Tuesday, May 4, 2010

S'pore casts its net wider for investors

Companies from Middle East and Russia now coming here to tap into Asian growth story

Investment interest in Singapore from non-traditional locations such as the Middle East and Russia is on the rise, as companies seek a base from which to tap Asia's growth.

There are now about 310 Middle East companies registered here, up from 260 in 2007. Russian companies have moved in at a faster pace, rising from 140 in 2007 to over 200, data from the Accounting and Corporate Regulatory Authority of Singapore (ACRA) shows.

'Apart from the traditional catchments of the US, Europe and Japan, and the increasing importance of China and India, EDB is also seeing interest from new geographies such as the Middle East and Russia,' said the Economic Development Board, the agency tasked with bringing in foreign investors.

Recently, several companies from these regions looking to gain from Asia's fast-growing oil-and-gas-related industries have announced investments here.

These include Qatar- based Tasweeq's new office, to be officially opened this week, and Russia's Gazprom, which intends to ramp up trading of liquefied natural gas (LNG) in the region via its Singapore unit.

Oman Oil Company's representative office here, set up last month to market aromatics and methanol feedstock in the region, may also grow into a full-fledged headquarters within the next three years.

Industry-specific opportunities are key to these developments but Singapore's wider proposition as a 'global business city' is attracting those new to the Asian market too. 'Companies from the Middle East and Russia are looking to tap into the Asian growth story, and Singapore can provide an excellent platform for them to do this,' EDB said.

This trend of rising Middle East and Russian direct investments is a nascent one. Most fixed asset investment (FAI) in Singapore still hails from the US, Europe and Japan. Last year, these three regions accounted for $7.6 billion or 65 per cent of total committed FAI, EDB figures show.

The global economic crisis meant that these investments in facilities, equipment and machinery, fell from the $15.4 billion (85.6 per cent of total FAI) seen in 2008. But this was in the context of a 40 per cent drop in global flows in foreign direct investment reported by UNCTAD.

Available statistics track investments from places other than the US, Europe, Japan and Singapore, as a grouped sum. Including the activities of companies from China and India, this gauge of investments from non-traditional economies stood at $700 million last year, compared to $800 million the year before. This was 5.9 per cent of total FAI in 2009 compared to 4.4 per cent in 2008.

Economists could not say if Middle East and Russian investments in particular are likely to keep rising, but are certain that the resilience of growth in Asia will draw more investments to this region.

According to David Cohen of Action Economics, the diversification of sources of capital is a continuing process. 'The fact is that the emerging economies are beginning to carry a bigger weight on the world stage,' he said. 'This is most dramatically so in the case of China, but likely also for the Middle East, and Russia as it recovers from its severe downturn last year.'

Other observers do note the growing number of newly globalised companies which are now using Singapore as a springboard into Asia.

Alexey Dakhnovskiy, senior counsellor, commercial, at the Russian embassy in Singapore, told BT that he knows of companies which previously conducted business directly in mainland China but are now choosing to work through Singapore partners.

'Singapore companies are welcome in China and sometimes do not have the same problems Russian ones might face if we go in direct,' he said.

While transparency and attractive tax rates are long-standing pull factors, Mr Dakhnovskiy added that 'both big and medium-size companies are setting up offices here so as to grow their business in Southeast Asia, and some even throughout the Asia-Pacific region.'

The major Russian MNCs here - Gazprom, Russia's second-largest oil producer Lukoil and its largest exporter of steel pipes TMK - all set up offices within the past five years.

Interest from Russian enterprises has been fuelled by initiatives such as the annual Russia-Singapore Business Forum and the Russian Business Incubator: Futurus, which aims to bring Russian technology and research to market in Singapore.

Momentum is likely to pick up, says Mr Dakhnovskiy, who knows of at least one other oil company which has its eyes on Singapore for its global expansion plans, and others that are considering a public listing here.

Zlata Sheve, a business consultant with law firm Thummel, Schutze & Partners LLP, which has assisted Russians investing in Singapore, says that large players aside, many smaller Russian start-ups have also sprung up here in the import-export trade and as investment companies.

Meanwhile, EDB says it has already been 'stepping up efforts to engage businesses from these regions by making more visits to understand the companies better'.

Source: Business Times, 4 May 2010

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