US firms venturing into ASEAN through Singapore

Representing 40% of global GDP and 28% of global goods and services trade, the framework aims to offer tangible benefits that fuel economic activity and investment, promote sustainable and inclusive economic growth, and benefit workers and consumers across the region.

ASEAN (the Association of Southeast Asian Nations), which has the fifth largest economy in the world, is increasingly becoming a market of interest for US firms looking to reduce their reliance on China for both growth and manufacturing. With the highest GDP per capita in ASEAN, Singapore has emerged as the preferred destination to diversify such growth.

As Arun Venkataraman, assistant secretary of commerce for global markets and Director General of the US and Foreign Commercial Service, previously stated: “Many US companies view Singapore as a lucrative market for doing business and an important trade gateway into Southeast Asia.”

Here are six reasons why…

1. Singapore: catalysing ASEAN investments

ASEAN has a network of plurilateral and bilateral free trade agreements (FTAs) in the Indo-Pacific region. More than US$24.9 billion¹ has been invested into the US by ASEAN member states, with Singapore being the largest investor contributing more than US$21 billion in investments.

In addition, Singapore is the only ASEAN member state to conclude FTAs with both the United States and the European Union.

The partnership between Singapore and US has strengthened through the US-Singapore Partnership for Growth and Innovation (PGI)². The partnership aims to facilitate inclusive economic growth through these four pillars: digital economy; energy and environmental technologies; advanced manufacturing, and healthcare.

Venkataraman states that the US has ample opportunity to make history with Singapore and other Southeast Asian nations through the PGI and IPEF. Not only will it drive trade and investments, but it also benefits workers and consumers on both sides of the Pacific.

There are more than 4,500 US companies present in Singapore, supporting 215,000 American jobs³, while there are more than 30,000 US citizens living in Singapore and nearly 4,000 Singaporeans studying in the US⁴.

2. Ease of doing business in Singapore

It takes just a few days for business registration and incorporation in Singapore with a single shareholder, director, company secretary and local address. 

Companies in Singapore enjoy one of the most competitive tax structures globally. Double taxation agreements with more than 80 countries mean that the city state is an attractive entry point for US companies looking to enter Asia.

A competitive corporate tax rate of 17% can be reduced even further with tax exemptions and tax holidays for target growth industries. For instance, the pioneer tax incentive allows corporations manufacturing approved products with high technological content to apply for 5-15 years for each qualifying project.

Furthermore, the development and expansion incentive benefits corporations engaged in new high-value-added projects looking to expand to a tax relief subject to a maximum of 40 years. A particular focus is also placed on incentivising research and development investments in specific sectors, ranging from healthcare to advanced manufacturing.

3. Singapore is a regional powerhouse

Singapore is a strategic gateway within the ASEAN region. Despite its relatively small size, the country plays a vital role in regional affairs and is a close strategic partner of the US in Southeast Asia.

The two countries have advanced military ties, with Singapore hosting nearly 1,000 service members, civilians and dependants related to the US military.

The island state also hosts the Shangri-La Dialogue, an important Asian security forum attended by regional defence chiefs and the US secretary of defence.

A resilient and safe cyberspace is also key to supporting a digital future. A memorandum of understanding (MOU) was signed by the US Cybersecurity and Infrastructure Security Agency and the Cyber Security Agency of Singapore to enhance cybersecurity cooperation. This MOU will facilitate bilateral information sharing on cyberthreats, and support combined cyber training and exercises.

Further, the Regional Comprehensive Economic Partnership (RCEP), which came into force in January 2022, is a mega trade agreement that will boost trade collaboration and integration within the region.

4. Singapore is a hub for future growth

Singapore’s connections to hundreds of business centres around the world was by proactive design. Extensive free trade agreements with more than 30 trading partners ensure easy access to major markets. Today, 20 of the world’s top 25 logistics companies manage their global or regional operations from Singapore.

The Civil Aviation Authority of Singapore currently has Air Services Agreements with 130 states and territories and there are plans to double the airport’s capacity. The Airport Logistics Park handles time-sensitive cargo, while cold chain centres process perishables and  regional express facilities support e-commerce activity.

Likewise, the port has worked closely with shipping lines to build one of the world’s densest maritime transport networks. The Next Generation Port 2030 plan makes Singapore’s port the largest integrated facility in the world, able to process 65 million standard shipping containers. Smart sensors and data analytics will be able to predict congestion spots and detect shipping anomalies such as piracy.

5. Working in Singapore: tech skillsets for digital dreams

Singapore is already ahead of many countries in terms of tech talent. A well-developed education system and proactive government policies ensure that the local skillsets match industry demand for talent.

Tech-based entrepreneurs are actively encouraged with a range of financial support from early-stage funding to overseas expansion through grants and equity funding. The National University of Singapore Overseas College has a highly successful entrepreneurial education programme with 3,300 alumni members where one in three have started a business.

In the 2021 Global Talent Competitive Index published by INSEAD, Singapore ranks second – behind Switzerland and ahead of the US. This index ranks 134 countries on how they grow, attract, and retain talent.

Given the size of its domestic talent pool, Singapore continues to attract top foreign talent with incentives and schemes. A recently launched Tech.Pass⁵  programme attracts top foreign technology experts who may start or operate a business or be an investor, employee or director in Singapore-based companies. They may also act as a mentor to start-ups or lecture at local universities.

A five-year employment pass option for specific tech occupations also helps ensure job security for top talent looking to bring their families with them.

6. US-Singapore ties strengthened

The US and Singapore have a close and cooperative relationship. This partnership is set to grow further with enhanced bilateral cooperation on supply chain resilience, economic growth, and technology innovation.

In the recent US government statement, several areas of increased cooperation were announced. The US-Singapore Partnership for Growth and Innovation will secure inclusive growth in new areas such as digital economy, energy and environment technology, advanced manufacturing, and health services⁶.

Despite the optimism displayed by both nations, US executives recognise the potential risks in the region. According to Standard Chartered’s ‘Borderless Business: US-ASEAN Corridor’ report, the top three risks are geopolitical uncertainty and trade conflicts, the slow revival of the economy and drop in consumer spending, and the ongoing COVID-19 pandemic or other health crises.

The respondents also agreed that adapting their business model to industry practices and conditions in ASEAN, understanding regional regulations, payment methods and infrastructure, as well as supply chain logistics, are the most significant challenges they anticipate in the next 6-12 months.

At Hawksford, we recognise the importance of support when looking to grow or expand your business into new regions. With access to local knowledge and expertise, we offer customised corporate solutions to help our clients manage the risks and complexities of business expansion.

If you'd like to learn more, get in touch with Hamida Sultan.