Singapore retains the top spot as the chosen investment destination for business expansion plans in Asia. According to the United Overseas Bank (UOB) Asian Enterprise Survey 2016, Singapore has retained its top spot as Asian enterprises’ favourite expansion destination.
One-third of Asian enterprises surveyed chose the city-state as the market that they would expand into in the next three to five years. They are drawn to Singapore’s stable political and economic climate (41 percent), large and growing customer demand (40 percent) and its favourable tax and regulatory environment (35 per cent).
In particular, Indonesian (43 percent), Malaysian (36 percent), Thai (34 percent) and Hong Kong (32 percent) companies ranked Singapore among their top three expansion destinations. Of all the Asian companies which UOB’s Foreign Direct Investment Advisory Unit had helped expand in the region in the first nine months of 2016, four in ten of them have ventured into Singapore.
The Unit was set up in 2011 to offer companies assistance ranging from incorporation to business expansion. In second place was Japan with 29 percent, followed by Vietnam with 28 percent, and Thailand and South Korea with 26 percent. China came in ninth with 22 per cent.
Within the Asian region, the 2016 survey found that in the next three to five years, Asian firms favour expansion into more mature markets, such as Singapore (32 percent) and Japan (29 per cent) over emerging ones, such as China (22 percent) and Indonesia (21 percent).
In Southeast Asia, after Singapore, Vietnam is the most popular expansion destination. Vietnam’s stable political environment, favourable economic conditions of low inflation and accommodative monetary policy, as well as its young and active workforce have added to its attractiveness as an expansion destination.
Mr Frederick Chin, Head of Group Wholesale Banking at UOB, said that the findings from the UOB Asian Enterprise Survey 2016 reaffirmed Asian enterprises’ entrepreneurial spirit as they continue to seek new markets for growth.
“As Singapore strives to become a global hub for research and innovation, it is attracting more companies from high-value industries, such as the information technology and telecommunications sectors, as well as the professional services sector. By collaborating with these companies, Singaporean enterprises will also build on their capabilities and develop new skills to transition to a high value-added, innovation-driven economy,” Chin added.
Overcoming growth constraints through innovation and regional expansion
In the survey, Singapore enterprises cited rising operating costs (42 percent) as their top growth constraint. This has been a stated concern since UOB’s inaugural survey in 2014. To overcome these constraints, Singapore enterprises are investing in information technology (44 percent), employee training (33 percent), as well as research and product innovation (32 percent) to become more nimble and competitive.
One company that has adopted technology to improve their business efficiency is Fitlion Pte Ltd, an online retailer specialising in health and fitness supplements and accessories. The company invested in a customised warehouse management system which enabled it to handle high sales volumes more efficiently.
Tan Tse Yong, Fitlion’s Group CEO, said, “Managing our warehouse inventory used to be a very strenuous task as our employees had to make several trips to pick up the goods required based on individual orders. With the system, they can make use of a tablet to consolidate and collect the items for multiple orders in a single trip. Without increasing manpower, we can now fulfil more orders daily, and in turn raise our customers’ satisfaction level.”
Singapore firms are also staying resilient by expanding regionally to sustain business growth. According to the survey, China remains the top destination market for Singapore firms, even as 56 percent of them are already doing business or operating in China.
Chin added that while Singapore’s economy may be affected by global market uncertainties stemming from a precipitous drop in oil prices and tepid consumer demand in the West, Asia’s rapid development still presents many opportunities.
“The global economy may be slowing down but Asian economies are still seeing growth. Singapore companies that are able to seize the arising opportunities, and produce the products and services needed to meet the rising demands of Asia’s middle class, will have a unique opportunity to build strong and sustainable regional businesses,” Chin concludes.
The survey polled 2,500 C-suite and senior executives in China, Hong Kong, Indonesia, Malaysia, Singapore and Thailand.