2016 marked 50 years of official diplomatic ties between Singapore and the United States, and coincided with the two nations reaffirming their relationship through the renewal of the US-Singapore trade pact. The signing is set to boost a bilateral business relationship that was worth $54 billion in 2015, benefiting thousands of companies, workers and consumers in both nations.
The timing is near-perfect for those enterprises that embrace the ability to trade across international borders as being crucial to their future as employers and profit-earners.
One reason for that optimistic outlook is the ASEAN Economic Community (AEC). Having kicked off in earnest at the start of 2016, the AEC seeks to create a single market and production base by freeing the flow of goods, services, investment and skilled labor across Southeast Asia and its roughly 625 million inhabitants across the 10-nation bloc grouping of Singapore, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, and Vietnam.
The AEC represents a larger potential consumer opportunity to US businesses than that available in either the European Union or via the North American Free Trade Agreement. As an entry point to the AEC, Singapore offers American companies with a gateway to the world’s biggest free trade area and a rapidly growing middle-class, while the spending power of US consumers and investors are important drivers to Singapore’s world-class companies.
Today, there are more than 3,700 US companies operating in Singapore and these numbers are set to continue. Indeed, the American Chamber of Commerce’s 2016 Business Survey has found that 86 percent of US businesses currently operating in ASEAN expect to increase their level of trade and investment in the region over the next five years.
Singapore’s zero trade tariffs, few restrictions on foreign direct investment and business-friendly reputation make it the obvious location for US companies to continue with their regional plans.
Singapore is also going through a transition towards information technology, research and development and innovation, which sits very well with many US sector strongholds and is only likely to burnish its reputation as a hub.
The American Chamber of Commerce says Singapore is the top choice for US IT companies seeking a base for expansion in Southeast Asia. They are not alone.
Singapore’s appeal to US business extends firmly into infrastructure, with $110 billion set to be spent annually in ASEAN in the decade to 2025, according to estimates by UNCTAD. The city-state is also set to benefit from China’s ambitious Belt and Road Initiative (BRI) – President Xi Jinping’s plan that is designed to develop stronger economic ties between China and the nations that sit along the former Silk Road trading routes of ancient times.
Singapore is strategically located along the Southeast Asian outreach of the plan and one of the largest beneficiaries of China’s $14.8 billion spend in 49 countries in 2015 as part of the BRI plan. Sectors like transportation, construction and energy – which many US firms leverage in Asia – are set to see opportunities from the huge amounts of infrastructure spending.
Even in the current global climate of trade protectionism, avenues for cooperation and mutually beneficial business links remain.
All this underscores how important 50 years of official ties between Singapore and the United States have been – and how important deepening them could be to the health of both economies in future. With this relationship as a model, the evolution of Singapore/US ties could be an important indicator of the future for trade and investment development far more broadly.
Harish Venkatesan is Head of International Subsidiary Banking, HSBC Singapore.