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Minimize Foreign Trade Risks with These 10 Tips

foreign

Minimize Foreign Trade Risks with These 10 Tips

Does your company follow a strategy to go global? International expansion brings endless opportunities. Statistics show that companies that export boost their productivity by 34% on average over the first year. They are also more likely to survive in the long term when compared to companies with a local focus. 

However, we must emphasize the fact that foreign trading comes with risks. Currency, credit, intellectual property, transport, logistics, ethics… you’ll be dealing with a lot throughout this journey. Being aware of these risks and taking steps to minimize them will ensure the success of your brand’s international trade management.

10 Tips on How to Minimize Foreign Trade Risks 

Make Sure Your Products Are Allowed for Distribution

This is the first thing you need to check: are you allowed to trade with your products in the respective country? For example, the EU has strict regulations that prevent many goods from China from being imported. Each country has its rules, which your business must respect. Otherwise, you would waste a lot of time and resources planning an impossible expansion project. 

You can get familiar with the rules by reading relevant laws and regulations or contacting the customs services.  

Focus on the Legal Aspects of Business Expansion

Each country has its own regulations regarding businesses from abroad. Legislators set the legal framework and conditions for FFcustomers, sales, and particularities regarding the industry. It’s important to be aware of all these details ahead of time. When designing your strategy and drafting the initial contracts, you should make sure you stay within the legal framework of the country where you expand the brand. In addition, you should be aware of potential legal disputes and their solutions. 

Most business owners hire lawyers in their respective countries. A lawyer from your own country can also make connections and give you the details you need.   

Get Shipping Insurance

Everything looks well on paper. You consider the costs of production, transport, marketing, sales, and everything else related to selling your goods abroad. But there’s a risk that business owners often forget: damage during shipping. Items may break or get lost during transport. Your shipment may become a subject of theft or even vandalism. Accidents and contamination happen during transport all the time. If you don’t get good insurance for your shipment, you risk losing a lot of money. 

Proper insurance is not cheap. You should talk to several agencies to get the best offer on international shipments. We recommend using the best finance apps to plan all costs, including insurance over a longer period of time. These apps will help you calculate a decent budget and determine a final price that won’t leave much space for losses. 

Consider All Currency-Related Things

When planning foreign trade financing, you’re guided by the official currency in your own country. You focus on evaluating the risks related to credit, but as most business owners, you might forget about one thing: currency conversions may initiate losses, too. 

The COVID-19 crisis hasn’t been kind in this aspect. In March 2020, emerging-market currencies faced losses of up to 30%. That’s something that nobody could have predicted. However, you can analyze the movement of relevant currencies and estimate potential losses. You might need to work with a financial expert to make these evaluations.  

Evaluate the Risk of Protectionism

Trade protectionism is a policy for protecting domestic industries from foreign invasion. If, for example, a particular country stimulates the domestic flour milling industry, it will impose import quotas, tariffs, and other handicaps on foreign traders. Governments do this because they don’t want foreign products to drop the market prices and get the domestic industries in trouble. 

If you plan for global exposure, you have to learn about these policies. You must take the additional expenses into consideration, so you’ll evaluate a realistic final price. Will it be acceptable for the living standard of the respective country?

Register the Corporate Names and Trademarks

When doing business abroad, you risk violating another brand’s intellectual property rights. You can avoid that by registering your brand’s names and trademarks. If that process goes undisturbed, you can feel free to offer the products on the respective market. 

Consider the Risk of a Changing Market Environment

No market situation is stable and rigid for all times. You will develop a general strategy, which will be based on solid international risk management. But no matter how well you predict potential risks and future circumstances, you cannot be 100% sure that you did it properly. 

In Deloitte’s Global Trade Management Survey, none of the Swiss chief financial officers who participated thought that the global trade environment would become less complex. Only 15% of them said they expected the conditions to remain the same. 

Your company must continuously review the strategy and make the needed adjustments as the market circumstances evolve.   

Evaluate Foreign Ethical Standard

When offering your products on a global market, you should think about the differing ethical standards that you’ll face. For example, Israel has a thriving vegan culture. It might not be a good idea to trade fur there before evaluating the risk of getting your brand dragged through discussions as an unethical one. 

Get well informed about the customs and social conditions in the country where you plan to expand. 

Invest Time and Resources on Collaboration

Business owners often neglect the need to get comprehensive advice through collaboration with foreign lawyers and governmental services. They want to save time and money, or they simply forget that getting insider information is crucial before international expansion. 

You need to talk to experts who will explain the laws and regulations. You might need finance experts from abroad as well. In addition, you have to collaborate with industry insiders who know the market and can help you build a solid network of connections.

Get Acquainted with Foreign Business Customs

You may be used to a direct, friendly approach with a bit of humor in the mix. But in a foreign country, such an approach may be considered unserious or even offensive. Intercultural differences are a major factor in foreign trading success. 

You have to get acquainted with business etiquette when entering a new market. You can find this information online, but it’s best to hire a business advisor from the country in question. You’ll get proper guidance from someone who knows the target region and the communication etiquette in the particular industry. 

The country’s culture, politics, and economy are also important. Learn as much as possible, so you can start and maintain a productive conversation with potential partners. 

Foreign Trade Is a Complex Endeavor

Yes, it will be a rewarding experience for you as a business owner. With the right approach, you’ll take your brand towards substantial growth. However, you have to conduct basic research regarding the risks you’ll face during the expansion. This is a process that requires thorough planning, so don’t rush through it.

