By Steve R. Okun, Chairman of the American Chamber of Commerce in Singapore, and Vice Chairman of the International Trade Committee at the Council of the Singapore Business Federation
Singapore’s Prime Minister Lee Hsien Loong’s National Day Rally speech held great significance to the foreign business community. The Prime Minister spoke on the influx of foreign talent, rising property prices, and the challenges for Singapore as it continues its growth as a cosmopolitan business hub. These issues arise with the booming Singapore economy.
The latest survey conducted by The American Chamber of Commerce in Singapore (AmCham Singapore) reflected the strong growth in Singapore business. But with dynamic growth come challenges such as higher costs of doing business which is of special relevance to the U.S. business community in Singapore.
The survey showed U.S. companies in Singapore are the most optimistic about the global economic outlook compared to last year. Most respondents (73%) predict the economy to be better or much better in 2010, a vast improvement from respondents in 2009 – when only 16% had such optimism.
The turnaround in optimism is greatest for U.S. businesses in Singapore than anywhere else in ASEAN. The Singapore government’s moves to counter the crisis and the ability of the U.S. companies to leverage Singapore’s regional status by taking advantage of intra-region trade are cornerstones for that optimism.
Positive changes in the world economy have reflected particularly strongly in ASEAN, as the world begins to regard it as a key component in the move towards recovery. Survey results show that ASEAN’s contribution to global business has continued to increase over the past two years and most respondents (70%) expect that the region will play an even more important role in the future. This is of special relevance in Singapore as home to so many regional headquarters for U.S. companies.
Of course, many issues must be tackles when doing business in ASEAN. The survey found corruption continuing to be a source of great dissatisfaction for respondents, many of whom cited it as a barrier to doing business in ASEAN. The level of local protectionism also remains a concern of AmCham members in many key ASEAN markets, including Indonesia, Malaysia, Thailand and Vietnam.
Among the ASEAN countries surveyed, business conditions in Singapore were the most conducive. US businesses in the region respond to this optimism by increasing investment in Singapore, including hiring more staff and bringing in additional expatriates.
But with this increased supply of workers and investment comes an increased demand in needs for companies and their employees. The survey identified a growing dissatisfaction among AmCham members with the increased cost of living, higher housing costs, and lack of space in international schools, which are products of Singapore’s preeminence in the region as the expatriates’ location of choice.
This year, 91% of respondents expect an increase in cost of living, while 89% expect an increase in housing costs. There was a sharp increase in dissatisfaction with housing costs, increasing from 55% in 2009 to 78% in 2010.
Rising costs result from rising demand. As the ASEAN region grows in importance to the foreign business community and as Singapore remains the regional business capital for U.S. businesses who desire to be at the center of that market, costs increase.
Singapore, however, differs from other global locations that serve as regional headquarters. Leading global cities such as Hong Kong, London and New York, being much greater in size, would seem to be better insulated to large swings in cost when there is an uptick in demand.
Similarly, Singapore has one of the best public school systems in the world. Yet many expats are here for a short period of time, or come with the expectation of returning to their home country. As such, their children need to be kept in schools with home-country curriculums. Thus, there must sufficient places in such schools so companies can bring expatriates to Singapore based on business needs and not on concerns about whether their children can attend school.
Can costs get too high in housing and office space that it would affect Singapore’s established status as the regional business headquarters for ASEAN? What if there are not enough international schools with home-country curriculums? Could this lead to companies increasing staff elsewhere? Answering these questions is vital not only the foreign business community, but also to the wider Singapore business community.
These are questions the U.S. business community wants to help answer. And the Singapore government has many avenues open to corporations to work on the business challenges. From working directly through the Economic Development Board, through offices such as the Ministry of Trade & Industry, and through other chambers of commerce such as the Singapore Business Federation, AmCham can weigh in on the development of public policy.
The Singapore business community will also work with the US business community. On the heels of this survey, the Real Estate Association of Singapore reached out to AmCham to discuss such issues.
AmCham Singapore looks forward to engaging in dialogue with government agencies, local chambers, and business associations. We welcome working with them on what can be done to improve the business environment in Singapore and continue to make Singapore a place where U.S. businesses continue to invest and grow.
For more information on the ASEAN Business Outlook Survey, visit: www.amcham.org.sg/aseanbusinessoutlook.