources in finding the right school that suits yours and your children's needs and requirements.
A good and trustworthy partner for legal advice is obligatory when doing business. We work closely with different lawyers, who are also well-versed in German, with different specialisations to ensure that you have a a qualified partner when it comes to legal advice.
Hawksford understands the needs of today’s entrepreneurs and business people who want flexibility in a fast-paced world and need administration services at their fingertips. We can make available our network of preferred business centres or co-working spaces, that are highly professional, fully-equipped, offer ready-to-use office spaces and are available on flexible terms and for rent on an immediate basis, whilst if the office requirements are of a more traditional nature we will work together with our network of real estate agencies.
Finally, when it comes to relocating professionals and their families, healthcare is a primary focus. We partner with several insurance brokers to help you find the right solution for the expatriate’s requirements.