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James Dorian is a technical copywriter. He is a tech geek who knows a lot about modern apps that will make your work more productive. James reads tons of online blogs on technology, business, and ways to become a real pro in our modern world of innovations.

economy

Back to Growth: U.S. Business Leaders Have Rosy Outlook for Economy

The COVID-19 pandemic has affected every aspect of our work and life.

Business executives have had to quickly reconfigure operations, and millions have had to unexpectedly work from home or cease work entirely. Videoconferencing has become the killer app, and Zoombombing became a new privacy concern.

Despite the widespread health and business challenges brought on by the coronavirus, two-thirds of U.S. business leaders are optimistic the domestic economy will recover within a year, according to a survey TMF Group recently released.

It’s an encouraging sign that business executives in the U.S. are expressing this type of optimism, particularly based on the unprecedented challenges experienced throughout the economy over the last few months. This group was obviously very confident before the onset of the pandemic, and they now seem eager to not only restart their businesses but help reignite the economy as well.

We conducted the survey in the middle of April to gain insight into how companies plan to navigate these uncertain times. More than 40 percent of the 300 decision-makers who took part in the poll work in companies with more than 5,000 employees. Most of the respondents (85%) said their companies do business outside the United States.

Nearly a quarter of respondents (23%) expect a V-shaped economic recovery, meaning a dramatic bounce to pre-virus activity by the end of 2020 following the sharp collapse. Only a small minority (12%) anticipate the economic impact of the pandemic to the last two years or more.

Looking beyond the U.S., business executives were a little less optimistic but still positive: 56% of respondents said the global economy would recover within a year.

It may be easy for critics to judge the survey takers as stereotypical American optimists, but I believe their confidence is grounded on some key facts. The economic shock has been largely demand-driven, as travel restrictions and government stay-at-home orders shut down wide swaths of the U.S. and global economies. Many of the world’s governments acted quickly to offset the economic damage. In the U.S., the federal government and central bank organized a massive stimulus package and pumped trillions of dollars into financial markets. More than 60% of respondents said the financial support to workers and businesses in the U.S. has had a very positive or somewhat positive effect on their companies.

Now, as states allow more businesses to reopen, consumers are eagerly venturing out despite the ongoing health risks. As consumer and business demand rebound, companies will begin hiring again.

Indeed, business decision-makers are confident their businesses will rebound quickly. More than half say their companies will return to normal operations within six months.

In times of crisis, there’s a premium on bold leadership and decisive action. Resilient leaders continue to mount appropriate responses to the global pandemic while charting paths to recovery.

The survey underscored that the pandemic has forced business to rapidly evolve. Many are moving ahead to reassess, reimagine or reinvent their businesses. Thirty-six percent say they plan to accelerate plans for international expansion, and 32% plan to seize domestic growth opportunities.

It’s a positive sign that the strategic imperative to go global remains strong because COVID-19 has dealt a serious blow to the international system. The World Trade Organization predicted in April that world merchandise trade would plummet between 13% and 32% this year.

But the factors that have driven globalization for several centuries have not disappeared. People have been driven to seek profit internationally since the earliest days of the Silk Road, and this instinct will continue. Furthermore, the spirit of international cooperation has been strong in the response to the pandemic. Companies, government agencies and nongovernmental organizations are working across borders to solve problems at scale, such as developing a vaccine for the coronavirus.

A big motive for international expansion is the diversification of supply chains, cited by 35% of respondents. The coronavirus has interrupted the flow of goods across borders, from raw materials to finished products. The disruption has vividly illustrated that today’s highly interlinked, international supply chains have more potential points of failure and less margin for error for absorbing delays and disruptions.

Reducing dependence on one country or region is a priority. Diversifying your supplier base may increase costs in the short-term but will make your network more flexible and agile and potentially reduce the economic shock of future disruptions.

The outbreak of COVID-19 forced business to reassess every strategic objective and business plan. The health crisis has exposed vulnerabilities and created unforeseen challenges.

As businesses around the world consider how they can return from the economic crisis unleashed by COVID-19, the survey results provide some food for thought. Expanding internationally or domestically in uncertain times, for instance, may seem counterintuitive but could also fuel faster growth. Severe adversity provides real perspective. It is possible to find strength and confidence in the face of real hardship.

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TMG Group is an international professional services firm that provides administrative support services across multiple jurisdictions.

overseas

7 Tips For Starting A New Business Overseas

Moving abroad has been the dream of many people. Instead of traveling for a vacation, you can move to another country and establish your life there. Setting up a business is one of the best ways to settle abroad. But what are the odds that your business will succeed? That is the worry for most people who intend to start a business abroad.

This article aims to give you hope and remind you that it is still possible to do business overseas. Once you are set, you can travel to any country that you dream of living in and start your establishment. All you need is a market for your products and comply with the local government regulations. On top of that, be aware that sometimes you may be far from your establishment or home if you do not intend to move permanently.

These seven tips should help you to successfully run any business of your dream in a foreign country.

Pick Your Ideal Destination:

Before you can travel and start your trade overseas, you must be specific about the place you want to settle. Many factors will determine your destination. The climate of the region can so much affect how you cope with the transition. For instance, if you come from the tropical regions, moving to the colder regions might be a harsh encounter, and you will take time to adapt.

