Exporting to Singapore

This island neighbour has only four million people, but with purchasing power that equals or exceeds that of the leading nations of Western Europe and a tradition of barrier-free trade, there are plenty of good reasons to explore this market.

When the Singapore-Australia Free Trade Agreement (SAFTA) was signed in 2003, many Australians wondered why we bothered. This tiny island, just one-twentieth the size of greater Sydney, has long been known (like Hong Kong) as a duty-free port, so what were we going to gain? 

The answer is plenty, and officials in Canberra were not the only ones to recognise the potential for enhancing business opportunities through a bilateral agreement. Over the past few years, little Singapore has minted similar agreements with the United States, Japan, Korea, India, New Zealand, Chile, Jordan, Panama and the four European countries making up EFTA (the European Free Trade Association, comprised of Norway, Switzerland, Iceland and Liechtenstein). Added to this impressive collection is Singapore's membership in the Association of South-East Asian Nations (ASEAN) and the ASEAN-wide trade agreement with China.

Singapore may be small geographically but economically it thinks and acts big. Measured on a purchasing power parity basis, the average Singaporean has a purchasing power equivalent to the average Aussie and the Singaporean market is a sophisticated one where consumers tend to be more concerned with high quality than with price. With a legal system based on English common law, English as the language of administration and business, and a long history of friendly relations with Australia, the country is a welcoming place for Australians to do business. It's also close by and extremely well connected.

Trade Hub

In 2006, Singapore's 4.4 million people managed to find a way to use 4.8 million mobile phones in service that year! It has a highly developed free market economy that has always depended on international trade and taken advantage of its good location to become a major trans-shipment hub. Exports of consumer electronics and information technology products are particularly important for Singapore (major Australian imports from the country include computers and telecommunications equipment), but the government worries about over-dependence on these sectors and has recently attracted major investments in medical technologies and pharmaceuticals. Other significant local industries in the country include chemicals, financial services, oil drilling equipment, petroleum refining, rubber processing and rubber products, ship repair and offshore platform construction. A near total absence of domestic production makes the country dependent on imports of food and many Australian purveyors of quality meat, fish, vegetable and dairy products have found attractive markets in Singapore. Several years ago, Food Adelaide ran a highly successful promotional trade mission to the country and a number SMEs were able to establish profitable export relationships with Singaporean retailers and upscale hotel and restaurant buyers.

Overall, Singapore is Australia's ninth most important destination for industrial and agricultural goods and an important export market (about $3 billion annually) for our services providers as well. Trade facilitation measures—many of which were significantly enhanced through SAFTA—make it easy to deal with customs and border formalities. Using electronic paperless trading techniques, goods are typically cleared through Singapore Customs before they arrive in port.

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Key Gains

The Department of Foreign Affairs and Trade has published a business guide to SAFTA in which it identifies the key gains to Australian exporters and importers from the agreement. Here's where we can see why it was worthwhile negotiating an FTA even with Singapore's history as a free port. Even without tariffs, goods trade can be enormously complicated by technical regulations, and SAFTA reduces costs to Australian manufacturers and exporters through a new framework for determining equivalence of Australian and Singaporean product standards and requirements, and commits both countries to work towards harmonising mandatory requirements with international norms. Trade in horticultural and other food-related products is addressed through a new system allowing for mutual acceptance of testing certificates and reports. Of course, this is a two-way street, and importers of Singapore-origin orchids have already benefited importantly from new procedures under which the flowers are no longer automatically fumigated on arrival in Australia.

Australian goods and services exporters also enjoy new access to Singapore's government procurement market where, in their efforts to sell to 47 Singapore agencies, they are now treated equally to Singapore-based suppliers. A competitive environment is assured through SAFTA's obligations on the two governments to consult whenever corporate anti-competitive conduct is suspected. The agreement also opens up new opportunities for bilateral investment, with investors from each country given "national treatment" in the other, supplemented by strong commitments on the legal protection of existing investments.

Importantly, if an Australian investor can’t resolve a dispute with the Government of Singapore, the investor is empowered by SAFTA to submit the issue to arbitration by an independent international agency.

Services Boon

A major area of gain for Australian exporters is found in the FTA's provisions opening up trade in services. Singapore may long have been a liberal free port for goods, but the same was often not true for trade in services where behind-the-border regulations tended to discriminate against foreign companies and individuals. In part, for these reasons, Australians' past forte in selling services to Singapore tended to focus on education and tourism. The new agreement opened up much more and adopts the generally very liberalising "negative list" approach to ending discrimination against Australian providers. This means that in all-important respects, Australians will be treated the same as Singaporeans unless a restriction is specifically listed in an annex to SAFTA. Some services sectors that will benefit significantly from the easing of a formerly discriminatory environment include financial, legal, architectural, environmental, and telecommunications. In addition, because employees of services firms often need to live temporarily in the country in which they are doing business, SAFTA benefits Australian companies by liberalising the rules for temporary residency and providing opportunities for accompanying spouses to work in Singapore as office administrators, specialists, and managers. Many SME services suppliers will find this changed environment makes doing business in Singapore much easier than it was in the past.

The longer-term outlook for Australian business in this sophisticated island nation is very good and getting better all the time. Singapore's growth rate regularly tops 7 percent, and as both India and China pursue enhanced trade integration with ASEAN and other East Asian partners, Singapore—at the centre of the action—seems sure to profit from its position and its openness. As incomes continue to rise, this will make Singapore an ever more attractive market for our own goods and services and the country will assume an enhanced status as a stepping stone to doing business throughout the region.

*Andrew Stoler is executive director of the University of Adelaide's Institute for International Trade (www.iit.adelaide.edu.au)

Fact: in 2006, Singapore's 4.4 million people managed to find a way to use 4.8 million mobile phones in service that year!

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