Singapore – the gateway to Asia and springboard to SEA.
We continue our country reviews by looking at one of the key springboard markets to Asia, Singapore. This article is co-authored by Proof Network partners Karri Knuuttila and Charlie Young from Kytky Advisors.
Sat almost directly on the equator, hot and humid Singapore has sunny weather all year round with the exception of the occasional tropical downpour. It’s a literal melting pot with a truly unique mix of local and global influences stemming from its centuries as a global trading hub.
The 5.8 million residents of this cosmopolitan city-state enjoy a first-world, first-class standard of living. Singapore’s GDP per capita ranking is amongst the highest in the world and is higher than any of the Nordic countries. World-leading healthcare, housing and education are combined with the status of the greenest city in the world. But, it’s the incredible diversity of this small island state that really makes Singapore unique.
A great metaphor for Singapore in general is that in 15 minutes of travel time you can be in the financial center amidst towering skyscrapers, on a sandy beach sipping cocktails, in a local Chinese heritage neighbourhood or in a tropical rainforest smack in the middle of the city.
In contrast to most of Asia, Singapore feels familiar to many western people. Due to the history of British colonial times, the high level of development and strong influence of international business, Singapore often feels like Asia for beginners. It seems like the least demanding place to start business in Asia for people and companies coming from Europe. Add to that the fact that Nordic people enjoy a strong positive reputation in Singapore, and the great groundwork that the Finnish embassy and Finnish companies have done to make doing business easier.
Transport: Strategically located at the southernmost tip of the Malayan peninsula, Singapore has a long history as a trade and transport hub connecting all corners of the world. The Pasir Pajang shipping port is the busiest in the world, and Changi airport is a strategic air travel hub that has been named the best airport in the world year after year.
Trade: Singapore is also connected to the world through a strong network of international trade agreements, including 20 Free Trade Agreements with 31 trading partners. The DNA of Singapore is steeped in trade and the government has made sure that Singapore is open for business with all parts of the world.
Infrastructure: Moving around and doing business within Singapore is easy and seamless with well-developed transport and digital networks. Singapore might have the highest quality transport, digital and societal infrastructure in the whole of Asia. The public transport system in Singapore is a global benchmark in excellence and all other dimensions of infrastructure in Singapore enjoy a similar standard of quality.
Because of its excellent connectivity and strategic location, Singapore is also a great regional springboard for business, particularly to South East Asia, but also to the wider Asia-Pacific region and the world at large.
It is no wonder that well-known global companies are very much present in Singapore with their regional ASEAN, Asian and APAC hubs. There are even some global operations headquartered in Singapore, such as Standard Chartered bank – driven by its focus on emerging markets in Asia, Middle-East and Africa – as well as homegrown global players such as DBS and Singapore Airlines.
Singapore has long fought a battle with Hong Kong about which city is the dominating global Asian city, but Singapore has been winning in recent years. Not only has the Hong Kong situation become very unstable because of the escalating relations between local inhabitants and the mainland China government, it has become nearly impossible for any company to run their China business without being located in mainland China. Meanwhile, for ASEAN and wider APAC region positioning, Hong Kong cannot compete with Singapore.
Significantly, quality of life has been continuously increasing in Singapore versus Hong Kong, and senior management have families craving for a better work-life balance, as well as a healthy, clean and safe environment for their families. It’s easy to see why Singapore has thrived in recent years and why it now has truly unique momentum. When you’re walking around in Singapore, even with it’s relaxed tropical backdrop, you can almost “feel” the opportunity in the air. This city-state is all about business.
The most competitive economy in the world, according to the IMF
The IMF World Competitiveness rankings are compiled using 260 indicators, which include national employment and trade statistics, as well as results from an expert opinion survey.
Number 2 in the world for ease of doing business
The World Bank’s Doing Business survey looks at measures, such as trading across borders, enforcing contracts, getting credit and paying taxes.
Number 1 in Asia for intellectual property protection
Singapore ranks 4th globally and 1st in the region for institutional protection of intellectual property in The World Economic Forum’s Global Competitiveness Report.