You would also want to research the economic and political stability before you move your investment there. You cannot put up your business in a place where you cannot sleep peacefully or are not sure if the product value will fall and lose your investment.

Learn the Local Language and Culture:

When entering into business, you should expect to interact with the local community. People are always skeptical when it comes to new businesses. They want to learn your business model, treat them, and your attitude toward their way of life. As you must be aware, nobody wants to give up on their culture.

Therefore, your business idea should not cross the customs of the people in the country you want to settle. Learning the local language makes it easy to blend with people and understand each other – improving your services to the consumers. However, the language will come in slowly when you finally settle.

Evaluate the Market:

Market research is essential when starting up a business abroad. What do people like? How specific are they when they buy their products? What pulls them to other brands? In your research, you need to understand two things. First, you should know who your ideal customer is and what they want. You also want to learn some things about your competitors.

How has the product you intend to launch been doing in the past – or anything similar? Knowing other traders’ performance in your industry will help you understand the growth potential of any new investment in the region. If your competitors have had some growth, you can invest in the industry and acquire customers.

Legalize Your Operation:

Each country on the planet has its laws regarding business operations. You should, as a fundamental step, register your company abroad when starting. Later on, you will want to register trademarks as well for your convenience. Inquire about business registration and licensing requirements, because in some regions, they are offered separately.

For small businesses and operations like retail and supermarkets, you may only need a local business license to operate. However, if you are into manufacturing, assembly, and supplies, you will need to register a company. You can consult an attorney about the process or visit a registered company formation agent to complete the registration process.

Expand Your Network:

Connections matter a lot in every aspect of our lives. In business, we need to engage with people who know the surroundings and the requirements we need to fulfill to ensure that we run our ventures smoothly. When you plan to move abroad, you should get in touch with businesses and people who can help you start.

Relationships also create lasting trust between you and your network. The network you have can support you in many ways through your business and provide any assistance you may need during challenging moments. It would help if you did not ignore your competitors as they are vital for the growth of your business.

Start with Freelancers:

Managing employees might be another issue people worry about when thinking of setting up a business overseas. How will you compensate your workers? What terms do you need in a foreign land? What about taxes and insurance? All these things might consume your time, money, and brains.

Managing employees has never been easy, and it is not going to be any time soon. As a startup, you should think of ways to run your business without formal workers at your premises. The initial stages of a business setup may not need workforce until you establish a customer base. Therefore, you are better off paying freelancers for the available tasks and pay them hourly or on daily wage agreements.

Set Up a Website:

We are in the 21st century when digital marketing matters in all business sectors. As a startup, you want to reach more prospects both locally and through the states and beyond boundaries. Various marketing channels are essential, but you need to reach more customers online through social media, content marketing, and PPC. It would help if you did not forget about SEO and the long-term customer flow.

However, all forms of digital marketing have something in common. Consumers interested in your ventures need to click on a link or button to read more about your business and products. You must, therefore, have a website for people to learn more and interact with your brand. Ensure that you have your contact information on the site, and make it easy to access mobile devices.

In Summing Up

Moving abroad to start a business is an awesome idea. Therefore, you should make sure that everything you will be doing is compliant with the local authority laws and consumer expectations to sustain growth. Research is essential, and preparation in every aspect is mandatory. Give no room to chances, but exploit every opportunity to grow.

ASEAN

Global Trade Talk: Navigating Geopolitical Currents in a Changing Southeast Asia

Global Trade Talk is part of an ongoing series highlighting international business, trade, investment, and site location issues and opportunities. This article focuses on the conversation between Simon Tay, Chairman of the Singapore Institute of International Affairs and Keith Rabin, President, KWR International, Inc.

Hello Simon. How have you been? Before we begin can you tell our readers about your background and current activities?

I am Chairman of the Singapore Institute of International Affairs (SIIA). We focus on the Association of Southeast Asian Nations (ASEAN), a regional organization comprised of ten countries in Southeast Asia, as well as the wider Asia Pacific and Singapore’s role as a hub for trade and investment and greater integration in the region. This includes a range of geopolitical issues including the rise of China, the role of the US, and most recently the coronavirus pandemic, which is serving as an accelerator for changes that have been occurring over the last decade.

Professionally, I am an attorney and was a member of Parliament from 1997-2001, serving during the Asian financial crisis. Then during the 2008 global financial crisis, I was stationed in New York at the Asia Society where we first met. These experiences have given me a unique perspective on the impact of globalization and other trends we have experienced over the past two decades.

While ASEAN currently possesses the third-largest economy in the Indo-Pacific and fifth largest in the world, many foreigners have never even heard of the regional group nor do they recognize its potential. Can you talk about how ASEAN evolved, what it represents as a commercial market and investment destination, and in terms of security and its global importance? What opportunities and obstacles and investment themes are of particular importance to foreign companies and investors in the coming years?

I don’t blame people for not knowing ASEAN. When one looks to Asia, one’s eyes are first drawn to the giants. China in particular has done very well over the past twenty years and no country has grown faster during that time. As it developed and labor costs and standards of living rose, Southeast Asia began to capture the attention of businesses, and deservedly so. ASEAN now has growing appeal, because of greater integration as we create an ASEAN Community with increased consumption and growth. That is why many people refer to us as the fifth largest economy in the world.

