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Singapore is one of the best countries in the world for doing business, but that doesn’t mean you should limit your company within its borders. In recent years, small and medium-sized enterprises (SMEs) from Singapore have been increasingly embracing global expansion, with 80 percent of SMEs now having an international presence. Southeast Asia is the most popular location for global growth due to the area’s robust trade infrastructure, bilateral agreements, and proximity. Integration into a worldwide marketplace can give companies a competitive advantage.
Suppose you’re looking to grow your business in Singapore and beyond. In that case, the first step is to evaluate whether now is a good time for global growth. If expansion is good for your Singapore-based business, then the next step is to determine which countries you should expand to.
Is now a good time for companies to grow outside of Singapore?
Today, many SMEs are expanding outside Singapore for a few key reasons. The nation encourages open trade, and nearly all of the country’s imports are duty-free. The government supports many initiatives that encourage foreign and domestic investment in Singapore-based companies. This government assistance has attracted foreign investors to the market, leading Singapore to be considered one of the most highly competitive economies in the world.
Companies based in Singapore may want to consider growing internationally to gain an edge over the competition at home. As one of Asia’s top economies, the country is a strategic location from which to expand your company. Singapore is also part of the Association of Southeast Asian Nations (ASEAN), offering strategic access to other member states.
While the government carries out initiatives to attract foreign investment, it also supports Singapore-based businesses expanding internationally with projects like the Market Readiness Assistance (MRA) Grant for SMEs. The program covers 70 percent of costs for up to SGD 100,000 per company and new market. The Grow Digital initiative is another program that has helped more than 500 SMEs expand internationally.
The pandemic is another factor making now a great time for international growth. Many companies have switched to remote work, and this digitalization has made collaborating abroad easier than ever. Global team members are likely to have previous experience with telework. Singapore’s government also has initiatives to help companies expand internationally by deploying a remote workforce. The Go Digital program aids companies in building their technological infrastructure.
Why expansion is good for businesses based in Singapore
Singapore is a small country with limited resources. The government has historically attracted international business due to this necessity. While the nation has succeeded in partnering with global companies, Singapore-based businesses can also benefit from international growth, especially considering the highly competitive domestic market.
Expansion is good for businesses based in Singapore because it offers:
- Increased flexibility and stability through diversification: Companies are able to track and manage inventory based on market demands and adapt to changes quickly. Diversifying your marketplaces also strengthens your company’s stability. By leveraging global resources, you can prevent supply chain disruptions, avoiding delays in fulfilling customer orders.
- Access to new markets: New markets will allow you to expand your client base and attract top global talent to join your team. You might also discover new investment opportunities that your domestic market may lack. Further, these new markets may help your company increase revenue and gain consumer loyalty.
- An opportunity to grow brand awareness: An international audience can help strengthen your company’s image by growing brand recognition, giving you an advantage over competitors. There are few globally recognized brands in Singapore, which means your company has plenty of room to gain a foothold in the international market.
- Workforce development: Going global can also grow employees’ skill sets. The SkillsFuture Enterprise Credit (SFEC) encourages companies to continue professionally developing their workforce. Companies that qualify will receive an SGD 10,000 credit to cover 90 percent of the costs of enterprise transformation. International expansion can help SMEs overcome significant hurdles, including innovation challenges and fulfilling customer needs.
- Reduced costs: Labor and materials may be less expensive in other countries depending on local laws and the cost of living. Your company could save money by moving particular operations to an international location. Some countries may also have more favorable tax rules for your company.
Ideal countries for Singapore-based companies to expand to
Once you’ve decided it’s time to expand your company globally, you’ll want to analyze the best locations. While China and Japan are outside of the ASEAN agreement, they’re still major trade partners. However, you may also find more ease partnering with companies in ASEAN member states, including Indonesia, Malaysia, and Thailand.
Mainland China is the most significant trade partner, with SGD 136.2 billion in trade in 2020. Singapore is also China’s largest international investor, demonstrating how important these economies are to each other. Further, China is the biggest market in the world, with a population of 1.3 billion people.
The two countries have had diplomatic relations for more than 30 years and enjoy free trade with the China-Singapore Free Trade Agreement. Under the agreement, 95 percent of exports to China are tariff-free and investments are afforded protection — ensuring a more predictable operating environment. Its 2018 update also gave better access to China’s manufacturing and construction sectors.
With China’s proximity to ASEAN countries, it accounts for nearly 12 percent of the region’s trade. The ASEAN-China Free Trade Area facilitates fair investment and reduces tariffs. In response to the challenges brought on by the pandemic, the two regions have committed to a greater cooperation for recovery.
Agriculture is one of China’s biggest industries — the country exports rice, cotton, pork, fish, cotton, and tea around the globe. Decollectivization and ample government support have increased sector productivity by better organizing labor. Construction, including industry jobs like mining, manufacturing, and water, is also an important sector of the Chinese economy. The service sector is another primary industry.
Singapore and Japan have enjoyed bilateral relations for more than 50 years, sharing the same goal of economic integration and trade liberation. Japan is one of the country’s top trading partners, with SGD 49.6 billion in 2020. More than 5,000 Japanese companies operate in Singapore, and Singapore-based companies have been increasingly expanding into the Japanese market as well. The two countries are part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): a free trade agreement.