Finally, Singapore offers one of the most attractive tax systems in the world, for both businesses and the individuals working for you. The corporate tax rate is a flat 17%, but the government offers significant discounts for new companies, with the opportunity to cut the tax burden to close to zero during the first three years of operations. Dividends from a Singapore resident company are taxed at 0% and the personal income tax rate is one of the lowest in the world. Singapore also has clear international tax agreements with most of the countries in the world.
All of these things contribute to making Singapore one of the best places in Asia, or perhaps the world, to live and do business. But make no mistake, making a success out of Singapore is in no way a cakewalk, as the competition on this small island state is fierce. People and companies who set themselves up in Singapore are thirsty for success, and there are lots of them. To be successful you need to be in the know about the ins and outs of Singapore and how to maximize its potential as an Asian hub for your business. Fortunately, we’re here to guide you on that journey.
Growth and opportunities
Singapore’s strong economy attracts and supports a diverse range of industries that we have been part of – or worked with. Industrial parks serve different clusters across the island, such as aerospace, electronics, medical technology, e-sports and the creative industries.
In the decades after independence in 1965, Singapore rapidly developed from a low-income to high-income country. GDP growth in the city-state has been amongst the world’s highest, at an average of 7.7% since independence and topping 9.2% in the first 25 years.
After rapid industrialization in the 1960s catapulted the island nation’s development trajectory, manufacturing became the main driver of growth. In the early 1970s, Singapore reached full employment and joined the ranks of Hong Kong, South Korea and Taiwan a decade later as Asia’s newly industrializing countries. In later years, Singapore has been going through the transformation towards a services and information economy.
The overall growth of the Singapore economy was 3.2% in 2018. Value-added manufacturing, particularly in the electronics and precision engineering sectors, remains a key driver of growth, as is the services sector, particularly the information and communications industries, which grew 6.0% year-on-year, and the finance & insurance industries, which grew 5.9% year-on-year. However, economic growth slowed considerably in 2019 to 0.7%.
Currently, the biggest main industries in Singapore are financial services, energy and infrastructure, biotechnology and ICT. However, there are some unique growth opportunities to grab hold of beyond that.
The country is working hard and fast to become a digital society – with the overall quality level of digital services only surpassed by the Nordics. Digitalization is therefore one of the big current opportunities in Singapore. E-commerce is also big in Singapore and, although there are big players on the move already, there are several niche opportunities to capture.
As the population is ageing, there is rising demand for new elderly care solutions. Singaporeans are also crazy about education, so there is excitement around new educational business, and bringing more creatively-driven Nordic educational ideas to the market could be an interesting avenue. Finally, as it’s a country known for safety and security, cybersecurity provides interesting niche opportunities.
These are just a couple of examples of opportunities in the Singapore home market. Beyond Singapore, The ASEAN region’s yearly GDP of over 3 trillion USD has been skyrocketing for a few years now, reflecting the region’s thriving economy. Home to close to a billion people, the diverse ASEAN region offers a huge amount of untapped opportunity, with Singapore as the perfect center of operations. Going further afield, the wider APAC region hosts 60% of the entire world’s population and the business opportunities are even greater.
The region is extremely diverse and the opportunities differ from market to market. In general, there are major opportunities in the areas of ICT & digitalization of society, medical and healthcare, environmental technology, financial services and manufacturing. Deeper insight into ASEAN and APAC opportunities needs its own lengthly article, which we might write up later on. Meanwhile, feel free to get in touch with us for more info.
The Singapore gateway approach in action – Dyson
Dyson, the UK home appliance company that assembles products in the Philippines and Malaysia and will start producing electric vehicles in Singapore, is an example of “having a supply chain in south-east Asia and being globally competitive”. (FT)
Having Dyson select Singapore to launch a new line of business (electric vehicles) requires “new ideas, new talent [and] is really a good endorsement of Singapore as a possible place to fill up all the gaps in [a company’s] capabilities”, says Mr Loh. professor of strategy and policy at the National University of Singapore business school
Mentality, culture and challenges
We have done business with organizations around the globe and have lived in multiple European and Asian countries. How people communicate and make decisions has become an area of special interest for us. Insight on this topic can be very beneficial when doing business, so we thought we would share a few initial tips for you. It’s important to adapt to the business culture of your partners in Singapore as things are done differently here than in northern Europe.