The reality, however, is a bit short of that – as we are not really one country or one system. We are, however, working to realize the “ASEAN 2025 Vision.” This is a roadmap adopted in 2015 to articulate regional goals to create a more cohesive ASEAN Community. SIIA is currently working on the ASEAN mid-term review, which is examining our progress, and how crises such as the pandemic can strengthen our will to more fully integrate. While an unfinished project, given the diversity in the region, it is — in some ways — every bit as ambitious as the establishment of the European Union (EU). The trend is toward closer integration.

Before the Asian financial crisis, which began in the summer of 1997, the region was mostly viewed, at least in the US, through the lens of the Vietnam War. Over the last twenty+ years we have advanced, however, and growth in ASEAN has been reinforced. This is true both in developed countries such as Singapore and Thailand, developing nations such as Vietnam and Myanmar, and those in between. Before the pandemic, ASEAN as a whole was growing at a faster rate than China. While the pandemic is hitting our people and economies hard, the region should still outperform the world.

The fundamentals are real. ASEAN is ascending from a lower base, leaving substantial room for further growth. There are many opportunities as countries raise consumption and leapfrog using software, digital innovation, and a greater online presence. Diverse sectors can do well, including labor-intensive manufacturing, infrastructure, services, consumer markets, and others that are part of the new economy.

As you note many people view ASEAN as being similar to the EU, a vehicle grouping together a group of countries into a more integrated market, though without a common currency. Is that fair and can you talk about both the diversity of ASEAN as well as the steps being taken to link these ten nations into a more cohesive entity? Is it possible for companies to have an “ASEAN strategy” or should they be looking at individual markets?

Given what I said about ASEAN, and how it is not yet a cohesive union, that is a very good question. The answer is yes and yes. Movement toward greater integration is very clear but we are not like China or the EU where you can put up one office and that’s it for the region. In a way, this is an economic strength as well as a political challenge.

In ASEAN you have an opportunity to link supply chains from a hub like Singapore, which offers first-class amenities, to less developed markets with eager and driven populations rising out of poverty and looking for jobs in factories and a more modern lifestyle. Myanmar for example is a sizable country with a pool of young people looking for jobs and a government seeking to develop. Myanmar also has a sizable expatriate population that has lived and worked in countries such as Singapore and Thailand, as well as Australia, Europe and the US, where they received education and training. Now their economies are opening – and they are returning with capacity, experience and ideas to implement change. So these countries are not starting from zero.

In between, you have countries such as Vietnam, Thailand, Malaysia and Indonesia. Labor there remains hungry for work, the land is relatively cheap and demand is growing. Today, a lot of attention is focused on Vietnam in particular. This is a country of almost 100 million young, dynamic, and hard-working people, which is well on its way to becoming a competitive supply base for many products.

ASEAN also benefits from not being China. Our diversity offers a decentralized model that adds diversification to global supply chains. It can be more complex to work across ASEAN — there is no one President or government to go to – but it is also less risky for those who can manage across borders – as it is not a case where if one government or economy fails, then the investor also fails. Moreover, ASEAN is not a threat to anyone politically. Vietnam for example has a trade surplus with the US whereas Singapore has a deficit.

Those who invest in ASEAN benefit from having an alternative to China, though are still located in this growing region. This allows synergies with production clusters based there. Being in ASEAN allows companies and investors to benefit and participate in this growing regional economy without putting more eggs into the China basket.

You mentioned the US has enjoyed strong ties with ASEAN since its birth in 1967. This was a time when the US sought to develop regional allies in the face of the Vietnam and Cold Wars. Today, however, despite a move to initiate an “Asian Pivot” under the Obama administration and talk of the “Indo-Pacific” under President Trump, some question US commitment to the region. How do you view the US presence and role within ASEAN? What should US companies and leaders know about ASEAN and how does their presence compare to other nations including Japan, Korea, Australia, and the EU?

The US remains an important partner and market for ASEAN and when looking at its involvement in the region, there are three strands we can talk about. The first is like an underlying current in the ocean, the second is the waves on top, and third like a bright object on the surface. If you look at the current, the destiny of the US remains very much an outward one. It is the country that created the modern world and global trading system you and I have grown up in. It was built to America’s advantage and I think this strong current of the US having shaped and benefitted from this world is ever-present despite current tensions. So we have not seen, whichever President, a lack of interest from US business, its military or security establishment. So whether you call it an Asian Pivot, Indo-Pacific region or before that the War on Terrorism, we believe this current can and should have reasons to continue.

At the same time, there are waves on the surface. These are more noticeable, as it is hard to see the underlying current unless you put your hand deep below. The waves do matter and I would say right now they are choppy and we are now going through a period where Americans are questioning globalization and retreating from multilateralism and international engagement. I was in Seattle during the 1999 WTO protests. At the time President Clinton had the political savvy to suggest we let these voices in to assuage concerns – even as he was the president who signed and implemented the NAFTA agreement. As a result, after a time, things calmed down and the situation became less tense for the moment.

Since then, however, the waves have gotten more turbulent, and it is important to recognize the tensions that brought Trump into office are not singular to him. Remember that Hillary Clinton responded to those choppy waves in her election bid. She supported the Trans-Pacific Partnership (TPP) agreement while Secretary of State, and yet as a candidate against Trump, she too expressed doubts about the TPP. So it is not just the Trump administration and we can see a wave of US constituencies questioning and expressing concerns.

