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US Businesses are Exploring Singapore as a Launchpad for Investment Opportunities in the ASEAN

Singapore as a Launchpad for Investment Opportunities in the ASEAN

US Businesses are Exploring Singapore as a Launchpad for Investment Opportunities in the ASEAN

Last Updated on January 12, 2022

  

The Association of Southeast Asian Nations (ASEAN) long enjoyed a robust and thriving trade and investment relationship with the US and the region is perceived by many American companies as potentially attractive for exploring business opportunities. This has been further fuelled by the recent Regional Comprehensive Economic Partnership (RCEP) signed on 15 November 2020 at a virtual ASEAN Summit hosted by Vietnam, an agreement between the 10 member states of the ASEAN and five of its free trade agreement (FTA) partners.

The RCEP is significant for both US businesses and investors due to the huge size of the participating economies amounting to 29% of the world’s GDP with 30% of the world’s population and having a market value of almost USD 25 trillion. The ASEAN economy also has a vast consumer base of approximately 2.5 billion of which an estimated 1 billion hail from the middle-class.

The RCEP will establish a comprehensive economic partnership based on the existing bilateral ASEAN agreements with individual FTA partners and be governed by a set of rules and standards such as better market access and reduced trade barriers. For American investors who look for one of the best Singapore company incorporation, RCEP will help by providing many trade and investment opportunities in new areas.

As per researchers, technology adoption has taken the front seat in the ASEAN to support economies and societies after the Covid pandemic and mainly for streamlining supply chains through initialization. The US high-tech companies can play a decisive role in accelerating this transformation and make distribution channels more effective. The supply chain has become the centre stage in almost all American companies’ long term business strategies due to the unprecedented disruptions experienced by the pandemic and made it more relevant for them to explore supply chain partners within ASEAN regional partners for digital integration of distribution processes.

Increased consumerism boosted by a resilient supply chain will promote sectors including FMCG, pharmaceutical and medical & diagnostic devices. Many US multinationals are now eager to relocate their manufacturing facilities closer to ASEAN and especially to Singapore, the new Silicon Valley in Asia as the city-state provides the highest level of technology adoption, political stability, safest business climate and strong manufacturing capabilities to make their businesses more competitive.

The ASEAN renewable energy sector has also got a big push recently in the face of increasing clean energy demand due to rapid industrialization and the US businesses can offer clean energy solutions to the participating economies.

A recent survey conducted by Standard Chartered revealed that the majority of the US companies expect considerable business growth in numerous business sectors of ASEAN during the next 12 months. While 93% of corporations expected an increase in revenue, an increase in production was anticipated by 86% of respondents. 60% of the respondents surveyed were optimistic about business expansion in Singapore followed by Indonesia and Thailand that were favoured by 45% and 43% of executives surveyed.

57% of the American companies looking for business opportunities in the ASEAN considered Singapore as their most preferred destination for regional marketing and administrative head offices and 43% favoured it for their innovation and R&D centre in ASEAN.

Several American corporations are critically assessing the USSFTA and RCEP synergy for making Singapore the primary hub to reach out to the vast ASEAN market. Besides the accessibility to a huge market and customer base, skilled workforce and diversified product portfolios have been considered to be the other two most important factors, the survey noted. 70% of respondents reasoned market access as the major driving factor while workforce and diversified product footprints were cited as the main cause by 53% and 40% of companies. Almost half of the surveyed participants expressed their desire to increase investment in Singapore over the next few years.

Singapore is also advantageous as a regional hub due to well-developed banking systems and other financial and logistics support services not readily available in other countries in the ASEAN. Many multinational banks in Singapore offer facilities to foreign entrepreneurs for opening a bank account seamlessly for Singapore company incorporation and meeting their financial needs in the Asia-Pacific region and beyond. US Companies incorporated in Singapore can also be 100 per cent owned by American companies.

A very competitive corporate income tax rate of 17% prevails in Singapore and profits realized overseas is excluded from taxation by the government. No capital gain or inheritance tax is also applicable to foreign American investors.

Besides all advantages, challenges are also being examined by the American businesses while considering Singapore for investment purposes. Amongst these challenges, the current global geopolitical instability reduced consumer spending and the health crisis was cited as the biggest challenges by 73%, 65% & 63% of people respectively. Acclimatizing the business model in the ASEAN was also cited as a great challenge by 68% of participants.

The US has been the worst affected by the coronavirus with the highest number of deaths and many ultra-rich families are becoming vulnerable and looking for a safer haven with world-class health and medical facilities. Singapore naturally comes as the first choice with zero counts of mishaps and high levels of control in combating the virus.

A new and innovative investment vehicle has also been introduced by the Singapore government last year, known as the Variable Capital Company, making it more attractive for American family offices and private equity firms. More than 260 VCCs have already been formed as per data available from the Monetary Authority of Singapore (MAS).

The number of single family offices in Singapore has increased by almost two times over the last two years as it is relatively easier for the ultra-rich to settle in Singapore. Google co-founder Sergey Brin and Shu Ping, the Chinese billionaire, have established family offices in Singapore. American Investment Management company, Bridgewater founder Ray Dalio recently announced establishing a family office in Singapore. The family office of late Microsoft founder Paul Allen also figures in the list.

The Singapore authorities are relentlessly striving to attract high-quality investors and UHNWIs from the USA and make the country the most desired destination for US high-tech multinationals.


  

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