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Singapore: Destination and Gateway for U.S. Exports to Southeast Asia
By Dale Good
In the wake of the global financial crisis, Singapore remains a major market for consumer-oriented agricultural products. What’s more, it’s becoming an important entrepôt for consumer-oriented exports to other countries, such as its fellow members of the Association of Southeast Asian Nations (ASEAN).
The Singapore Setting
Singapore itself has for some time been a significant market for U.S. goods. Whether measured by sales or number of outlets, it ranks as a top Asian market for many firms.
It’s well known that Singapore has a developed economy and one of the highest per capita income levels in the world. Its expanding middle class can afford quality and convenience, and is growing ever more cosmopolitan in its tastes. But why is this city-state a vital gateway to the rest of Asia?
It’s the world’s busiest, most efficient seaport, combining a strategic location with ample, efficient storage and port facilities. Its free port status also facilitates the coordination of business in Southeast Asia.
Its traders historically have had links throughout Asia, Australia, New Zealand, the Middle East and, to a lesser extent, Africa. They know the official and unofficial channels for getting things done, for moving products through and around the sometimes cumbersome customs controls in hard-to-penetrate and high-tariff markets.
Singapore’s leadership in computer and communications technology and the incentives it grants multi-national companies are giving it an edge over other cities in attracting their regional offices. The Hilton and Shangri-La hotel chains recently moved headquarters or senior people in Singapore from Tokyo and even mighty Hong Kong.
Singapore sometimes plays a sales, coordination, and customer servicing role for shipments destined for neighboring countries. Larger firms have offices, agents or wholesale partners in the region, and control business from Singapore.
Some retailers and food service buyers come to Singapore and buy directly from exporters. Companies often consolidate imports in Singapore for distribution to regional customers, and handle warehousing, financing, invoicing and market support functions there.
The Ebb and Flow
of Trade
With its dual role in meeting its own and other countries’ food needs, Singapore’s imports naturally run the gamut of the consumer-oriented spectrum. From baked goods to beverages, soups to snacks, Singapore imports and re-exports a plethora of fresh, canned, dried and frozen foods and ingredients in virtually every major product category: fruits and vegetables; dairy; beef, poultry and seafood.
To get a clear picture of Singapore’s consumer products market, its current trade patterns and future trends, it’s necessary to study the period 1990-1996, before the economic crisis began.
In the import area:
In the export area:
Sizing Up the Competition
With all this going for it, it’s no surprise some of the biggest U.S. competitors see Singapore as a launching pad to the rest of the region. They have agents who can represent their products in Singapore and expand sales to other countries if their products do well in this sophisticated, multi-ethnic market.
Australia tends to be very enterprising in market development. Many restaurants have been using Australian products since the crisis began. New Zealand, the EU and South America are also offering stiff competition.
And although its high operational costs and limited resources preclude Singapore from becoming a production center, the rest of Southeast Asia will continue to produce plenty of products. Once food products from China and Thailand meet Singapore’s stringent food safety standards, they will give their counterparts a run for their money.
A Safe Harbor
To help U.S. companies better understand and compete in this market, FAS’ Agricultural Trade Office (ATO) in Singapore elicited the views and advice of importers, re-exporters, food service representatives and retailers on the current market and the changes they foresee.
There was a consensus among respondents that Singapore will remain the region’s leading port until neighboring ports substantially upgrade facilities and services–although eventually Singapore's role as a middleman for transshipments will decline as other ports improve. But for the next 10-15 years, Singapore will continue to be a prominent entrepôt for consumer products.
Consolidation, transshipment, and documentation activities will still occur in Singapore, largely because of its stable regulatory system and excellent geographic location. Master food franchise operations in Singapore will provide marketing, logistics and procurement support for regional outlets.
Some franchise operators purchase items from or through the United States so they can adhere to strict specifications: Starbucks buys coffee beans and paper products; Hard Rock Café, poultry; and Swensens, ice cream toppings. They often work with a consolidator in the United States that puts together shipments for importers in individual markets.
Singapore’s own food market will become increasingly international. The market’s size, variety and sophistication will grow as more foreigners work in Singapore, and Singaporeans increasingly travel abroad.
Singapore will re-export more specialty and premium items. Exporters of dry groceries think their share of the re-export market will hold steady or increase. Exporters of fresh and frozen items, conversely, expect their shares to decline as neighboring countries increase direct imports.
The Singapore Link
Singapore’s future prominence will lie in its emergence as a research and development center, a testing center for quality and taste, a showcase for new food items and a base for financial, administrative and marketing support.
The greatest growth export potential in Southeast Asia appears to lie beyond Singapore. Countries considered to have strong sales prospects are: Indonesia, due to its large population and expanding middle class; India, particularly for frozen and fresh foods; and Vietnam.
The Philippines, Brunei, Malaysia and Thailand will likely remain strong buyers. Bangladesh and Pakistan also are thought to have good potential. Burma and Cambodia, because of their less prosperous economies and unpredictable and unclear policies and regulations, offer dimmer sales prospects.
Consumption levels in newer markets like Burma, Cambodia and
Laos are not yet high enough to justify direct imports. Some
markets, such as outlying 
Indonesian islands,
still prefer to import from Singapore than from Jakarta.
A Market in Flux
The whole Southeast Asian food industry will experience major changes as international chains with significant buying power enter individual markets and alter distribution channels by directly importing items. If their need for a product warrants it, restaurants and hotels will bypass local distributors and buy directly from exporters or consolidators in the country of origin.
