Jan 3, 2013

Singapore - S'pore companies likely to continue investing overseas

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SINGAPORE: According to trade agency International Enterprise (IE) Singapore, local companies are likely to continue expanding their regional footprint in 2013.

IE Singapore also expects companies in infrastructure development and in consumer lifestyle to lead the way in overseas investments.

Companies will typically consider several key factors and risk elements first, before making the move to expand overseas.

Among the issues that they will take into account include manpower needs, competition landscape and local knowledge of target markets.

Teo Eng Cheong, CEO of IE Singapore said: "Overseas markets are obviously very different from that of Singapore. To go to these markets, you must know about the government rules and regulations, you must know about the consumer trends, you must know about the potential partners and potential customers. So knowledge is something that companies find it difficult to build up over time."

Eu Yan Sang, a Singapore-based company that specialises in traditional Chinese medicine, has over 300 retail outlets in six countries in the region.

Revenue from its overseas operations accounts for about 75 per cent of its annual turnover.

The company said increasing its regional footprint will be a key strategic goal in 2013.

Eu Yan Sang recently expanded its operations into Australia, and said it will be opening more outlets in China over the next two years.

Richard Eu, group CEO of Eu Yan Sang International said: "In terms of the considerations, of course the size of the market is very important. The type of people that we have to run the operations is also important -- who we can find to manage the business down there. In some countries, that includes looking for the right local partners."

Meanwhile, for Singapore-listed golf equipment provider, Transview Golf, its foray into overseas markets has resulted in its retail and distribution network expanding across nine countries in the region.

Currently, just over half of the company's turnover come from its overseas operations.

Yet, Transview said its biggest challenge in investing in emerging markets are understanding and navigating the regulatory environment.

Kelvin Lee, financial controler of Transview Holdings Limited said: "It's important that we have a local partner with good local knowledge, so we don't get ourselves entangled in the local rules and regulations. Because in a lot of these countries, their rules and regulations are not clear-cut."

Most Singapore companies have headed for China to expand.

China is now the top destination for overseas investments, according to Singapore's Department of Statistics, because of its large market size and potential.

Data from the China Embassy show foreign direct investment to China by Singapore companies last year have increased 19.6 per cent on-year to US$5.4 billion for the 10 months between January and October 2012.

Going forward, IE Singapore said investments by Singaporean companies in China will likely move westward to cities like Chengdu and Chongqing.

IE Singapore said investment focus and interest by Singaporean companies is likely to shift slowly and steadily away from China's coastal cities, such as Shanghai and Guangzhou, due to market saturation and increased competition from global multinational companies and state-owned companies.

Meanwhile, Southeast Asia will also be another preferred investment destination - mainly due to rising consumerism and high growth rate in the region.

In particular, Indonesia, Malaysia and Thailand are the three most popular investments in Southeast Asia, but companies are increasingly paying more attention to emerging markets, such as Myanmar and Cambodia.

- CNA/xq

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