The concern is rising to the point where now even the underlying current of outward movement that I mentioned is less visible. Companies are now being judged by how many jobs they are reshoring and their loyalty to America and American jobs. This is now seen as more important than an overall win-win growing the global economic pie paradigm, which has guided the thinking of policymakers and companies for decades.

And then there is the ball or float which can be seen in tweets and incendiary rhetoric. These attract a lot of attention and concern but they are not necessarily consistent. You mentioned the Indo-Pacific strategy and frankly, I haven’t really seen one. I have seen Indo-Pacific statements and senior US officials talking about issues, but I haven’t seen an overall strategy tying things together. I have to say I view this from an ASEAN perspective and generally, ASEAN is the final stop after a comprehensive strategy dealing with other parts of Asia is finalized.

There is also much less US involvement in multilateral institutions. This is important given the nature of the problems the world faces today. I also think the State Department itself has less access and the whole US establishment which has guided foreign policy and economic engagement, has been weakened.

At the same time other countries – and China in particular – have upped their game. They engage us, not only at the top level – but very thoroughly on an ongoing basis.  Ambassadors of these countries, whether you agree with them or not, are out all the time engaging people, and are much more present. The US is still here but less than in the past. Take something as simple as Ambassadors. How many ASEAN countries have sitting US Ambassadors? And if you talk with the ones that are here, how much access do they have into Washington and White House decision-making at a high level? Stove-piping is always a problem in big countries, but it is now becoming a more serious issue.

Since the early days of ASEAN, China has developed rapidly and has now become the world’s second-largest economy. It is also a major driver of economic growth and seeks greater regional and global influence through vehicles such as the Belt and Road Initiative (BRI) and Asian Infrastructure Investment Bank (AIIB), at a time when the US is backing away from multilateral institutions and its traditional role as a global leader on a range of important issues. As tensions rise between China and the US, both in terms of trade as well as influence and security, how is the region affected, and what are the challenges ASEAN countries face in navigating this changing environment?

The pandemic makes a vast difference. We are trying to figure out in a post-pandemic world whether China or the US will recover faster and at the moment the answer seems to be China. It is still early, however, and of course, there is now an outbreak in Beijing so we will have to see. At the same time within China, there seems to be a growing understanding they need to remain engaged with the outside world. They also did not have this pre-pandemic spirit of isolationism and questioning of whether it is good for China to export and invest abroad. So unlike the US, they did not come into this with a globalization backlash, strengthened further by the pandemic.

Singapore recently entered into a “green lane” agreement with China for business travel and Singapore-based businesses of all nationalities can now travel to six cities and regions of China with minimal testing as a first step toward reopening our borders. This is not political but an effort to restore supply chain links and our ability to operate as a hub while maintaining decent safety levels. We are also trying to open Australia and New Zealand, and other countries in ASEAN, but those discussions are not yet concluded.

Also, if you look back to the global financial crisis of 2008, it is notable that Asia and China kept growing. While the US did not shrink, in relative terms its global market share declined. That caused an adjustment similar to when an elevator goes up and suddenly stops. I feel if the US does not respond correctly to the current situation, we may experience another of those adjustments; it doesn’t mean the US will fade and fall down the elevator shaft, but there will be another jerky moment and perceptions in this part of the world will shift further as they did after the onset of the global financial crisis.

That said, people in ASEAN want more US involvement and encourage US investment and more participation by US firms. We think of the market and technology as rational and neutral, but it is beginning to get colored. Meaning if people think the winner will be China there is a tendency to go more in that direction – even though we are still fighting to keep things as neutral, rational, and as inclusive as possible. You can see that in the struggle over the decision this week to award Singapore’s 5G network to Ericsson and Nokia, though it still maintained a smaller role for Huawei.

In the past, there was a belief in the west that China’s development would lead it toward a more democratic form of government and integration within the global trading system that arose following the Second World War. In recent years it has become apparent this is not the case and China is embarking on its own path. This has led to growing concerns about China’s aspirations and efforts to exert global leadership and establish standards in new technologies as seen its “Made in China 2025 initiative”, its policy toward Hong Kong and Taiwan, cybersecurity and privacy, social credit scoring and other policies, practices, and beliefs. Do you share these concerns? How does China’s model translate to ASEAN and do you see a new “Cold War” developing in which countries will be asked to choose sides?

I have studied, lived in, and like the US, but never assumed China would become more democratic. I believe the Party will have to evolve and change in response to China’s development but never assumed this would necessarily be in a democratic direction. When I look at the region beyond China, I would also say most in Asia are not a democracy in the US-style. Even look at Japan, which you Keith know well. It is not a one-party system like China but it is not a US-style democracy. Neither is Singapore. We will have an election here in less than two weeks, yet there is almost no doubt which party will win. So I am not sure you as an American would describe such systems as democracy.

So I do not look at China through an ideological lens of democracy and have always thought China would do what made sense for China. As neighbors, we do have to figure out whether what is good for China will be a threat to us, rather than win-win. This applies when we look at Chinese investment; we tend to look at it through pragmatic calculations. I do not begin with the assumption that it is an attempt to politically suborn every place where they invest. There are of course risks that remain but they can be managed. For example, with BRI we have talked to Myanmar and others about the risks of unproven projects that burden them with high debt. That is Singapore’s style. We initiate projects incrementally. We start with one terminal and gradually expand to five, or one chemical factory into a large complex as demand is proven. We have an idea of where we want to go – but build incrementally rather than start with grand projects.

