How Singapore’s private firms can look abroad to grow
In recent years, the urge to go international has only intensified, prompted by factors such as the pandemic
AMBITIOUS enterprises in Singapore have always sought to expand outside their relatively small home market – a goal that the Enterprise 50 (E50) Awards, which KPMG co-organises with The Business Times, has celebrated for three decades.
In recent years, the urge to go international has only intensified, prompted by factors such as the pandemic, which compelled companies to sell to a wider range of markets. Although notable E50 winners have shown the potential rewards of internationalisation and deserve recognition for doing so, there are still concerns about moving beyond Singapore’s borders, especially to lesser-known markets.
There are understandable reasons for this reluctance. The prospect of expanding beyond Singapore – with its straightforward, structured and relatively low tax rate – into markets of far greater risk and uncertainty is not straightforward. Despite a plethora of government incentives, grants and assistance, expansion can be costly, and involves a multitude of tax, regulatory and compliance considerations. A lack of in-depth knowledge among enterprises in Singapore about overseas markets in Asean and the broader Asia region also adds to this hesitation.
However, with the right factors and knowledge, there can be smoother navigation through these challenges.
Know where to look for help
Success starts by making use of the help on offer – and there is no shortage of that in Singapore. The government is extremely pro-business and assists enterprises in different industries and at varied stages of growth to transform, innovate and expand overseas – such as through offering an array of grants and incentives.
Less positive, though, the sums are limited. Qualifying firms can access a market-readiness grant worth S$100,000 per new jurisdiction, with this amount divided into three categories for marketing, setup, and secondment of staff. Additionally, vast markets in Asia and other regions qualify as single jurisdictions, even though they typically have numerous provinces or states. That makes it harder for the grants to offset the costs of investing and setting up.
There is other assistance besides funding. Government agencies help aspiring Singapore enterprises by connecting them with larger companies that have expanded overseas. For instance, bringing together Singapore enterprises and parties from supply chains in other jurisdictions can be helpful – though some enterprises do encounter problems after this matchmaking process, given that business practices and processes often differ outside Singapore.
Beyond government support, there are associations in Singapore that can provide advice to firms aspiring to expand overseas – which is helpful when navigating unfamiliar jurisdictions. For instance, while some South-east Asian markets have grants, incentives and credit schemes, these may not be as straightforward to access as those at home; additionally, awareness about these schemes may be less prevalent. Furthermore, requirements are becoming more substance-based, which means firms might have to invest in headcount and fixed assets before qualifying. That makes the expertise available at associations extremely valuable; after all, some members will be familiar with these challenges and may have advice on how to overcome them.
Assess the risks before taking the plunge
The risks associated with expanding overseas depend in part on the nature of the business. A company selling products, for instance, may be able to do so online rather than via a physical outlet. Any business must also consider the optimal legal entity. Is it preferable to set up a company in that market or establish an overseas branch? Or should it enter into a distribution agreement with a local partner?
Each option has its pros and cons. Businesses also need to consider tax implications, such as how they can repatriate income in a tax-efficient manner. Or when it comes to transfer pricing, how will they ensure that intra-company charges are conducted at market pricing and at arms’ length? Other considerations, such as hiring employees locally or from abroad, also need to be thought through.
North, South, East, West: A world of opportunity
While the challenges are numerous, they can be overcome – with many of the past E50 winners paving the way and pushing beyond Singapore.
It is also the case that in this uncertain world, geopolitical tensions have made it harder for enterprises from some countries to enter new markets. However, Singapore’s neutral stance may be an advantage, along with its strong reputation, high levels of education, and its status as a global financial and trading hub. These advantages were built up over decades, and Singapore will carry them into the future.
As the E50 Awards marks its 30th year and with three decades of winners to emulate, companies are encouraged to look abroad and draw encouragement from those that have done so successfully. Although there are challenges associated with expanding internationally, the rewards can be substantial – and there is no shortage of assistance available that can increase the chances of success.
The writers are from KPMG Singapore. Chiu Wu Hong is partner, head of private enterprise, and Lee Bo Han is partner, R&D and incentives advisory.
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Copyright SPH Media. All rights reserved.
