With increasing ASEAN integration creating further potential for growth, and the government emphasizing value creation as one of the key pillars of Singapore’s economy, the city-state will play a crucial role for U.S. investors seeking to capitalize on the region’s growing opportunities.
Singapore has long been a strategic partner for U.S. traders seeking to gain a foothold in the lucrative Southeast Asian region. As far back as the early 19th century, U.S. merchants would visit the port on their way to and from China, and that early mercantile connection has given way to a broad and deep relationship today. Today, Singapore is home to a whopping $274.3 billion of U.S. investment, more than the figures for China and Japan combined.
Measuring just 721.5 km2 – about a quarter of the size of Rhode Island – Singapore faces limited natural resources and land space, and has instead built its fortune on its intellectual capital and value addition. Its highly- skilled English-speaking workforce, multicultural environment and enviable geographic location at the convergence of the world’s main trading and shipping routes, combined with a pro-business environment – the country ranks second in the World Bank’s latest Doing Business rankings – have made it an obvious choice to the roughly 4,400 U.S. companies that have made it their home, such as Microsoft to Citi and ExxonMobil.
Despite its small size, Singapore represents an important consumer market for U.S. firms. According to Prime Minister Lee Hsien Loong, on a per capita basis, Singaporeans buy around $5,400 worth of American goods and services every year, from mobile telephones to pharmaceutical products, financial and consultancy services.
“Singapore’s economy is the most trade dependent in the world. As they recognize how important trade is for the economy, they have oriented their policies, their infrastructure and their capabilities towards trade, which is the perfect place for American companies. We call it America’s business headquarters in Asia,” says Dwight Hutchins, Chairman of the American Chamber of Commerce of Singapore.
A new approach
The Association of South East Asian Nations (ASEAN) is now the world’s fastest-growing region, and U.S. companies have taken note. The United States first engaged with ASEAN as a dialogue partner in 1977, and economic ties have grown from strength to strength, with the recent 2018 ASEAN Business Outlook Survey showing that 71 percent of American companies present in ASEAN are looking to expand in the region.
As ASEAN becomes a global economic force, the large, young population and deep talent pools of other countries in the bloc are fast becoming formidable contenders to Singapore, which is taking innovative steps in order to remain competitive, shifting its model from value addition to value creation. This will come through a series of measures to enhance existing business infrastructure that rewards risk-takers and innovators, creating a greater focus on new opportunities.
“On the economic side, we find like-minded economists, like-minded business people in Singapore. They’re very pragmatic. They are very forward-looking. They’re not risk averse and they’re pragmatic. For all those reasons, they find very willing partners in the United States and the growth in our two economies together is a big testament to that,” says Ambassador Michael W. Michalak, Senior Vice President and Regional Managing Director of the U.S.-ASEAN Business Council.
For long-time economic partner the United States, this new approach throws up a multitude of possibilities. Singapore already sustains as many as 250,000 U.S. jobs through trade, and Singaporean investment into the U.S. outstrips that from China, with $73 billion in cumulative investments in sectors from banking to agriculture and telecoms across more than two dozen U.S. states, making it the second-largest Asian investor in the U.S. after Japan.
One such investor is global technology, defense and engineering group ST Engineering. “The U.S. continues to be a key market for us. In fact, it’s our single largest market outside of Singapore,” says Vincent Chong, President and CEO. “We’re present in ten states in the U.S. over a spectrum of various businesses.” ST Engineering has leveraged on its strong ties with the U.S. as it seeks to branch out into new business lines in order to benefit directly from the robust growth of the global aircraft fleet, agreeing in September this year to buy aircraft part manufacturer MRA Systems from General Electric for $630 million.
The company has also built on the shared military synergies between the two nations to create a base in the States. With its U.S. business headed by a retired U.S. Army general, the company is now also the biggest VSAT terminal supplier in the world through its ownership of U.S. firm iDirect.
“Not only the economic relationship, but our strategic security relationship with Singapore has been exemplary,” adds Ambassador Michalak. “At any point in time, you will find a significant part of the Singapore air force is in the United States training. The relationship on the security side is just about seamless.”
Singaporean officials see the economic and security relationships with the U.S. as inextricably tied to each other. “Trade and investment are a very necessary part of and integral to security because they go hand-in-hand,” says Heng Chee Chan, Ambassador at Large at the Ministry of Foreign Affairs and former Singaporean ambassador to the United States. “You cannot just talk of security and strategic perspectives without the support of the economic and trade pillars because that strengthens security. To take one without the other just doesn’t work.”For government-owned investment firm Temasek, the synergies between the two countries are clear. “Our four themes for investment are urbanization, middle income population, comparative advantages and emerging champions. If you think about comparative advantages in technology, life sciences, healthcare and biosciences, consumer, and you look at payments and Fintech, the U.S. is at the forefront. If you are not investing in the U.S., you might not be able to take advantage of these trends,” says Dilhan Pillay Sandrasegara, deputy CEO.
Temasek, which invested mainly in Singapore companies in its early days, have turned into a global player in recent years. More than 70 percent of the company’s portfolio exposure is now outside its home country. The highest proportion of its new investments for the last three years have been allocated to the United States, with U.S. assets comprising 13 percent of the investment firm’s portfolio at the end of Q1 this year, up a third from two years earlier. Its three outposts in the U.S. – a New York office opened in 2014, a San Francisco office opened in 2017, and a newly-opened Washington branch – have given it a firm foothold in every aspect of the U.S. economy. Today, it holds a $2.3 billion stake in telecommunications company CenturyLink, a $570 million stake in payments provider Visa, and is an investor in Amazon, AirBnB and Alphabet’s Verily.
Described by the U.S. companies it invests in as a “patient, forward- looking partner focused on generating sustainable long-term returns”, Temasek has also recently been a participant in the U.S.’s ongoing energy revolution, with multimillion-dollar investments in clean energy firm Cypress Creek.
Building on solid ties
On the political front, too, Singapore has shown itself to be a key partner for the U.S. as it navigates the increasingly complex global geo-political environment. The two countries have worked as close partners in support of a rules-based economic and security order in the Asia-Pacific and have consistently partnered to address global threats and challenges. Most recently, Singapore was chosen by U.S. officials to host the June summit between President Donald Trump and North Korean leader Kim Jong Un, with secretary of state Mike Pompeo and White House chief of staff John Kelly both highlighting its advantages as a country that is diplomatically neutral, highly secure, and well-practiced at holding sensitive events.
“The relationship is in a good place and I hope it remains so,” says Ambassador Chan, who holds fond memories of her time as ambassador to the United States and of the enduring positive relationship between the two countries. “The highlight of my term was working on the bilateral free trade agreement with the U.S. in 2000,” she says. “I believe we set the gold standard at that time.” Today, the high standards remain, with Singapore offering ever-increasing opportunities to create value for the U.S. as a strategic partner in ASEAN and beyond.