That is why you now see a number of Singapore industrial parks in Vietnam. These parks are not just physical spaces. Some provide training, education, and skills development for local workers so they can better serve companies based there. This helps our neighbors while developing our role as a hub. Singapore companies are also involved in BRI. For example, Surbana Jurong provides consultancy services to some Chinese investors in ASEAN countries, as well as acting for the hosts on other occasions. The Port of Singapore Authority (PSA) is also pushing out into the region and beyond; recently opening a joint port in Greece with Cosco, a Chinese shipping line. So Singaporean efforts are to seek cooperation and commercial deals that look non-ideologically to support globalization and free trade around the world.

The bigger question is the “new Cold War” between the USA and China. We do feel it. We try to make rational decisions based on market principles but increasingly everything is reduced to whether “you are for or against China or the US.” For the AIIB, Singapore participated from the start because infrastructure is a big issue in the region. We are in the Asian Development Bank (ADB) too and the World Bank. We think there is no reason we can’t be in more than one, and I do not see why the US objected to the AIIB or what was the alternative they were offering. On the other hand, when American’s spoke about the Indo-Pacific we were happy to work with our ASEAN colleagues to develop an ASEAN understanding and response.

The view of the Indo-Pacific that ASEAN has developed is slightly different than the US, as our goal was to make it more inclusive and not just for democracies. But we do agree a larger framework for the region is necessary. For Singapore, as close friends with India, we have no problems working with them as well and continue to hope they will become more and more integrated with the region.

Even before the coronavirus and heightened US-China trade tensions, corporations were beginning to reevaluate global supply chains to lessen their reliance on Chinese production. Many view ASEAN as a natural beneficiary, offering cost and diversification benefits. As a result, we see many clients giving the region more consideration given its strategic location, strong infrastructure and its ability to bridge operations that had been based in China and still rely on inputs from there. How do you view ASEAN’s potential as the region rises in importance as a hub within the global supply chain? What are the prospects for developing and more developed countries in ASEAN– as well as integration between the two, for example, the relationship between Singapore and Batam/Bintan and the Riau Islands, where we have been active for many years, located in Indonesia only 12 miles away?

Our greatest fear is not a splintering of global supply chains but rather the idea of bringing everything back home in response to growing nationalism. Big countries sometimes think they can do that – whether it is the US, China, India, or even Indonesia. They believe they can produce everything for themselves and capture their own market. We used to see this in the “import substitution” and “beggar thy neighbor” days. That is something we need to work together to avoid. Post-pandemic there will be exceptions and a degree of self-supply is important, for example with masks and ventilators, to prevent a cut-off of supply. Similarly, markets such as Singapore which imports almost 100% of its food supply, need to rethink being completely reliant on offshore sourcing. But we need to make sure that tilt does not go too far.

But I would emphasize we are not going to exclude China either. The interesting question is whether we still believe in global supply chains. I think the answer is that we do, provided that security and other key concerns can still be addressed. If that is the case, countries that can provide that, who can reliably manage increasing supply chain complexity with good governance and rule of law, with an ability to deliver will be rewarded. ASEAN and Singapore are well-positioned in that regard.

The larger danger is that countries retreat back completely to a reliance on national production and protectionism. It is a lesser danger for supply chains to split into two, one being the US and the other a Chinese supply chain. Sometimes it is important for other countries to have guts and stand up against that and bullying from either side. This is especially important during the pandemic when some powerful countries were trying to grab masks and other medical supplies for themselves when these had been contracted to others. For Singapore, and for me as an attorney and international lawyer, I emphasize the importance of fulfilling contracts. This does not always work to our advantage in Singapore. Sometimes in the pandemic, neighbors cut off supply but we still try our best to observe our commitments. The rule of law is important. The bottom line is – trust is something you can’t ditch in a crisis.

You ask about Batam and Bintan as part of our strategy to expand across the region. These islands are part of Indonesia but stand just a small distance from Singapore. Back in the early 1990s, there was a lot of excitement in Singapore about their development as an early step in regionalization and cross border cooperation. They are still significant; proximity still matters, but not quite as much as before. Other opportunities arise, and regionalization has deepened. One newer aspect is whether that proximity is connected to another market.

For example, a major Singaporean company now has an industrial park operating in central Java that caters to Indonesia, rather than offshore markets like Batam and Bintan. Singapore also has more than seven industrial parks in Vietnam – and we do more there than in these Indonesian islands nearest us. Why? It is not because we do not like Batam and Bintan; they also have a role to play. But they do not enjoy any special preferences or contiguous market, have no natural workforce so workers there are imported from other parts of Indonesia. In the end, they remain useful, allow easy commuting, but do not provide a definitive advantage in an environment characterized by deeper and more complex regional integration.

ASEAN has been severely affected by the coronavirus – and by most measures handled the pandemic relatively well. Can you talk about how the virus has been handled in Singapore and other countries in ASEAN, the nature of regional cooperation, and how the pandemic is likely to affect economic and other aspects of integration moving forward? What lessons should the US take from the ASEAN experience dealing with the virus?

