International Business in Singapore

Introduction

Singapore is a country located in the south-eastern parts of Asia and is an Island country comprising of up to 63 different Islands. The country is served by a port off her coast which is also considered as one of the busiest in the world. Singapore is among the Asian Tigers and her massive wealth ever since attaining independence and self rule governance has seen it become a preference for many global business magnets. The country’s economy is basically dependant on service sector as well as on manufacturing industries. The world’s second largest casino gambling market is found in the country while it is also considered as the fourth-leading financial centre in the world. The World Bank ranks Singapore as the world’s easiest country from where investors can plan and do their business. This paper seeks to explore further on the suitability of Singapore in as far as international business is concerned, analyzing on her success and failures, globalization in Singapore, her taxes and tariffs, as well as her foreign direct investment and the balance of trade. Buy this excellently written paper or order a fresh one from acemyhomework.com

How international business fair on in Singapore

The Singaporean government has put in place incentives that are meant to woe international investors into establishing their business in the country. According to World Bank statistics, Singapore ranks fourth in the world with reference to the simplicity of starting up business. The authorities in the country have enabled this by making it easy for investors operating in the country to acquire construction permits, getting electricity connections, as well as registering their property. Overly, the country took the first position in enabling cross-border trading, meaning it attracts more international business traders to operate from her territories. It is also easy in the country to apply for and be granted credit while the government generally cushions investors from harsh conditions that can easily hurt business performance. The strong legal systems and mechanism are highly competent in enforcing contracts while the authorities are also quick in resolving insolvency related issues.

In general, Singapore’s leading international business partners include Malaysia, Hong Kong, China, Indonesia, as well as the United States of America, and Japan. The country exports more than one million barrels of oil per day although it also imports more than two million barrels of oil daily. The main export commodities include pharmaceuticals and chemicals, petroleum and refined petroleum products, together with machinery and equipments. On the other hand, she also imports mineral fuels, foodstuffs, chemicals, consumer goods, machinery and equipment from international import partners which also include South Korea and Taiwan (Wong & Chan 507).

Key success of doing business in Singapore

Singapore is strategically placed as a business hub where the country acts as a meeting point between the East and the West. More investors en route to these parts of the world make frequent stopovers in the country as they explore on her suitability for doing and sustaining business. The country also boasts of modern infrastructure that support and enhance business performance, including state of the art rail network, good roads, and an elaborate air transport infrastructure. The country produces oil which is used mainly to assist in the running of economy while other vital factors of production, such as electricity, are readily available.

The highly developed free-market economy particularly attracts investors from different parts of the world as this is an incentive to development. The prices are generally stable and the country’s GDP is comparatively higher than those of other developed countries in the world. Technologically, Singapore has explored numerous opportunities and her pharmaceutical and medical industry remains highly advanced owing to the integration of technology. From Singapore’s geographical location, it is easy for products manufactured in this country to reach countries such as China, Indonesia, and Malaysia which have huge populations and therefore offering ready market to the country’s products. The authorities have managed to stamp out corruption in the country which often scares away foreign investors.

Singapore’s population is also highly skilled and educated, offering quality labor force to investors willing to venture into the country. The country has also taken an initiative of integrating the capabilities of the information technology into its production sectors, thus enhancing its opportunities and chances of growth. Most Singaporeans are connected to the internet in one way or the other, making it easy to communicate in the country. With modern trends showing indications that information communication technology has a huge role in enhancing growth and development, Singapore’s connectivity rate offers it a very strong position as a country or destination where business performance is likely to succeed (Krugman 62).

Business failures

By virtue of her geographically strategic location which also makes Singapore an international transport hub, the country has been grappling with the problem of illicit drugs trade. The country faces the threat of money laundering as a result although strict regulations have been enforced to contain it. There is also the problem of piracy, particularly in the Malacca Strait, a menace that has the potential of scaring investors away. Maritime boundaries between Singapore and her immediate neighbors, Malaysia and Indonesia, remain unresolved for so many years now. This is a potential scare to development and business mainly because suspicion remains high between these countries and problems of sovereignty could easily creep in to affect the international relations.

Additionally, relations between Singapore and Malaysia have not been the best despite the two countries being close trade partners. Historical suspicions between the two neighbors continue to strain their relations with Singapore consistently threatening to send her military across the border to enforce her demands. Currently, the two countries have an agreement where Malaysia is expected to supply clean water for human consumption to her neighbor. However, Malaysia has been threatening to discontinue the supplies, an action that could potentially disunite the two neighbors.

