Saturday, July 22, 2000

Singapore: Singapura - the "Lion" City

Singapore: Singapura - the "Lion" City

By Paul Beretz

(Reprinted with permission from IOMA's Report on Managing International Credit and Colections, July 2000 issue. Prepared by Paul Beretz, Editorial Advisory Board Member of IOMA'a Managing International Credit and Collections publication).

Have you ever landed at an airport - either in the United States or overseas - where your subsequent ride by bus, limo, taxi, or private auto to the downtown business area did not pass through slums or derelict factories with "for lease" signs? Probably not very many. Well, welcome to Singapore! At this airport, with suitcase in hand, climb into a clean, an air-conditioned cab that will take you to the downtown area of Singapore on well-paved roads lined with orchids! Yes, orchids, the national flower!

One of the more "western" cities in Asia (a fact which some North Americans may like or not like), Singapore is the "end-up" place before traveling home that I recommend to the harried business traveler who is trying to squeeze too many Asian cities into too few days, attempting to script the Pac Rim version of "If This Is Tuesday, It Must Be Belgium." I suggest that the final leg of an "Asian swing" be Singapore. The food, culture, and signage (in English!) is very western and late-night activities - for both men and women - end safely with a 4 a.m. walk back to the hotel!

Singapore is an island about the size of Chicago, 244 square miles, located off the southern tip of the Malaysian Peninsula. It's a beautiful place: nature preserves on the central plateau are home to 139 species of birds, small forest animals, trees, and more than 700 pant specifies. Men, don't bring your sports jacket, and ties are often not worn. You will wear short-sleeve shirts, as temperatures range between 78o F and 82o F all year round. Women, you will be treated with more dignity than in many other Asian locales.

The Economy

Singapore, although the smallest country in South East Asia, has a prosperous entrepreneurial economy. In the 1980s and 1990s, economic growth averaged more than 8%, and Singapore even appeared to escape the Asian economic crisis of 1997, with the nation experiencing 7.8% growth. By the end of 1998, however, recession had taken hold, and unemployment doubled to 4.5%.

Most of the trade in Singapore involves receiving exports from other countries and re-exporting them. Petroleum is the largest industrial activity, but the city/state republic has become an import financial and manufacturing center. The key semiconductor industry should remain strong, as Asian demand for wireless telecommunications and office machine equipment is heavy. New orders for electronics from the United States reflect the demand for these products, with industrial production growing of 15% over a year ago.

The "official" economic growth for this year should hit 6.5%, according to the minister of trade and industry, Khaw Boon Wan. While there may be a slight slowdown in the second half of the year, the overall growth in the electronics and chemical sector should continue at a consistent growth of 7% for the balance of 2000.

Currency

Since the Singapore economy is so reliant on trade, government officials carefully monitor the exchange rate of Singapore dollars to maximize the competitiveness of exports in world markets while guarding against the threat of imported inflation. A weaker dollar increases the competitiveness of exports because it makes them cheaper overseas. However, it also makes the cost of imported goods more expensive, which is potentially inflationary.

Fortunately, price pressures have been relatively tame in Singapore so that the Monetary Authority of Singapore (MAS), the country's central bank, has been content to keep the currency weak while the local economy got out of the 1997 Asian financial crisis. In April, the Sing dollar had risen sharply, raising speculation that the MAS may be moving toward a tighter monetary policy to hold back inflation.

"Let My People Go!"

During the first quarter of 2000, Singapore Telecommunication lost opportunities when British-owned Cable and Wireless walked away. Ditto two Malaysian companies, Binariang and Celcom. Rupert Murdoch's News Corp has cancelled plans to create alliances because the companies in question were not publicly held. Currently the government holds $50 billion worth of stock - one quarter of the Singapore market - from wafer fabs to shipping lines to banks. Unless the state gets out of business, it will not achieve the knowledge-based economy it seeks. While the government has recently removed limits on foreign equity investment in sectors dominated by state-controlled companies (banking, telecom, and transportation), it continues to own interest in companies that run subways, seaports, and power stations.

Credit

Recent surveys from companies based in the United States show over 75% are selling on open-account terms, usually from 45 to 90 days. Letters of credit are not uncommon, but competition for exports from outside Singapore may make obtaining security on credit transactions difficult for the company selling to Singapore. Singapore is very English-language friendly and, in the Pac Rim area, presents a rare opportunity for the United States. Credit managers telephone their customer to resolve payment issues (if one doesn't mind making telephone calls late at night from U.S. time zones, here's a hint: Always send an e-mail to your customer first, outlining the issues and asking for confirmation about a time to place the telephone call).

Joint ventures, while sometimes made difficult by the government, exist in enough Singapore markets so that prepared financial statements that Big Six accounting firm audit and that the West is familiar with are available (with figures usually denominated in Sing dollars). Credit insurance cover is available though the normal U.S. agencies and channels.

Living and Customs

Singaporeans consider their nation to be unique because they hold to traditional Asian values of a strong work ethic and, consequently, they have a reputation as one of the world's best work forces. Those who have been in the credit profession have heard of the "C's of Credit" - character, capital, capacity, and conditions - that are usually considered when assessing risk probabilities. In Singapore, look to the "C's" as personal lifelong goals of the new generation of Singapore citizens: career, condominium, car, cash, and credit card.

This includes the value placed on education, obtaining homes that are nicer than government built "flats" or apartments, cars (very expensive), and cash or credit cards to validate the level of consumption important to upwardly mobile people of the country.

Greeting customs vary. Singapore is a city with Malay, Chinese, Tamil, and English as official languages, and greetings match the diversity. Chinese people shake hands, with a slight bow. Malays greet with the salaam, where two people bring right palms together, as if to shake hands, then slide them apart and touch his or her heart. Indians join their palms together in a prayer position and say Vanakkam (Tamil for hello).

0 comments:

Show/Hide Navigation

Pacific Business Solutions | PO Box 215 | Clayton, CA 94517 | 925.672.2644