Singapore’s future as Asia’s business hub
Singapore is at the centre of international business based out of Asia. Given its strategic position, both participants and observers in the market are keen to understand how the country will fare in the wake of the pandemic and other geopolitical developments.
Singapore was efficient and effective in its handling of the pandemic with the government taking swift and strong action through widespread testing, a complete lockdown (aptly named a circuit breaker), and innovative technologies to monitor and track the spread of COVID-19. As a small city state with high levels of governmental control, a vaccination program was swiftly implemented and smoothly rolled out with comprehensive enforcement measures taken to control any external routes of entry. Vaccination rollouts are continuing at a steady pace with the country aiming to have 80-90% of its population vaccinated by the second half of the year. Much of the ‘at-risk’ population has already been vaccinated.
The future looks bright for Singapore and it has prominently been used as an example for the rest of the world for how to handle the coronavirus. With these measures in place, it is now well positioned to continue life in the “new normal”. Social distancing measures and restrictions are still tight in the city, but that hasn’t prevented business from continuing, albeit with preventative measures in place.
Out of all Asian countries, Singapore has been the most pragmatic and advanced in its approach towards re-opening its borders, with the greatest degree of flexibility applied towards those coming in from territories that are deemed low risk, such as China, Hong Kong, Taiwan, New Zealand, and Australia. Ongoing proposals and discussions of travel bubbles have been tabled with these countries – an example of the government taking a front foot approach to pioneer safe travel.
Almost 100 billion Singaporean dollars have been pumped into the domestic economy since 2020 in the form of stimulus packages and rebates to not only alleviate the difficulties that COVID-19 caused for the economy, but also to ensure that both local and international businesses are capable of weathering such arduous conditions during this time. This, coupled with its other methods of managing the pandemic, will allow major international signature events such as the Shangri-La dialogue and Bloomberg New Economy Forum to take place (albeit with strict social distancing measures in place).
Because of Singapore’s history, the economy has been significantly focused on leveraging expertise, human capital, and technology rather than traditional labour-intensive supply chain models. Therefore, post-pandemic effects we see on supply chains elsewhere in less developed areas of the world have not had such intense effects here. Singapore is well situated to continue to develop as an international trading and financial hub as has been highlighted by multiple government agencies and the initiatives they have pushed forward.
Despite the global disruption, we have observed and noticed that the pandemic is unlikely to have a significant direct effect on the commodities industry in Singapore itself. Singapore (due to its historical, cultural, and traditional roots) has always been more of trading and logistics hub than a destination or origination market in itself. As long as the city-state can continue to maintain its full capabilities in logistics infrastructure and keep abreast of developments across the region, traders can continue to do their job managing logistics, risks, and relationships across the hemisphere. Having said that, with the traditional nature of the commodities industry – whereby a trader’s word is their bond – and the very physical nature of the business itself, a large portion of the business and relationship management will be disrupted (no more handshakes and face to face meetings will change local business tremendously).
Notwithstanding these disruptions, Singapore has been enforcing certain measures to ensure that its citizens and permanent residents remain competitive in an international job market, especially in a time where international talent becomes even more mobile due to their respective countries’ pandemic and labour responses. Quotas on the proportion of foreigners to local staff, fair advertising and employment rules, and increased enforcement of equal hiring policies have resulted in a significantly tougher environment for international candidates to find a job in Singapore, barring a shortage of local talent or corporate necessity. As much as such protectionist measures may help with local hiring and the domestic economy, the global exposure and talent pool required for the commodities market may inspire further discussion within the local government to increase flexibility on these matters.
We are also seeing a shift in Singapore’s most relevant commodities, particularly in relation to when our Proco Commodities office here first opened over a decade ago, with the energy transition at the forefront of this. Over the last 10 years, renewables and LNG have been and will continue to be a hugely important part of the energy mix in Asia and an increasingly important source of energy. 95% of global LNG demand growth over the next 3 years will come from Asia. Reflected in this, we have seen LNG desks grow larger, smaller players set up offices in Singapore, and companies begin to embed more business developers into growth markets such as China and parts of South-East Asia.
Over the last quarter, we have also seen a surge in activity within the carbon markets. Again, spurred on by the energy transition, we have spoken with various businesses across energy, agriculture and metals who are looking to set up carbon trading and origination teams in Singapore. While it is still a relatively underdeveloped market in comparison to Europe where there is the regulated Emissions Trading Scheme, there is no doubt that Asia is not far behind the trend e.g. China’s national ETS is due to launch in June, which will instantaneously make it the largest regulated emissions trading market in the world.
Singapore has always concentrated Asia’s commodity trading activity and that is unlikely to change with international businesses favouring Singapore as a prime destination to set up their regional headquarters and satellite offices over other locales. Beyond commodities, we have seen businesses from other industries choosing to base APAC headquarters in Singapore as opposed to other international Asian cities such as Hong Kong. We have also seen Singapore voted number 1 in other areas, such as top destination for arbitration. As businesses increasingly opt to set up their Asian HQ’s here, it will only serve to make the Lion City a more globally connected hub and attractive for talent in general. The city-state is also primed to access major growth markets such as South-East Asia. With much of the population brought up to speak both Mandarin and English, it’s also well positioned as a hub for international business for Chinese, Australian and New Zealand companies.
It is clear that Singapore provides an all-round ease of business that other Asian cities struggle to match due to an English lingua franca, established rule of law, and security. The only caveat to this will be whether an aggressive (and so far successful) COVID management approach can be balanced with a reasonable opening up to continue this ease of business with counterparts regionally and globally. But overall, Singapore can be highly commended on its handling of the last year and we anticipate it to play an ever-important role in the regional and global economy.
*Information is correct as of 18/5/2021 at 5 P.M.
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