Business customs and etiquette in Singapore

Singapore’s business attire is casual, with short sleeved shirts and long trousers being generally acceptable. Ties are less common for most business operatives, save for those employed in the financial sector, such as banks. In most business meetings, the sessions commence with warm handshakes and introduction of members in attendance. Exchange of business cards takes place immediately meetings get underway and mostly it is expected that the person receiving the card does it using both hands.

The way through which to address people varies as there are natives with different backgrounds, including Indians, Chinese, and Malays. It is advisable to stick to an honorific title while addressing people unless if they advice you otherwise. Most travelling around the city is by taxi although an MRT service is also available, especially when traffic jams seem to be inconveniencing. Generally, Singaporeans cut a calm demeanour and communicate with welcoming softness. In business meetings, it is advisable to stick to the agenda and not go off tangent by discussing other non-related issues. Business negotiations take place at very slow pace as Singaporeans often are non-confrontational. They take their time to respond to questions as they need to be sure of their answers. They put much emphasis particularly on price and deadline issues and therefore you need to be fully prepared with concessions for the sake of your own business (Zuliani para 1).

Types of businesses to be done in Singapore

Singapore is a great technological hub where most people, both visitors and locals, marvel at innovations. As such, you can run a mobile phone shop where a lot of people will be interested in checking and buying the latest models and releases by manufactures. Additionally, you can also stock an assortment of electronics, including portable computers, video games, video players, digital and portable music players. You can also start an accessories shop where you can specifically deal in parts of computers, cameras, mobile phones, and portable music players. You can also deal in computer software as Singapore is largely ICT intensive and many people are continuously looking for alternatives of increasing efficiency.

International trade between Singapore and other countries

Singapore exports light and heavy machinery, as well as manufactured goods and equipments, which include electronics and telecommunications gadgets. She also exports refined petroleum products, chemicals, and pharmaceutical products to Malaysia, which is also the leading export partner, at 12.2 percent, Hong Kong at 11 percent, and China at 10.4 percent. Other international export partners include Indonesia at 10.4 percent, the USA at 5.4 percent, and Japan at 4.5 percent. In 2011, Singapore’s export value stood at $409.2 billion, which was a marked improvement from the previous year’s value of $351.2 billion. The country imports mineral fuels, chemicals and chemical products, finished consumer goods, foodstuffs, machinery, and equipment. The country’s main import partners include Malaysia and the USA, each at 10.7 percent, China at 10.4 percent, and Japan at 7.2 percent. Other significant import partners include South Korea and Taiwan, each of which stand at 5.9 percent. In 2011, Singapore imported goods worth $36.55 billion which was a significant drop from her previous year’s value of $310.4 billion (Central Intelligence Agency para 1).

Singapore and globalization

Singapore is ranked as the third largest economy in terms of her degree of globalization in reference to the GDP value. According to the index released by Ernst and Young, Singapore’s main reason for her globalization has been the openness to participate in trade, capital movements, the exchange of ideas and technology, as well as the easiness with which labor is moved between countries, as well as the cultural integration levels. At present, Singapore is home to close to 7,000 multinational companies, a fact that is attributed mainly to the strategic positioning of the country. These multi-nationals account for about two-thirds of Singapore’s total output, a majority of which is exported to other countries (Ernst & Young para 1).

Free trade agreements and organization

Singapore has more than ten international and regional trade agreements, all of which have strategically been signed to spur trade and growth. These trade blocs include the Association of South East Asian Nations, which is abbreviated as ASEAN. The bloc is constituted of other countries in the region, such as Malaysia and Taiwan, which are also performing well economically and it allows for easy movement of trade within the territory. Singapore also has a trade agreement with the USA which is among the biggest trade partners of the country. Other leading international trade partners with the country, including China and Japan, also enjoy common trade agreements that see free movement of goods from either side (Yeung & George 107).

Benefits of dealing with international organizations

International organizations benefit Singapore in ways that continue to sustain and enhance its economic growth. These organizations offer opportunities of employment to Singaporeans, thus giving them the financial power necessary for the growth of any economy. These organizations also pay taxes and contribute a great deal in enabling the government to collect revenues for the day to day running of its operations. They also enhance international integration by offering Singaporeans opportunities to act as expatriates in other countries where they learn to mingle and associate with the locals.