More products will be produced in Southeast Asia as multi-national corporations expand regional operations. In a reversal of traditional trade flows, companies based in developed countries are enlisting the help of Singaporean firms to obtain raw materials in Southeast Asia.
Local products will imitate well-known brand items. Store sizes will increase–but products will have to sell quickly to succeed in an increasingly fierce competitive environment.
People will eat out more often, and will be more adventurous and discerning in their eating habits. New restaurant concepts and cuisine styles will abound; life cycles of dining concepts and products will correspondingly shorten.
Food quality may exert less influence over consumers’ restaurant choices than ambience and layout. There will be a shift toward healthier diets, e.g., more seafood and less meat, and greater demand for vegetarian dishes.
Consumption will become a more hurried affair in major Southeast Asian cities; higher customer turnover will allow food outlets to shrink in size. Larger establishments will find it hard to compete with outlets that need little food preparation space, since such outlets have lower overhead and greater flexibility in location.
Fast-food and other types of restaurant outlets will multiply. Casual dining is becoming increasingly popular. Consumers, particularly young ones, have turned to drinking coffee in cafés as a leisure and social activity.
Food cultures will blend more, sparking a rise in consumption of "fusion food." Exposure to the "wine-and-dine" concept of the West has spurred demand for wine, especially red wine, at meals. Western-style restaurants will increasingly offer alternative menus featuring local cuisine.
Policy Pitfalls
and Prognosis
Food industry and trade rules and regulations of many Southeast Asian countries are arbitrary and inconsistent. More transparent, predictable rules and regulations are essential for the smooth running of businesses.
But markets across the region will likely become more open as economies recover and globalization and integration of trade continue. Greater transparency and consistency in trade terms will have a salutary effect on market stability and trader confidence.
In general, tariffs will decrease, but non-tariff barriers will increase. Regulations governing organic and genetically modified foods may be passed, and could affect access for U.S. products.
Singapore is becoming more regional in its outlook and governmental policies, which often serve to strengthen its regional linkages. Moreover, Singapore has great influence on its fellow ASEAN members on trade policy issues.
Because Singapore relies on imports for its own food needs–and therefore has little need to protect local industries–it is respected as a voice of impartiality in trade discussions. The United States also has the opportunity to participate in harmonizing rules and regulations in the region.
Company Adaptations
Though most companies anticipate no change in their roles, others expect that they will:
! produce more high-value-added products and act as marketing arms for local manufacturers that need foreign contacts;
! shift their focus from the logistics of moving goods around to promotional support, such as marketing efforts in the supermarket sector; and
! examine their whole supply chain management to eliminate unproductive elements and increase efficiency. For example, some larger exporters plan to add offices, while smaller companies appear to be eliminating middlemen to deal directly with end customers.
Meeting and Beating the Competition
The trade representatives offer the following suggestions for
the U.S. Embassy and ATO Singapore in their efforts to help U.S.
firms capitalize on Singapore's linkages and boost regional
sales:
They have similar recommendations for U.S. suppliers:
! Increase marketing and advertising.
Some Final Caveats
Though they appreciate the generally high quality of U.S. products, most of the trade representatives think U.S. prices are too high. This situation is due to the strong dollar and high product markups.
Meanwhile, other countries are developing good-quality products at lower prices. Food service outlets are very price conscious, constantly on the lookout for cheaper supplies at comparable–or nearly comparable–quality.
If they continue, these trends can hardly help but erode U.S. market share. Some operators have reduced use of U.S. products, and some U.S. franchise operations are apparently looking into alternative sources.
Challenges clearly abound. But U.S. producers and exporters should bear in mind that before the economic crisis, U.S. agricultural, fish and forest product exports to Southeast Asia were growing an average 20 percent a year. Recovery is now underway in many countries. Corruption in many countries’ import systems is being eliminated. There’s every chance that 20-percent annual growth is again within the grasp of U.S. suppliers.
 And Speaking of Trade Shows. . . U.S. exporters should mark their calendars and start planning now for the next Food and Hotel Asia, April 9-12, 2002! Traders from the world over recently participated in Singapore’s Food and Hotel Asia 2000. Inaugurated in the parking lot of Singapore’s Hyatt hotel 25 years ago, Food and Hotel Asia is now one of Asia’s premier trade events. This year’s show fully occupied the city’s new, 645,000- square-foot Expo Center. It drew 32,907 visitors from more than 80 countries. FAS’ USA Pavilion was the largest and perhaps most frequented location at the show. U.S. exhibitors averaged 25 serious trade contacts. Eight U.S. exhibitors reported on-the-spot sales of $500,000. Twenty-seven projected show sales totaling $22-25 million in the next 12 months. U.S. exhibitors test-marketed over 500 products. The list of products generating the most interest reads like the menu in a smorgasbord, from baked and mash potatoes, to precooked meats and catfish, to tropical tea and bundt cakes and cheese cake wraps. Other favorites included tomato products, sauces of all types, candy sticks and seafood, to name just a few. The explosion of the show’s size and importance can be attributed to the emerging market opportunities in Southeast Asia, and to Singapore’s stature as a business hub for its Southeast Asian neighbors and a gateway to all of Asia. This is the one show that serious traders cannot afford to miss. |
The author is the director of FAS’ Agricultural Trade
Office in Singapore.
Tel.: (011-65) 737-1233/737-1729; Fax: (011-65)732-8307; Email: ato_sing@pacific.net.sg
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