Singapore remains the hub of choice for EU firms drawn to Southeast Asia

The Southeast Asian region is an attractive place for European firms to do business and Singapore continues to be their hub of choice, noted the executive director of the EU-ASEAN Business Council.

Mr Chris Humphrey said ASEAN’s attributes such as its young and tech-savvy workforce, the growing middle class, an abundance of natural resources and the region’s geographical location make it extremely attractive for foreign direct investments (FDIs).

The EU-ASEAN Business Council represents European businesses in Southeast Asia.

FDI inflows in ASEAN rose by 42 per cent in 2021 to US$174 billion (S$241 billion), according to a recent report, which also noted that the region was the second-largest recipient, second only to China.

ASEAN’s share of global FDI inflows has been rising – from an annual average of 7 per cent between 2011 and 2017 to 11 per cent between 2018 and 2019, and rising to 12 per cent between 2020 and 2021.

Mr Humphrey said ASEAN has become even more compelling as an investment destination now. “If you look at the rest of the world, you have geopolitical tensions and increasing nationalism in China, Europe’s growth rates are pretty flat to negative, the US is much the same as well.

“Africa is not nearly as developed as Southeast Asia. South America is a bit too far away.”

European businesses use Singapore as their base to expand into the region, Mr Humphrey added.

The Economic Development Board notes that 46 per cent of Asia regional headquarters are based in Singapore, and they cover a diverse range of industries.

The French business consultancy Capgemini is one of the European companies that moved here, while food and grocery delivery platform foodpanda, which is owned by German food delivery group Delivery Hero, established its base in Singapore in July, a decade after it started operations here.

Mr Jakob Sebastian Angele, chief executive of foodpanda Asia, said Singapore is the firm’s base for market expansion and a test bed for new features and innovation, such as pandamart, its network of delivery-only stores and pandago, its on-demand delivery service.

Foodpanda also operates in Cambodia, Laos, Malaysia, Myanmar, the Philippines and Thailand.

Singapore is the regional hub for the Finnish oil refining and marketing company Neste. It is increasing the capacity at its Singapore refinery, which will raise renewables production capacity to 2.6 million tonnes a year by the end of the first quarter of 2023.

It will also put in additional capabilities that will allow the Singapore facility to process waste and residue raw materials.

Foodpanda’s Mr Angele noted that firms that have Singapore as a base still need to adopt a hyper-localised approach to venture into the region.

ASEAN is a diverse market, and each country is at a different stage of development. There are highly developed economies such as Singapore and Malaysia on one end of the scale, and less developed economies such as Laos, Myanmar and Cambodia on the other end.

Mr Angele said this diversity means companies will have to adapt their products and services to remain competitive.

Mr Humphrey added that ASEAN’s diversity presents opportunities because companies can manufacture different types of products in different countries, depending on which one has the relevant talent or skill sets.

This allows firms to manufacture lower-value products at a cheaper location and higher-value products at a more developed site where the people have the relevant skill sets.

Full regional economic integration under the ASEAN Economic Community would mean goods and services could move freely around the region, noted Mr Humphrey, adding: “It would also allow for better economies of scale in the region.”

The European Union signed free-trade agreements with Singapore in November 2019 and with Vietnam in August 2020.

Similar deals with other ASEAN economies are ongoing, and negotiations on an ASEAN-EU trade pact will resume after talks were suspended in March 2009.

Mr Humphrey said more also needs to be done to reduce non-tariff barriers to trade.

Non-tariff barriers include import quotas that restrict the number of goods that can go into a country, and the imposition of local content requirements that stipulate that a certain percentage of the final value of a good or service must come from local firms.

“It is a clear protectionist move by some of the countries. And some of the worst offenders are Thailand and Indonesia,” Mr Humphrey added.

 

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.