International organizations, in a way, also assist in exporting the Singaporean culture and way of life to other countries. Organizations operating in the country develop new systems and strategies that are unique to Singapore and also try them out in other countries to see whether the ideas work. Some other foreign expatriates who are posted by the international organizations to come and work in Singapore transform into investors after admiring the environment, thus further helping the country to realize growth and development (Mutalib 39).

Taxes

Singapore applies taxes to goods and services as a way of enabling the government obtain resources for running daily operations. The Singaporean form of Value Added Tax is known as the Goods and Services Tax, commonly abbreviated as GST. This consumption tax is levied on goods as well as services that are supplied locally and also those that are imported from foreign countries. This tax is not an additional operation cost to the manufacturer as it is levied on the end consumer. Currently GST is charged at 7 percent to the set selling price. Companies producing goods and services and which are GST-registered are required by law to collect the GST from their consumers then forward the same to the authorities.

GST is levied on all taxable supplies, meaning all goods and services that have been manufactured in Singapore excluding exempt supply. Most goods manufactured locally in Singapore and services rendered are considered standard-rated supplies. A taxable supply is divided into two categories; the standard rated and zero-rated supply. The standard rate currently stands at 7 percent. Exempt supplies do not attract any GST and are also divided into two categories, that is, financial services and lease and sale of residential land.

Foreign direct investment

The period between 1995 and 2005 witnessed a remarkable increase in Singapore’s foreign direct investment. The major contributors to Singapore’s FDI include European countries, North America, as well as Asia. In total, these regions contribute up to 82 percent of Singaporean FDI stock. In particular, the United Kingdom, Netherlands and Switzerland are the leading European economies with direct foreign investment in Singapore. Combined, the three countries contribute to over 77 percent of all foreign investments from Europe currently established in Singapore. Two other countries from Europe with significant investment in Singapore include Germany and Norway

From the Asian continent, Japan leads the pack of major investors in Singapore with her total direct investment in the country comprising of 60 percent of the continent’s total. Malaysia and Taiwan have also considerable investments in Singapore, with both countries accounting for 10 percent each of the total investment from all other Asian countries. Hong Kong’s direct investment in Singapore has also been steadily rising and has already reached a significant percentage (Pempel 13).

The major investments in Singapore which are foreign owned include financial and insurance institutions, hotels and restaurants, as well as a host of manufacturing companies. The other sector with huge foreign investment is wholesale and retail sub-sector. In total, these foreign investments account for between 80 and 90 percent of the FDI stock in Singapore on average. With continued development and improvement of all the production sectors, Singapore is set to continue attracting other foreign countries and investors wishing to expand their territories and markets.

On the other hand, Singapore also has portfolio investments in different countries as the country seeks to enhance her economic prowess and sustain her economy. Although the amount of direct investment interests from Singapore to other foreign countries is not comparable to the foreign direct investments in her own territory, the figures are set to grow with time as the country continues to experience growth and expansion in her overall economy (McNicoll 217).

Balance of trade

Latest figures posted on March 2012 indicate a surplus balance of trade figure for Singapore. A total of 2447 Million Singaporean dollars worth of trade were collected in the fiscal year ending March 2012. This is an indicator of the country’s growing appeal for investors, particularly foreign multi-billion-dollar multinational corporations whose business performance has tangible results in the economy. In the past, Singapore’s balance of trade has been recording deficits but the trend has changed in the recent years (Solingen 507).

Conclusion

Singapore is considered among the Asian tigers following the country’s successful economic growth over the years. Singapore remains one of the most lucrative and sort after business destinations in the world. Her strategic geographical location makes the country a business hub that connects the East and the West. The country’s main export products include refined oil and related products, manufactured commodities, such as electronics and telecommunication products, as well as machinery and pharmaceutical products. In return, the country imports fuel, foodstuffs, machinery, and finished consumer goods. Main international trade partners to Singapore include the USA, China, Malaysia, Hong Kong, and Taiwan. Foreign direct investment is also significantly present in Singapore with the main players including the United Kingdom, Switzerland, the US, Japan, Malaysia, and Taiwan. The countries balance of trade has steadily risen over the years, where it recorded deficit results, to the present results where the country mostly records surpluses. The country has also signed numerous trade tariffs and agreements with other international trade partners, such as the US. However, despite positive trade operations and outcomes, Singapore is grappling with the problem of illicit drug trade owing to her positioning on the international trade corridor. The threat of piracy around its waters also threatens continuous growth in the economic front.