Singapore is a diverse and multiethnic society unlike almost any other. The country consists of Chinese, Malay, Indian and Eurasian communities, as well as expats from around the world. But, in most cases, you will encounter Singaporean Chinese as your business counterparts as they form the majority of the population (72%).
Singaporeans are generally open and cosmopolitan in their outlook. They are not likely to take offence if you commit a social faux pas, especially when they understand that you come from a different culture. The general advice is to be courteous at all times and avoid discussions on topics like religion, racial issues and politics. The government and Singapore society in general work hard to preserve social harmony, therefore such sensitive topics are best avoided. The Finnish way of asking direct or provocative questions should be kept to a minimum as it might seem insensitive or impolite.
English is the working language while the official languages are Chinese, Malay and Tamil. There is a local vernacular, Singlish, which is essentially English generously peppered with local slang and dialects that can be a bit confusing at first. In fact, some expats joke that Singlish is not English at all. But you’ll get used to it fast. If you spend more time with your Singaporean counterparts it might be worth learning some of the local expressions, like “shiok” (fantastic), “kiasu” (the fear of missing out or losing face) or even “choping” (the art of reserving a table at a hawker center).
Business meals and entertainment
Business breakfasts are rare in Singapore. Lunch is the preferred meal for business discussions. Spouses are rarely, if ever, invited to these power meals. As long lunches are not uncommon in Singapore, it may be wise to avoid scheduling meetings between noon and 2pm.
The inviting party of a social business event usually picks up the bill. The other party can reciprocate next time around. Singaporeans are typically pretty punctual with their appointments and expect the same with others. Call if you are unexpectedly late.
When entertaining Malay associates (who are Muslim) avoid conducting business on Fridays or during Ramadan, the Muslim fasting month, which runs from April 23 to May 23 in 2020. Note that Ramadan is based on the lunar calendar and moves back roughly 11 days per year. Never serve alcohol or pork, and also note that most Indians do not eat beef.
By the way, be careful, as Singapore has some of the most delicious food and drink on the planet. It’s easy to overindulge, and routinely working your way through lunches and dinners in Singapore will make you gain weight if you’re not careful.
Gift giving is a common way of expressing thanks. Small business-related gifts, such as a pen with the company logo, are sufficient. Gifts are typically wrapped, presented and received with two hands, and opened after the presenter leaves. Gifts with the connotation of severance or cutting, such as scissors, are not appropriate as they symbolize conflict.
For the Chinese, the number 4 rhymes with the word for death, meaning that it is important not to give anything in a set of four. Clocks are also considered inappropriate gifts, as the Chinese expression for “giving clock” has connotations of death. For your Malay associates, avoid products made from pigskin and alcohol as these goods contravene Islamic laws.
However, don’t worry too much. As we mentioned earlier, Singaporeans are international in their outset and generally well informed, so they will not take offence if you’re not completely up to date with local cultural faux pas.
Business etiquette in Singapore
We have experienced important differences when doing business in Singapore compared to elsewhere. The following offers a valuable summary of considerations around etiquette.
Name order can be a little confusing when making introductions for the first time. In formal meetings, always use the person’s title and family name followed by their first name. If he/she has a Chinese name, you may then be told how they wish to be addressed.
Many Singaporeans have a western name, like “Peter”, and can be introduced in the same way as in the West i.e. by given name before family name. The Malays do not use a family name. They use their own personal name followed by “bin” (son of) or “binti” (daughter of) before their father’s personal name. Indians use their personal name followed by “s/o” (son of) or “d/o” (daughter of) and the father’s personal name.
