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Doing Business in Singapore

by: Jaime Ong-Yeoh

Singapore is an outlier in Southeast Asia in a multitude of ways. With a land size and population approximately comparable to the city of Hamburg in Germany, it is 459 times and 2,645 times smaller in size than its immediate neighbours Malaysia and Indonesia respectively. In a region characterised by emerging markets, it is the only country viewed as a developed market. Its GDP per capita (2020) is USD59,797 [1], approximately 13 to 14 times the average in the region [2].
 
To make up for its small size and limited natural resources, Singapore actively developed the policies and infrastructure needed to position itself as an open, market-oriented economy. Prior to the rise of China as an economic superpower, Singapore was known as one of the Four Asian Tigers along with South Korea, Taiwan, and Hong Kong. It continues to be one of the leaders in global business indexes – Asia Pacific’s most innovative nation in the Global Innovation Index 2020 [3], 2nd out of 190 global economies for ease of doing business in the World Bank Doing Business 2020 Report [4], and 2nd among 169 countries for trade connectivity according to the DHL Global Connectedness Index 2020 [5]. It is also widely known as one of the big three strategic locations for regional Asia Pacific headquarters of multinational companies (along with Shanghai and Hong Kong that focus on the China market).
 
If you choose to do business in Singapore, you will be aided by its conducive policies, efficient processes, and be treated fairly by the law
 
The three most important things when doing business in Singapore:
  • Success or failure, trust or distrust, is based on meritocracy. One is judged based on merit over everything else, making it an attractive, yet highly competitive, business landscape.
  • Singapore has long been exposed to top multinational companies with products and technologies from all over the world. In addition, it has many homegrown conglomerates that are regionally successful across diverse industries. Therefore, position your offering carefully - unless you are confident that yours is a truly exceptional offering, avoid positioning yourself as superior or assume that you will be able to command interest or a premium just because you are a European/Western company.
  • Singapore has a large amount of foreign labour. While the majority are low-wage, low-skilled migrant workers, there are also many highly paid C-suite expatriates, professionals, and knowledge workers not just from Asia but all over the world. Therefore, do not assume that the people you meet and deal with come from the same background or have a homogenous culture. Be mindful of different cultural influences, and be adaptable.
 
Top challenges for doing business in Singapore:
  • It is not a low-cost location, therefore do not count on labour arbitrage in Singapore compared to other countries in Southeast Asia. Instead, leverage its location for access to the rest of the Asia Pacific region, as well as its knowledge economy and highly skilled workforce such as in advanced manufacturing, high tech products and services, and professional services.
  • Singapore has had great success with doing things its own way, and as a developed nation it naturally benchmarks itself against other more advanced countries or economic leaders such as the US, China, Germany and Japan. However, in doing so, Singapore may be missing out on learning from less developed or rapidly developing countries about different approaches and ways to adapt.

 

What to look for in a reliable business partner

 
You will not have a shortage of established, well-run companies in Singapore as potential business partners. In order to find the right business partner, look more closely at how each company is set up to evaluate the way in which it would complement your business; for example, the functions it has, its technical capabilities, and its human capital.
 
An ideal business partner:
  • Has a regional presence and strong network in Southeast Asia, or is willing to explore new markets rather than focusing only on the local Singaporean market.
  • Understands that different countries in Southeast Asia have different business cultures compared to Singapore, and is willing to adapt. 
  • Is not too set in its ways or is rigid, as that might stifle your potential and your ways of working.
 
It is always a good idea to have an independent third party contact on the ground to perform due diligence by checking the reputation and credentials of potential partners. An initial background check can be done by going to the Accounting and Corporate Regulatory Authority (ACRA) online directory [6].
 

Business Culture and Etiquette

   
Meetings should be scheduled in advance, and in a business setting punctuality is expected. It is advisable to communicate the objective or provide a high-level agenda in advance, but this may not be strictly followed if it is felt there are other more pressing matters to be discussed. Working lunches are acceptable if suggested by the host, otherwise you should avoid scheduling meetings between 12 pm to 2 pm as most Singaporeans prefer to go out for lunch and socialise with colleagues (lunch break is 45 minutes to 1 hour, with the exact time being up to the organisation/individual).
 
Initial meetings are usually slightly more formal and used for both parties to get to know each other and build rapport. Not much emphasis is placed on hierarchy and titles during introductions - there is generally no specific order in which one should greet people, be introduced, or be seated. You can expect some small talk at the beginning of the meeting, after which either party can initiate the business conversation.
 
Business cards are usually exchanged during the initial introduction. There is no set etiquette, but the general practice is to present and receive it with both hands (a custom adopted from the Japanese), examine it to show interest, and lay it down on the table in front of you. More recently, some people may use a mobile phone app to scan your business card and return it to you so as to not waste paper, or not have a business card at all.
 
