SINGAPORE and Australia have concluded a landmark agreement to deepen ties which will, among other things, pave the way for Singapore companies to invest A$1 billion in Australian companies without the need for prior government approval.
Investments by companies linked to the Singapore government will still, however, require the greenlight from Australia's Foreign Investment Review Board (FIRB).
The agreement builds on the Comprehensive Strategic Partnership (CSP) adopted last June, said the Ministry of Foreign Affairs (MFA) on Friday.
The higher threshold of A$1 billion for non-government linked companies could trigger a rise in investments from Singapore, said UOB economist Francis Tan. The revised limit is up from the present threshold of A$250 million, said the Sydney Morning Herald.
Property and hospitality companies such as Pontiac Land Group are among those which have been channelling investments Down Under in recent months, with the weakening of the Australian dollar against the Singapore dollar.
ANZ economist Ng Weiwen noted that while the higher ceiling could foster more investments from private companies, there is unlikely to be a significant impact where government-linked companies are concerned.
The Singapore Exchange, for instance, found its 2010 attempt to take over its Australian counterpart thwarted by the FIRB, which flagged concerns that the deal was against national interests.
The economic climate will also influence investment prospects. While the CSP is "medium-term positive", companies are not bullish on capital expenditure in the next six months, Mr Ng said.
UOB's Mr Tan also raised the question of whether strategic assets in sensitive sectors such as defence or agriculture would be exempt from scrutiny from the regulator, even with the higher threshold.
Other key initiatives under the agreement include the modernisation of the Singapore-Australia Free Trade Agreement (SAFTA), which was signed in 2003. Under the third review of this deal, both countries will implement measures to boost trade and investment flows. Aside from reinforcing Singapore's position as a trading partner for Australia, it will strengthen the country's position as a hub for Australian businesses.
The deal is expected to reduce red tape, improve mobility and length of stay for business people and give greater leeway for businesses to bid for government procurement contracts in both markets.
In addition, Prime Minister Lee Hsien Loong and Australian Prime Minister Malcolm Turnbull have agreed to promote innovation and entrepreneurship. Research and scientific bodies will be brought together; these include the National Research Foundation, the Agency for Science, Technology and Research (A*Star) and Australia's Commonwealth Scientific and Industrial Research Organisation (CSIRO). To support their collaboration, matching funding will be provided by both countries amounting to about S$50 million over five years.
On the defence side, Australia and Singapore will jointly develop military training areas and facilities for use over 25 years at a cost of up to A$2.25 billion. This means Singapore will be able to boost the number of troops on rotation in Australia to 14,000, up from 6,000 presently.
PM Lee said: "It is a win-win deal that will cement relations and benefit Australians and Singaporeans for years to come. The CSP is an ambitious package covering many aspects of our relationship. We will move quickly to implement the various measures, although some will take time to bear fruit."
He added: "We have much to gain by working closely together. The CSP will draw our two countries closer, economically, politically and at the people-to-people level."
Organisations such as the Australian Chamber of Commerce Singapore (AustCham) and the Singapore Business Federation (SBF) welcomed the enhancements under the CSP framework. In particular, AustCham said the new developments address many issues faced by businesses seeking to expand into Singapore.
AustCham president Guy Scott said: "Singapore is best placed to be a hub for businesses looking to expand into the broader South-east Asian region, and these changes make it easier for companies to do that.
"The changes to labour mobility requirements are particularly exciting, and will open the door for many businesses to expand their presence in Singapore."
Meanwhile, Australia will locate one of its five "landing pads" - an A$11 million initiative of the Australian government to stimulate innovation and entrepreneurship - for market-ready startups in Singapore. The city-state joins a list which includes Silicon Valley, Shanghai, Berlin and Tel Aviv.
The SBF said: "Greater co-operation with Australia will reinforce Singapore's role as an international hub for innovation and the creative industries. It will also increase opportunities for Singapore companies and enhance complementary value creation.
"Businesses and entrepreneurs can leverage each other's network to expand their exposure to the ecosystem, broaden their market and then scale."
Other benefits under the deal include a multi-year visa for Singaporeans travelling to Australia; Singapore will also recognise the law degrees and postgraduate medical degrees of certain Australian universities.
The two countries also plan to start talks for mutual recognition of professional qualifications, with engineers and accountants high on the list, which could boost the flow of talent across borders.
ANZ chief executive in Singapore David Green said: "Singapore has recognised that structural shifts in its economy, like the gradual move out of manufacturing and into services, may accelerate with Asean's rise. This commitment between Singapore and Australia to promote closer collaboration, exchanges and agency-to-agency innovation and science engagement will aid Singapore's efforts in innovation amid its multi-year restructuring."