Growing partnership - Australia and Singapore trade relations

Business Asia, Sept, 2001 by Tamsyn Smith

The Singapore-Australia relationship

Singapore is increasingly looking at Australia as a place to base businesses, and not just another trading partner.

SINGAPORE HAS long been a trusted trade partner and close ally of Australia, but in recent years, the two countries' business ties have become more intertwined as the city state's biggest companies look more and more towards Australia as an ideal place to expand operations.

Austrade's senior trade commissioner to Singapore Sean Riley said the low Australian dollar, the relative ease to which we coasted through the Asian financial crisis, and our recent success with the Olympic Games had made Australia a more attractive investment destination for Singaporeans. And the investments don't stop with the high profile plays of SingTel/Optus and Singapore Airlines/Telecom New Zealand.

"Because of the nature of those sectors (telecommunications and aviation) there's been a high amount of public debate, but behind the scenes what people don't realise is that there's been quite a lot of Singaporean investment slipping through," Riley said.

The increase in Singaporean investment is part of a changing culture, according to Riley. Further helping things along was a strong recent push by the Government for Singaporeans to invest offshore. The encouragement is obviously working. Over an eight-year period leading up to 1999/2000, Singaporean investment in Australia rose from just over $7 billion to almost $20 billion.

Riley believes a main reason behind Australia's growing popularity for investment is the success of the Sydney Olympics.

"Quite frankly, in Singapore, I think there was surprise that we could do it. I wouldn't underestimate the impact it's had on showing them how well organised and developed we are," he said.

Australia survived the Asian crisis of 1997 reasonably well, as did Singapore. This contributed to the image of the Australian economy being strong and well managed.

Combined with the Australian dollar being slightly lower than Singapore's, and the potential of a domestic market of 20 million people, Australia is suddenly a very good destination.

In the past, the nature of Singapore's investment in Australia has been largely real estate -- owning land, houses and hotels. More recently, this has matured into mergers and acquisitions, such as the SingTel interest in Optus and Singapore Power investing in part of the Victorian power grid. Riley says it's a situation where Singaporeans are saying "here are some well-managed businesses which have got either a market that we're interested in or technology that we're interested in, and we can invest in that business".

Riley sees many positives from the successful SingTel/Optus deal.

"The psychological impact is very good for what Austrade wants to do, and that is to get them looking at greenfields projects," he said.

The greenfields projects referred to by Riley involves Singaporeans starting businesses from scratch, rather than investing in existing companies. This will benefit not only Singapore, but also Australia in terms of employment and attracting other internationals.

In general trade matters, Riley says the doom and gloom surrounding Singapore over the past few months should not overshadow the fact that Singapore is a rich nation with money to spend around the globe, particularly in Australia.

"Certainly there's a lot of doom and gloom at the retail and basic business level. Put yourself in a Singaporean's shoes. Here's a country who for the last 20 to 30 years has had 10 per cent growth every year," he said.

The Government has continually lowered the growth forecast for this year, and is now at around 0.5 to one per cent, a figure which Riley says a lot of developed countries around the world would be pleased to achieve.

According to Riley, Singaporeans are great savers who live in a very secure society, so they are particularly conscious of the recession. "Also they still have the memory of 1997 very close. 30,000 people lost their jobs. This time they're being overly cautious," he said.

This is evident as Singaporean companies make major cutbacks. The government predicts 20,000 people could lose their jobs this year, which is about double last year's number.

Riley is pragmatic about the situation, saying Singapore's position is still far from poor.

"The bottom line is the Government has foreign reserves bigger than Germany's," he said.

To try and pull the economy out of its rut, the Singaporean Government has a clear vision to become a knowledge-based economy -- part of their strategy is to internationalise the economy.

Dr Tony Tan Keng Yam, Singapore's Deputy Prime Minister and Minister for Defence, said that up until now, the Government had been the primary catalyst in Singapore's economic development by channelling national resources to stimulate growth in specific industries.

This now needs to be complemented by a more market-oriented approach, involving contribution from the private sector, he said.