Business cards should be exchanged upon meeting and treated respectfully. Ideally, they should be given and received with both hands – as this is the polite way of giving items (including money). Upon receiving a business card, lay it in front of you on the table in accordance with the placement of the people you are having the meeting with. Never write on the business card, put it casually in your back pocket or haphazardly stash it in a folder. Any of these actions can be misconstrued as disrespect.
There is an emphasis on gender equality in Singapore. You will find that women hold positions of authority in business, perhaps even more so than in the Nordics. Singaporean society promotes work above many other things, and it has been important for Singapore to be able to create a system where both sexes can work. There is even a very comprehensive system of household help services to ensure that parents are not forced to stay at home. Spouses of both sexes do not usually attend business events or functions, unless specifically invited.
Although the climate is tropical, long-sleeved shirts are still the usual call for men, while smart business wear is recommended for women. However, in general, the dress code is far more relaxed than in other Asian countries. You will rarely see people in business wear a suit, unless it’s in the higher power echelons of the financial industry – in contrast to countries, like Hong Kong or even Thailand, where suits are typical in business.
Do note that, in many spaces, especially in exhibition centers, the air conditioning will be blasting on high power, so it is better not to wear clothes that are too cool. We’ve actually found that it can be handy to carry a light business jacket (made out of silk, cotton or linen) with you just in case you need to warm up a bit in longer meetings.
One of our favourite frameworks for communications analysis is the Lewis Model. British linguist Richard D. Lewis is famous for having charted communication patterns, as well as leadership styles and cultural identities. His organization offers classes in cross-cultural communication for clients, like Unilever and BMW.
“Determining national characteristics is treading a minefield of inaccurate assessment and surprising exception. There is, however, such a thing as a national norm,” he writes. We have found his model to be accurate for Singapore – as well as many other cultures we’ve dealt with during our careers.
The Lewis Model plots countries in relation to three categories:
Multi-actives — those lively, talkative cultures that do many things at once, planning their priorities not according to a time schedule, but according to the relative thrill or importance that each appointment brings with it. Italy, Latin America and Arab countries are members of this group.
Linear-actives — those who plan, schedule, organize, pursue action chains, do one thing at a time. Germany, Switzerland and the U.S. are in this group.
Reactives — those cultures that prioritize courtesy and respect, listening quietly and calmly to their interlocutors and reacting carefully to the other side’s proposals. Vietnam, Japan, China and Korea are in this group.
There are strong similarities between Finland and Singapore, who both sit between linear active and reactive.
In general, the Finnish direct way of doing business is in line with the linear nature of getting things done in Singapore. However, Singaporeans do tend to make things a little bit more complicated via shrewd negotiation tactics and hidden agendas.
Singaporeans also generally take time to build a relationship, and there is an emphasis on relationship building prior to negotiating, whereas in Finland things can be taken forward quite directly from the first meeting onwards. Interestingly enough, after becoming closer with you, they will often prove to be quite fierce negotiators and will strongly uphold their positions against you.
In general, we have noticed throughout the years that culturally, Singaporeans tend to have reservations and lack trust compared to the stereotypical “blue eyes” of Finns. Therefore, you should expect to need mediators and detailed contracts for any kind of transaction – because Singaporeans use these methods to lower their feelings of risk.
As a market that leans towards being reactive, Singaporean business people may seem reserved about wanting to take a step forward unless they are certain of an outcome or if they have seen a competitor take a similar approach. We’ve faced situations time and time again where bringing an innovative idea to the table might be disregarded unless you can prove that it’s already worked somewhere else.
The interesting contradiction is that, despite Singapore’s highly innovative image and pioneering spirit, Singaporean culture is very risk averse at its core. If you thought that in the Nordics it can be hard for organizations to embrace risk-taking to get new innovations and ideas to breakthrough, you will find that Singapore is no different.
Interested? Please contact us and let’s talk more!
Karri & Charlie, Kytky Advisors
Tommi, Proof Advisory
Writers Charlie Young and Karri Knuuttila have more than 20 years of combined experience in the Asian market. Kytky Advisors can connect your business to the right growth opportunities covering the whole of Asia – with offices in Singapore, Bangkok, Berlin and Helsinki (in cooperation with Proof Advisory)