Emerging Markets : Focus on Singapore

Image: destination360

Singapore  formerly a British colony which became fully independent in 1965  with  approximately 5 million people with almost 60% Chinese. Singapore is one of the major hub for investments in the Asian pacific because of its cosmopolitan nature with different cultural background. Many foreigners find Singapore as their new home because of the peace and tranquillity and co existence of people of diverse culture and religion.

One of the reasons that makes Singapore to rise is the creation of Economic Development Board (EDB) which facilitated companies like HSBC, MAYBANK, ASCOTT to have their regional headquarters in Singapore. The general knowledge that economic growth solves social problem and the realisation of the small domestic market with the understanding that there is no natural resources to rely on made Singapore government to invest in its people to have the required knowledge am be able to compete well with the foreigners.

The government created possibilities for export by opening up its borders for foreign direct Investment unlike other countries they have always been outward looking.

Singapore Stats:

Ranking	Quality of Life	Economic Activity
1	London	London
2	Singapore	New York
3	New York	Hong Kong
4	Geneva	Shanghai
5	Sydney	Singapore
6	Hong Kong	Beijing
7	Paris	Dubai
8	Vancouver	Paris
9	Miami	Tokyo
10	Dubai	Frankfurt

Figure 1:  Quality of life

Ranking	Data 2010	$ US	Expected 2050	$ US
1	Singapore	56,532	Singapore	137,710
2	Norway	51,226	Hong Kong	116,639
3	US	45,511	Taiwan	114,093
4	Hong Kong	45,301	South Korea	107,752
5	Switzerland	42,470	US	100,802
6	Netherlands	40,736	Saudi Arabia	98,311
7	Australia	40,525	Canada	96,375
8	Austria	39,073	UK	91,130
9	Canada	38,640	Switzerland	90,956
10	Sweden	36,438	Austria	90,158

Figure 2: GDP Per Capita (2010 PPP US$ )

( Figure 1& 2 according to The Wealth Report 2012 published by Knight Frank and Citi Private Bank)

The Attractions:

The above stats might give you small indication about the growth and prospect of Singapore. Let us look at some of the attractions

Closeness to China: Singapore's closes to China which is the second largest economy in the world has definitely impacted on her growth  going by this shows a direct relationship between the two economies.

Free trade: Singapore government has always been one of  the foremost advocate for free trade and this preaching is paying off on the level of influx of foreign companies. Singapore has the busiest port in the world. it is also a key factor in its economic development.

Tax advantages: Singapore opened up its borders by allowing Investors and companies to benefit from the double taxation agreements with other nations. Start ups can gain tax advantage for the first 3 years if certain conditions are met. Angel Investors Tax Deduction Scheme (AITD) this like (venture capital) will also enjoy 50% tax deduction when they invest in start-up companies

Real Estate : The property business is booming with the abundant opportunities and also the policy that allows investors to own property in their name which is not common in the Asian-pacific.

Low Business cost: Investors are drawing towards Singapore also because of the low cost of doing business which is evident when the World bank ranks the country as the world's easiest place to do business in its report (Doing Business 2011 report). It takes just two procedures to register a company in Singapore with maximum of two days timeline.

The challenges:

The multi cultural divide might be used to disrupt the economy by some politician when they fill threatening. There are also barriers for foreign companies to operate in some sectors like legal services.

Emerging Markets : Focus on Asian - Pacific Countries

Having noticed that lots of multinational firms and investors see the Asia, Latin America as well as some African countries a safe haven in this time of financial crisis coupled with major European countries struggling to overcome the Euro debt crisis, we will be focusing on some Asian- pacific countries that are attracting these investments and also discuss why these countries have become the toast of investors.

In our previous post, we have featured some large financial firms in Europe who  find succour in the Asia, Latin America and Middle East, like Banco Santander, Standard Chartered bank and HSBC etc.

Looking at the responses and emails we have got from this part of the world, we have decided to write about some of these countries like, Singapore, Malaysia, Honk Kong, Indonesia and host of others in the next few days . We will focus on why these countries attract investors and the potential challenges. 

Why Standard Chartered Bank Operates Outside UK

Standard Chartered bank  is a UK bank with its  headquarters in London the assumed hob of financial activities in Europe. Standard Chartered bank has little commercial activities in UK compared with the financial activities in Asia, Africa and some part of middle east.

The question that comes to mind is why did Standard Chartered moved? or why don't they have considerable presence in the UK or even EU at large? Our  submission at EcoInshore is that, there  has always been contagion effects in the UK banking sector where the problem with one financial institution affects the other this is because of the exposure of trading of these other banks in the same market, the risk of one will ultimately affect the other.

The British banks that operates and realise more than 60% of their business activities  in the UK like Lloyds banking group , Royal Bank of Scotland (RBS) fell victim of this contagion effect predominantly caused by the Euro crisis which eventually affects their  balance sheet position and profits.  The unwillingness to diversify and enter into the emerging markets in other to hedge their risk exposure to Euro lead them to government bailout. This is evident because the UK government had to use tax payers money to bail out both Lloyds bank and RBS with the government having 43% stake and 83% respectively.

The two British banks Standard Chartered and HSBC have significantly diversify their business operations in Asia, Africa, Latin America and Middle east see their businesses not only grow compared to its other UK banks but with no bail out from government. 

Standard Chartered bank half year result of 2012 shows Income growth of 9%  these growth are based on 2 elements which are not evident in other UK banks  like  RBS and Lloyds bank.

1. Diversification and multiple income engines with growth rates in double digit : UK and America 26% , China 22% , Malaysia  21%, Indonesia 20% , Korea 13%  and Hong Kong 10%.

2. Cost and risk : The Payment Protection Insurance(PPI) provisions have depleted the profits Lloyds and RBS because of their more reliance on the UK increased their cost. Standard Charted have limited exposure to the Euro though but only acts as a bridge to link the Asia ,Africa with Euro

Though some might argue that Standard Chartered bank is not much of a retail bank that is why they do not have much presence in UK, but they understood that doing business in Malaysia, Singapore , china , Indonesia, Africa and middle east has been the best business decision they make because these regions make up 90% of their operating profit in the half year result.