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Japanese companies look to Singapore

Publication Date : 06-07-2012

 

From an apparel maker who dresses professional golfers to nail artists with proven artistic flair, an increasing number of young and enterprising Japanese are making a beeline for Singapore.

They are joined by Japanese small and medium-sized enterprises (SMEs), all of them convinced that their survival lies in bustling Singapore and not in Japan's shrinking economy.

Unlike in the past, when Japanese manufacturers dominated the skyline, many of the recent arrivals are in the service industries.

Figures for the actual number of Japanese businesses that have gone to Singapore in the past few years are not available.

But Japanese business organisations in Singapore believe the numbers have skyrocketed since 2009, after the financial crisis sparked by the collapse of Lehman Brothers.

In 2009, the Singapore office of the Japan External Trade Organisation (Jetro) saw 211 cases of Japanese companies seeking advice. The figure grew to 523 in 2010 and then to 735 last year, a 248 per cent jump in just three years.

"The data we have, based on the number of cases handled by our investment officer, supports the notion of a rush by Japanese companies to Singapore," Shigeki Maeda, the head of Jetro Singapore, told The Straits Times in an e-mail interview.

More than half of the cases involve SMEs, he noted.

The predominance of service- sector companies is also a recent trend. Of late, for instance, the Republic has seen a growing presence of food and beverage companies from Japan.

"They want to expand their business in Singapore because of the ease of investing and its high-income market," said Maeda.

About 30 per cent of the enquiries at Jetro are from service sector companies.

But even manufacturing firms are not looking to build production centres in Singapore but to set up sales, service or control headquarters. Increasingly, the companies going to Singapore are from regional cities, not major metropolitan areas like Tokyo and Osaka.

Regional Japanese banks that support these companies are also opening in Singapore.

Said  Maeda: "We believe there will be a continued wave of Japanese companies to Singapore for the foreseeable future."

The secretary-general of the Japanese Chamber of Commerce and Industry (JCCI) in Singapore, Junichi Azuma, receives at least one business delegation from Japan a week wanting to find out about the investment environment in the Republic.

Singapore offers potential investors many attractions, including a low corporate tax rate of 17 per cent, a highly developed infrastructure, ease of doing business and the widespread use of English. Singapore also has a good supply of skilled workers, both local and foreign.

But these days, many Japanese companies are going overseas for another reason as well.

"While the Japanese economy is shrinking, the economies of South-east Asia are expanding. Many companies feel that if they do not go abroad, they may not survive," Azuma told The Straits Times.

Singapore is a popular destination for these companies, he said.

"Countries like Vietnam and Indonesia are good for manufacturing bases. India and Myanmar are attractive as markets. But when Japanese companies want to set up a regional base, they choose Singapore for its easy access to the rest of the region," he added.

Like Jetro, the JCCI gets a lot of enquiries from IT or service sector firms, including business consultants and recruitment agencies, which provide support services for Japanese companies.

Crosscoop Singapore, a rental service firm, says nearly half of its clients are in IT and service-related fields.

Said its director Yasuji Seki: "I think our client mix reflects to some extent the trend for all Japanese firms coming to Singapore."

Many Japanese entrepreneurs who get off the plane at Changi Airport these days are young and often in their 30s.

"IT-related companies are run by young people who make decisions quickly. They do not have large fixed assets and are therefore mobile," said Seki.

What does the future hold for Japanese companies in Singapore?

"Singapore's per capita gross domestic product already exceeds that of Japan. In future, consumer needs in fashion, food, beauty products and so on are going to increase in Singapore," said Shotaro Kobayashi of Funai Consulting.

"Japanese companies are likely to use Singapore as a show window to market their brands to the rest of the region, even to as far afield as India and China," said the business consultant, who specialises in Asian economies.

 

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