The Japan-Singapore Economic Partnership Agreement (JSEPA) is a trade agreement that removes tariffs for most exports to Japan. It also helps ensure the marketplace is more stable and protects investors while improving market access. The Japan-Singapore Partnership Programme for the 21st Century (JSPP21) is a joint training program between both countries. The program has the goal of ASEAN country development, and it covers a range of topics, including:
- Trade promotion
- Health care
- The environment
- Industrial development
Technology is Japan’s leading industry. However, the aging population has made health care a rising sector of the economy. The country’s feed-in-tariffs have also grown the renewable energy industry. Companies in infrastructure development, technology and innovation, and tourism and hospitality sectors should consider pursuing growth in Japan.
An ASEAN member state, Indonesia is Southeast Asia’s largest economy. It’s one of Singapore’s top trade partners. The country has a population of 260 million and an abundance of raw materials. Its most prominent industries include:
- Urban solutions and infrastructure
- Technology and the digital economy
Growing companies can take advantage of the two countries’ close economic and social relationship. Many Indonesian customers and potential team members are already familiar with Singapore-based companies. The nations enjoy strong bilateral relations and are connected through the Global Innovation Alliance Plug and Play initiative.
Most imports have no duties, as both countries are ASEAN member states and enjoy free trade. Further, the countries have a Double Tax Avoidance Agreement to prevent unnecessary taxation of income in both countries.
Malaysia and Singapore are each other’s second-largest trading partners, with SGD 103.50 billion in trade between the two nations. The countries are also very close in location, with easy road, rail, air, or sea access. Further, industries are located across multiple regions rather than concentrated in areas like Johor Bahru, Kuala Lumpur, Penang, and Selangor. This setup allows for relatively little competition and access to a variety of markets. Malaysia is also an ASEAN member nation and part of the CCPTPP.
Malaysia’s economy has seen an annual GPD growth above 4 percent in recent years. The country’s population of 31.4 million and sizeable middle class will give your company a large consumer base. The retail, education, and food service industries are flourishing — about 40 percent of franchise brands are internationally owned.
Other significant sectors include the digital economy and e-commerce. The government is planning on setting up a digital free trade zone for SMEs. Manufacturing is also a major part of Malaysia’s economy, especially industrial automation and Internet of Things solutions.
Another top trade partner and ASEAN member, Thailand is Southeast Asia’s second-largest economy. This strategic trade partner has a well-developed transportation infrastructure and communications network, a large population of 69 million, and a central location with access to Cambodia, Laos, Myanmar, and Vietnam. The country also has plans to improve international transportation infrastructure, providing easier access to the region’s market of 230 million people.
The Board of Investment Incentives provides investment incentives for global industries that focus on research and development. The board encourages investment in the Eastern Economic Corridor, special economic zones, and areas with the lowest income. Your company can enjoy multiple incentives by investing in the Eastern Economic Corridor, including reduced corporate and personal income tax.
Infrastructure is one of the country’s biggest industries, with considerable public and private partnership plans for growth in transportation and interconnectivity in the Eastern Economic Corridor region. Manufacturing and Industry 4.0 are also major pillars of the economy — the automotive industry and electronics are the most prominent sectors. The National Digital Economy Masterplan encourages growth in the tech industry. However, Thailand struggles to find talent in this field, making it a rich investment opportunity for technology companies. Health care is another significant industry due to the country’s aging population.
Since Singapore and Thailand are both ASEAN member states, the two countries enjoy free trade agreements and double tax avoidance agreements.
How to expand your Singapore-based company internationally
Once you’ve determined where your company will expand to, consider analyzing business and research programs and government grants that can help. You should think about the following factors when evaluating how to expand your Singapore-based company globally:
- Consider whether your company is ready: Before your company starts growing in a new country, you’ll have to decide whether the expansion will be profitable and how you’ll evaluate success. Balance the speed of moving to a particular region with your company’s stability. When researching a market, assess expansion costs and whether your projected profits and current savings will cover the price.
- Conduct thorough market research: It’s critical to gauge if a particular market will further your company’s mission. Choose countries with target demographics for your industry. For example, Japan’s and Thailand’s aging populations make these countries good places for healthcare companies. Researching other businesses that are also expanding to a location can help you understand an area’s market and demands. You should also contemplate market sizes, such as city population in a particular demographic, to ensure you’ll have a customer base in a specific location.
- Understand the legal requirements: Each country has unique employment laws. For example, certain benefits that are mandatory in some countries may not even be a requirement in others. Tax laws also vary. However, partnering with a global Employer of Record can help you onboard international teams, run payroll, understand taxes, structure employee agreements, and ensure you’re compliant with local labor laws.
- Explore the culture: You should learn about a country’s culture before growing your business there. Providing team members with sensitivity training is crucial in building a global team. Working with knowledgeable international leaders can also help ensure you understand a particular market’s culture.
- Research what government grants can help you: The Singaporean government offers a variety of grants to help companies with international growth. In addition to the previously mentioned MRA grant and digital expansion initiatives, the government provides a plethora of other initiatives and export guides to help you with global growth.
Expand your company with Globalization Partners
When you’re ready to scale your company internationally, let Globalization Partners be your source for expert advice and support. Our global employment platform expedites payroll setup, employment contract generation, and employee onboarding while ensuring your company is fully compliant. Contact us or request a proposal to discover how our team can help your company expand globally.