Investment interest in Singapore from non-traditional locations including Russia and the Middle East is escalating, as firms look for a base from which to tap the growth of Asia.
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Currently, around 310 Middle East companies are registered in the country, higher than the 260 firms recorded in 2007. According to the data released by the Accounting and Corporate Regulatory Authority of Singapore (ACRA), Russian companies have moved in at a faster pace, rising to more than 200 from 140 in 2007.
“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 (EDB), the agency assigned to bring in foreign investors.
Recently, some firms from these regions expecting to gain from the fast-growing oil-and-gas-related industries in Asia have announced investments in the country.
These include Russia’s Gazprom, which plans to bolster trading of liquefied natural gas (LNG) in the region through its Singapore unit, and Qatar-based Tasweeq’s new office, which will have its official opening this week.
The representative office of Oman Oil Company in Singapore set up last month to market methanol feedstock and aromatics in the region, may also grow into a full-fledged headquarters within the next three years.
Although industry-specific opportunities are key to these developments, Singapore’s wider proposition as a “global business city” also attracts those new to the Asian market. “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,” said EDB.
This trend of increasing direct investments from Russia and the Middle East is a promising one. Most of the country’s fixed asset investment (FAI) still comes from the US, Japan and Europe. Figures from EDB showed that these three regions accounted for $7.6 billion or 65 percent of the total FAI committed in 2009.
The global economic crisis meant that these investments in equipment, facilities and machinery declined from the $15.4 billion or 85.6 percent of the total FAI in 2008.
Available statistics track investments from places other than the US, Singapore, Japan and Europe, as a grouped sum. Including the activities of firms from India and China, the gauge of investments from non-traditional economies stood at $700 million in 2009, compared to $800 million in 2008. This was 5.9 percent of the total FAI seen last year compared to 4.4 percent the year before.
Economists are certain that growth resilience in Asia will attract more investments to the region, although they could not tell if Middle East and Russian investments in particular are likely to keep rising.
Mr. David Cohen of Action Economics said that the diversification of capital sources 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 market observers noted the increasing number of newly globalized firms, which are now using Singapore as a springboard into Asia.
According to Mr. Alexey Dakhnovskiy, commercial senior counselor at the Russian embassy in Singapore, he knows of companies which previously conducted business directly in mainland China but are now opting 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 attractive tax rates and transparency are long-standing pull factors, “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,” added Mr. Dakhnovskiy.
Russian enterprises’ interest has been driven by initiatives such as the Russian Business Incubator: Futurus, which aims to bring research and Russian technology to Singapore market, and the annual Russia-Singapore Business Forum.
Mr. Dakhnovskiy said that momentum is likely to pick up, as at least another oil firm has its eyes on the country for its global expansion plans, and others that are planning a public listing here.
Meanwhile, EDB said that it has already been “stepping up efforts to engage businesses from these regions by making more visits to understand the companies better.”