There are differences in how ASEAN countries have handled this and from what we can see, Vietnam has come out on top in terms of controlling the pandemic. In Singapore, the overall national numbers may look scary, but it is under control for most of the community though the problem is acute within the foreign work dormitories which account for the bulk of numbers.

Singapore has a strong health system and has ramped up testing and treatment facilities; our medical system has coped and there has been a very low mortality rate. Malaysia and Thailand are also doing relatively well. For Laos, Cambodia, and Myanmar the numbers seem ok but it is really hard to know for sure, given low levels of testing. In Southeast Asia, I think the biggest worry is Indonesia where numbers are beginning to rise while the country faces strong economic pressure to reopen.

A key question is transparency. The more you test the more you find cases. So we look at testing rates as an indicator. In Singapore, we have good testing for a small population. As testing increased in dorms for migrant workers, this caused our numbers to really jump. It was just last week that Indonesia overtook us as having the most cases – and we have to ask why did it take that long? Basically, many countries are not testing enough. When they do test, it is for confirmed cases and not more generally – and the number of tests per million is very low. So from the reported numbers, the situation may look acceptable, but no one can be quite sure.

The current question is how to ease up the restrictions to restart the economy and allow travel across borders. There are worries about importing cases and all countries have at least temporarily closed off tourism, which are important parts of their economies. In the pipeline, I think green lanes for business are possible. But there will continue to be concerns about large numbers of tourists unless easy and reliable testing and (ideally) vaccines are ready. So we will have to figure out how to manage borders – allowing transport of workers as well as goods and services – to restart our economies and manage our integration and supply chains in an increasingly interdependent region.

One of the things we have learned is we have to be open to help from outside and cooperation is critical. In early February we first had a China-ASEAN meeting on how to deal with the virus and it was just China, but then we had an ASEAN Summit and this was notable in bringing in Japan and Korea – two countries that have the industry and technology needed to help. Now some of us are advocating Australia and New Zealand also need to be added as well. If we address the pandemic together – we have a much better chance of containing and dealing with it. Harmonizing our approaches to treatment and travel is important. Multilateral dialogue and cooperation are essential and world leaders should encourage talk rather than just closing borders.

India also represents a major economy that borders ASEAN and has traditionally had a major impact though often gets overlooked given the attention paid to China. What is your view on India as a regional and global player and how important is its economy to the development of ASEAN and how should companies be approaching this important market? Additionally, any thoughts on current tensions between India and China?

Last year before the pandemic we had the Regional Comprehensive Economic Partnership (RCEP) discussions which could potentially not only open up India but bring India more into the region as a major global manufacturer and supplier – much as China embarked on that path decades ago. RCEP’s importance rose after the US withdrew from TPP negotiations, and aimed to bring together all ASEAN members and our key trading partners — including India, Australia, China, Japan, New Zealand, and South Korea. But it seems the Indians didn’t like that vision or thought the costs of opening up their market were too high and walked away.

They thought they could scupper the whole initiative, but ASEAN has decided to go ahead without them. That was not our hope and it would have been much better to include them, but we were not going to let India veto RCEP, and it will now proceed, aiming to conclude by the end of 2020. I always tell my Indian friends we have to move – particularly now with the pandemic – and they would be advised to jump on board.

India has tremendous potential and their size and promise will always be there – but it is a bit like a giant universe operating by itself – cut off from the outside. That is sad as there are some really top-class Indian companies that can more than compete in the region. But India as a whole has not really been fully engaged. The politics are complicated – and while Singapore remains great friends of India – it remains to be seen if a path forward can be found. If Prime Minister Modi with all the support he enjoys is not willing to open up, how and when will it happen? Compound that with the pandemic and a lack of desire to integrate, and my fear is India will miss the boat.

For Indonesia, the largest country in ASEAN, it’s different. They know investors are questioning reliance on China because of costs and Sino-American conflict and are working to catch the attention to join global chains and attract more investment to create more and better paying industrial jobs. They are trying but it won’t be easy. China has retained many supply chains, and many that moved decided to go to Vietnam.  One Indonesian minister I know quite well is working hard to attract jobs and promote innovation and some companies are moving to base there. The minister told me his scorecard is based on an ability to attract foreign investors and industry. It will be difficult, but it is good they are trying. India, however, has mostly been sitting on the sidelines and it may only get harder over time.

Singapore is one of the world’s great success stories and has become a preferred destination to establish businesses and operate for companies in a wide range of sectors, including as a world financial center. For many years we operated our own company there as a base for activities in Myanmar, Indonesia and other ASEAN markets which lacked the same level of infrastructure, governance and services. Does the Singapore model hold, and what changes need to be made, as neighboring countries develop? Can you tell us about current Singapore initiatives, the upcoming election and the “bubbles” that are being created for business, travel and trade?

Singapore understands we serve as a hub for the region and if we cut ourselves off due to the pandemic and health reasons, we will find ourselves in a bubble that does not have enough air for all of us. You can live your life that way if you need to, but resources become scarce and it will not be much of a life. So we have to reopen, and all small economies face similar issues. New Zealand for example is further away but faces similar decisions.

That is why we talk about green lanes and bubbles. We need to start but in a controlled way with trusted partners. In the past, we were wide open. When you entered Changi Airport, even before you got to the doors, they opened wide. There was seldom a line and often no one even checked your luggage. Now, while I have not been there in five months, I imagine the scanners are working overtime. You need to show a health certificate and the process is much more cautious and guarded.

