Recent research in the business community indicates that Singapore is currently the priority destination for US companies looking to expand into the ASEAN region. Looking at the country’s economy, the workforce, its business ethos and growth, it is easy to understand why this is the case.
The talent pool in Singapore is impressive in a number of ways. English is one of the four official languages in the country, education levels are uniformly high, and there is a large and prosperous middle class.
Likewise, prospects for growth in Singapore remain high, with the Ministry of Trade and Industry (MTI) issuing a growth forecast for the year 2022 of 3% to 4%, following on from recorded growth in Q2 of 4.4%. This is expected to be accompanied by expanded production.
In addition, being located in Singapore provides US companies with easy access to the entire ASEAN region and market, with a population that is expected to reach over 720 million people by 2030. Its geographical location is also beneficial for business, as Singapore is strategically located on most major international aviation routes.
Overall, these factors plus the relative ease and low costs of doing business in Singapore (there is a limited tax base for companies, for instance), all combine to make it one of the most appealing countries in the ASEAN region and all of Asia, for US companies to expand into.
What industries are commonly expanding to Singapore?
Given the economic climate, physical location and the quality of the human resources, Singapore is a natural fit for a range of industries and sectors.
The commitment of the government to promoting and developing technology, plus the extensive infrastructure and networks already in place, make Singapore the ideal location in which to set up a regional R&D center, for instance.
Likewise, the geographical location and easy access to the entire ASEAN region also helps to make Singapore a perfect place in which to locate a sales team, or corporate HQ, particularly for enterprises in the production and manufacturing sectors (notably biomedical manufacturing and engineering).
Following on from this, Singapore also is widely recognized as having some of the world’s best hospitals, so it follows that telehealth should be a sector in which companies based in the city-state are leading the way.
Unsurprisingly, given its standing in the global banking sector, finance and insurance also continue to be industries in which expansion to Singapore is appealing.
Potential risks of hiring in Singapore
Despite the many benefits, there are some potential risks for US companies expanding and hiring in Singapore.
For instance, trade conflicts can make the business climate more challenging. The best known and most far reaching recent example is that of Huawei, which as of 2019 was placed on the Entity List, and unable to do business with organisations that operate in the US — effectively a ban.
Geopolitical uncertainty in the wider ASEAN region (albeit unlikely in Singapore, which is a highly stable country) is also a potentially inhibiting factor for some US companies to expand into this part of the world.
Other challenges to expanding into Singapore
There are some other challenges that US companies expanding into Singapore may potentially face.
For instance, there are regional regulations in place that differ to those in the US, and so adapting to these can present challenges, particularly as there can be stiff penalties in Singapore for non-compliance.
Creating a subsidiary-based entity, for instance, can be a convoluted process if you have no previous experience in this area; likewise, registering with the Accounting and Corporate Regulatory Authority (ACRA).
Anyone considering expanding into Singapore also needs to be aware that other enterprises are likely to be looking to enter the same market (both foreign and local), and so you will encounter a highly competitive business environment, almost regardless of the sector in which you operate. This also means that you will likely also find yourself competing for the same talent.
As a global city, with a workforce drawn not only from the ASEAN region but around the world, it is also important to recognize that you are likely to encounter some cultural differences which may impact on working practices. These will be far from insurmountable, as the workforce in Singapore is accustomed to working for international organizations, but it is important to be aware of this in advance.
Hiring and retaining talent in Singapore
As touched on above, Singapore is a highly competitive market and finding, hiring and then retaining the best local and international talent is increasingly a challenge in the current environment.
The nature of remuneration and compensation packages — both in dollar terms and the benefits that come with them — have evolved, as have workplace expectations. Likewise, there have been some changes in Singapore’s approach to foreign workers, so that the best international talent is able to demand more.
A consequence of these factors, plus the challenges of attempting to operate in a regulatory environment with which you are unfamiliar, means that a US business looking to hire in Singapore without a local entity can expect to be required to offer a total compensation package of 50% more.
Whether it’s bonuses, workplace flexibility, share deals, mental health benefits or raises above inflation and the cost of living, the best talent is demanding much improved packages, secure in the knowledge that in a tight labor market, they are very likely to get them.
Finding key employees and then being able to offer a sufficiently attractive package to be able to retain them is therefore an essential part of using Singapore as a springboard to the ASEAN market. This is especially the case in light of the impact of The Great Resignation phenomenon, from which even Singapore is not immune.