Singapore-U.S. Trade High Persists on Record FDI: Southeast Asia

Singapore’s trade with the U.S. in

2013 will probably exceed $50 billion for a third year after the

nation attracted the most investment from American companies in

the Asia-Pacific region.

“U.S.-Singapore relations are generally at an all-time

high,” U.S. Ambassador to Singapore David Adelman said in a

Bloomberg Television interview. He gave the trade target for the

two countries, saying “Southeast Asia has become increasingly

important to American multi-national corporations as they

continue to increase their participation in the global

economy.”

U.S. foreign direct investment into Singapore rose 17

percent to $138.6 billion in 2012, higher than to Japan and
Australia, according to data from the Department of Commerce.

Singapore was the first Asian nation to sign a free-trade

agreement with the U.S. in 2003.

Ranked by the World Bank as the easiest place to do

business seven years in a row, Singapore offered incentives and

tax cuts to spur investment, luring U.S. companies from Google

Inc. to Exxon Mobil Corp. (XOM) to set up their regional operations on

the island. Singapore’s shipments to the U.S., one of its top

export destinations, rose for the first time in three months in

July as a recovery in the world’s biggest economy gains

traction.

Adelman will end his term next month and will be replaced

by Kirk Wager, a Miami lawyer.

Deepening Ties

“I would see trade as continuing to grow as they deepen

their ties on the investment side,” said Leif Eskesen, chief

economist for India and Southeast Asia at HSBC Holdings Plc in

Singapore. The U.S. will probably “get back on its footing over

the next three to four years” and “export prospects from

Singapore into the U.S. will gradually improve,” he said.

U.S. retail sales rose in July for a fourth consecutive

month, showing American households are regaining momentum as

employment climbs. A pickup in consumer spending, which accounts

for about 70 percent of the economy, would help counter the

fiscal headwinds of government cutbacks that have held back

growth.

Pratt Whitney, the jet-engine unit of United Technologies

Corp., is spending almost $110 million on two new facilities in

Singapore, including a 180,000-square-foot manufacturing plant

that’s scheduled to be completed in 2014, it said in a Jan. 31
statement. The plan will boost its Singapore workforce to more

than 2,500 over the next five years.

Remaining Competitive

“Singapore’s thriving aerospace industry is mutually

beneficial to the U.S.,” William Kircher, vice president of

Pratt Whitney’s Singapore overhaul and repair operations, said

in an e-mailed response to queries. “It is a hub for U.S.

exports and investment, and our presence in Singapore enables

the company to reinvest in innovative technology while remaining

competitive by performing the right work in the right places.”

The government is focusing on developing new sectors and

attracting investment while it restructures the economy to wean

companies off cheap foreign labor. Singapore’s economy grew 1.3

percent in 2012, the slowest in three years.

Singapore may be less attractive than its neighbors as

labor costs and property prices rise, according to Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore.

Fewer Advantages

“The reason why U.S. and other foreigners like Singapore

is to gain access to the region,” Prior-Wandesforde said. “The

advantages of that have been reduced and will continue to fall

while other countries within the region are more open to foreign

direct investment and offer significant opportunities.”

Overall foreign direct investment into Indonesia rose 18.9

percent last quarter from a year earlier, government data showed

last month. The Philippines received $2.8 billion in 2012, and

Thailand got $8.6 billion, according to the World Bank.

Located at the southern end of the 600-mile (965-kilometer)

Malacca Strait, Singapore is home to one of the world’s busiest

container ports. The city was ranked first among 221 cities in a

survey of infrastructure by Mercer International Inc. (MERC) released

in 2012.

“U.S. firms are attracted by a strong and equitable legal

system, stability and consistency across government, a strong,

well-capitalized, and well regulated banking and financial

system, high intellectual property rights,” said Greg Tirrell,
executive director at Singapore’s American Chamber of Commerce.

U.S. companies are increasing investments in banking,

energy, consumer products and aerospace, he said.

Regional Operations

Citigroup Inc. (C), the third-largest U.S. bank, has about

10,000 employees after a threefold increase from 3,600 a decade

ago. The lender has regional operations in Singapore including

retail banking, private banking and treasury and trade services,

it said.

“Factors supporting our decision to locate our hubs here

include the established credit bureaus, regulatory bodies and

comprehensive dispute resolution options available,” Adam

Rahman, a Singapore-based Citigroup spokesman, said in an e-mail, where he also pointed to the country’s tax structure and

talent pool.

Singapore is targeting as much as S$13 billion ($10.2

billion) of investment commitments in manufacturing and services

this year.

“Singapore, like every country around the world, has its

basket of challenges,” Adelman said. “It’s a small country and

small countries are always going to be challenged by their lack

of resources and by the importance of getting the policies

right, because the margins for error are much tighter.”

To contact the reporters on this story:

Sharon Chen in Singapore at

schen462@bloomberg.net;

Haslinda Amin in Singapore at

hamin1@bloomberg.net

To contact the editor responsible for this story:

Stephanie Phang at

sphang@bloomberg.net

Singapore-U.S. Trade High Persists on Record FDI: Southeast Asia