Gift giving is avoided as it may be construed as corruption. However, if you would still like to present something, small gifts of nominal value such as corporate branded items or handicrafts and food from your country are generally acceptable.
 
On the other hand, business entertainment in the form of meals and drinks is a common and acceptable part of business culture and local hospitality. It is typical for the host or person who extended the invitation to pay the bill, and the other party should reciprocate the gesture at the next opportunity. Note that spouses are generally not invited unless explicitly mentioned, as the conversation can be both casual as well as business-related. Be aware that business relationships may become social ones; the line is not distinctly drawn.
 
Do not expect decisions to be concluded immediately during meetings, as the decision-making process may take a little longer. This can occur for various reasons. Firstly, it can be group-based - lower levels may not feel comfortable making decisions independently, so recommendations are discussed and jointly agreed upon in a peer group. Secondly, recommendations may then need to travel up several levels of authority, with the decision ultimately being made by the power holder. Singaporeans can be highly effective and empowered to make decisions. However, for major deals, companies need to operate within strict corporate governance with different levels of authority matrix.
 
Singapore has a long-term oriented culture. Therefore, be prepared to make heavy investments (not necessarily in money, but also in time/effort/commitment) and be pragmatic in your methods with a view to reap benefits in the future rather than seeking quick wins. 
 
  • While travel may be at a considerable cost to you, the personal interaction achieved during face-to-face meetings are important and expected (at least initially and for matters of importance).
  • Disagreements and conflicts are not necessarily frowned upon but stay objective, logical and diplomatic when presenting your case. Trying to win an argument by using pressure tactics, dominance or making the other party lose ‘face’ will work against your favour.
  • Prioritise a long term, mutually beneficial relationship (win-win) rather than competition (win-lose) or seek to merely derive maximum value on a transactional basis.
  • Show humility and respect. Appreciate the experience and wisdom of the local partner rather than coming in with a fixed mindset/approach or forcing your mindset/approach upon them.
 

Building Trust

 
Singaporeans are critical; they apply careful analysis and judgement. You must have actual substance to offer and be able to prove your capabilities to gain trust. Having a good relationship alone will not be enough; you must perform.
 
Projecting a capable and professional image will also help others gain trust in you. Your organisation should appear credible and have the proper functions in place.
 
For important matters, one’s word or handshake alone is not sufficient. You will need to follow up in writing. Contracts should be formal and detailed; expect them to be scrutinised by the other party.
 

Be Especially Careful with

 
The government has put in place a very effective framework with clear policies and efficient processes for doing business in Singapore. If one wishes to operate within this ecosystem, one has the responsibility to play one’s part in an equally professional manner. Dot all your i’s and cross all your t’s – you must follow due process, perform proper and detailed recordkeeping, have tight controls, and apply industry best practices. 

 

Short Case Study 

 
A global insurance company with its regional headquarters in Singapore was undertaking a systems replacement for one of its core IT systems. This critical, large-scale effort was being executed by an American vendor.
 
The American vendor had sent several of its consultants onsite to manage the initial stage of requirements gathering with the business end-users in Singapore. As part of the process, the client had many decisions to make, as well as provide a lot of detailed information. 
 
The client Claims team was falling behind compared to the others, with many items still not completed. In one of her weekly follow-up emails, the American project manager from the vendor team wanted to stress these deadlines without sounding too authoritative. So she began her email with what was intended to be a joking, cheeky sentence, “The Claims team has the dubious distinction of having the most number of outstanding items …”.
 
The head of the Claims department did not take this lightly and replied to everyone on the mailing list, as well as the vendor management team, stating how she did not appreciate the accusation that her team was untrustworthy and underperforming. The vendor project manager apologised immediately, saying that it was meant to be a light-hearted encouragement and no offence was intended. Nothing more was mentioned after that, but the relationship had been damaged, and the working environment remained tense for the rest of the project.
 
Takeaway: Singapore is a high performing, highly competitive, meritocratic society. Any insinuation, even in jest, that one is not doing one’s best, performing worse than others, or not doing things in the proper manner will cause the receiving party to lose ‘face’ and should be avoided. 
 
 

References & Links

 

[1] GDP per capita (current US$) - Singapore. The World Bank. https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?name_desc=true&locations=SG
 
[2] ASEAN Key Figures (2020). The ASEAN Secretariat.
 
[3] Global Innovation Index 2020.
 
[4] The World Bank (2020.) Doing Business in Singapore. https://www.doingbusiness.org/en/data/exploreeconomies/singapore
 
[5] DHL Global Connectedness Index 2020.
 
[6] Accounting and Corporate Regulatory Authority (ACRA) online directory.
 
What makes Singapore the most competitive country in the world? Asialink Business.
Last updated: 04.08.2021 - 10:22
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