My analogy is that we have gone from an automatic door and seamless travel to a situation that requires a special pass and perhaps a key before you will be able to pass. Safety concerns are a priority. But for Singapore, the important thing is the doors need to remain open even if there are more checks and verifications to ensure adequate safety and easy passage. Singapore is committed to that. The government just formed a new public-private partnership called the “Emerging Stronger Task Force”. This will gather ideas on how to develop new processes and procedures to get better ideas on Singapore’s economic strengths, and how to move forward into the “new normal” in the wake of the pandemic.

It won’t be easy. But when I look back, there is reason to believe we can rise to the challenges. Singapore came out stronger from the Asian financial crisis and we are determined to do that again. That was true after the global financial crisis as well. If we get it right, Singapore can come out stronger this time as well. Of course, we could get it wrong and have made mistakes along the way;  two recoveries do not automatically translate into a third so we have to be careful not to have hubris and to work hard and innovate to succeed.

As you know we have been active and involved with Myanmar’s development for many decades, and one of the more interesting developments – at least in terms of Singapore – are long term plans to develop deep seaports in Kyauphyu, which would provide a land route into China. This initiative would allow shippers to bypass the Straits of Malacca and the Port of Singapore which has long dominated trade in the region. How do you view Myanmar’s prospects and the potential of these projects?

Do we see other ports in the region as a direct threat to Singapore? The answer is no. We think win-win. Our ports are busy and before the pandemic operated almost at full capacity. If Asia continues to grow, the volume of traffic will grow even more. The PSA has been expanding internationally to places in the region and beyond. Moreover, within Singapore land is very valuable and there is a plan to create a new mega port named Tuas in the north of the island. The current site of one port is very close to the city and is such valuable land that, rather than stacking containers, far more value can be realized if it is used for real estate and infrastructure development. So while we do want Singapore to continue as a major port, this means that we welcome and want to participate in growth across the region.

As for Myanmar more generally, we are very encouraged and remain positive. We would love to see them come up like Vietnam. As mentioned, there are several Singaporean industrial parks there and while there are none are as yet in Myanmar – we have very good relationships there and see lots of potential. Many people from Myanmar received their education and training in Singapore and many Myanmar companies rely on Singapore for banking, legal and financial services. So there are extensive people-people relationships and we want to help and be part of their development. Also, two of the most active banks in Myanmar, UOB and OCBC are from Singapore and as Myanmar opens up and liberalizes they are seeking to increase their presence.

Thank you Simon for your time and attention. Look forward to speaking again soon!

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Keith Rabin serves as President at KWR International, Inc., a global consulting firm specializing in international market entry; trade, business, investment and economic development; site location, as well as research and public relations/ public affairs services for a wide range of corporate and government clients.

business

Where do People Travel for Business?

When it comes to global business, the right transportation is essential. Getting talent from one side of the globe to another matters as much as ever it has – and perhaps even more so. But which cities are the most attractive for modern business? This is a question whose answers have remained more or less the same over the last four or five years, despite the fact that global business flights have more than doubled.

New York

The Big Apple leads the pack when it comes to inbound business flight, and it has done since 2014. This is largely thanks to its status as a centre of global finance, but it’s also because New York is among the most business-friendly states in the US, with a range of tax incentives offered to startups. Buzzfeed and WebMD originated here. Whether you’re taking a private jet or a commercial airliner, New York remains the world’s premier destination for business travellers.

London

London has consistently run a close second, despite the uncertainty still lingering over Brexit. Among the biggest draws of the capital is the English language, which remains the second most widely-spoken language in the world (and probably claims the top spot when we count only the customers of international airports). London contains around 15 businesses per hundred residents; the figure for the rest of the UK is around 10.

Paris

Paris is something of a fast-climber, experiencing around twenty-per cent growth over the two-year spell from 2016-2018. It’s easy to see why a business might locate here; Paris has an enormous amount of culture and history to offer, and thus it’s easy to persuade would-be staff to settle here. While France might have something of a reputation for overbearing bureaucracy (the word, is, after all, derived from a French one), the business environment is competitive enough to tempt many international businesses and skilled employees looking to sample life on the continent.

Shanghai

With China having established itself as a global power, it’s probably no surprise that its busiest airport is so attractive to international business customers. While the city isn’t quite as attractive to western travellers as the other entries to this list, it’s a location that no globalised business can afford to neglect – and this is reflected in its rapid rise as a centre of international air traffic. 

Among the more interesting trends in global air traffic generally has been an increased spread between different continents, with five of the seven listed in the top twenty destinations. There is perhaps no better example of this than that of Shanghai.

Toronto

Toronto outranks many US cities, including San Francisco, Houston and LA. As with New York, there is a range of incentives to businesses looking to grow here. The combined rate of corporate and income tax sits at around 26.5%, which is lower than the US average by around thirteen percentage points.

Singapore

Like Dubai, Singapore claims a great deal of air travel thanks to its popularity as a stop-off for long-haul flights between Europe and Australia. But there’s more to Singapore than that. The country is widely regarded as an ideal place from which to tap into Asia’s emerging markets. The location is strategically attractive, the workforce is competitive and the economic policy is explicitly favourable to business. It’s also emerging as serious competition for Hong Kong’s financial centres. For the world’s business travellers, there’s no shortage of reasons to pay this part of the world a visit.