Economy

The Asian lion

Written by ProfitGuide Staff

Five years on, Roger Hardy can still remember the frog-leg porridge. The president, chairman and CEO of Vancouver-based Coastal Contacts Inc., an online retailer of contact lenses and eyeglasses, was dining in a Singapore restaurant with potential business partners when his host introduced him to the specialty of the house. “It was the Arnold Schwarzenegger of quadriceps sitting in front of me,” says Hardy. “What do you do when your host is looking at you enthusiastically with a big smile on his face?” Hardy dug in.

He may have been reluctant to augment his dinner repertoire, but Hardy had no such qualms about expanding his company’s reach into Singapore. In 2006, Coastal Contacts enthusiastically acquired Singaporebased AsianZakka Pte. Ltd., whose annual online sales of contact lenses in East Asia were $10 million.

The acquisition made sense for a number of reasons. “From a regulatory standpoint, from a tax standpoint, Singapore is a compelling market,” says Hardy. “It’s business-friendly and a strategic launching point to that whole region.”

Although Coastal Contacts doesn’t divulge its sales by region, Hardy says, revenue from its Singapore operation continues to grow: “We’re very happy with the results.”

Hardy’s firm is far from the only Canadian company that has discovered the appeal of doing business in Singapore, which gets its name from the Malay word for “lion city.” The multicultural city state boasts a probusiness government, highly efficient infrastructure and tax advantages for foreign firms. It’s centrally located within a Southeast Asian market of 500 million people. Its port has a well-earned reputation for fast and efficient customs clearance and handling of foreign shipments. And, after contracting by 0.8% in 2009—thanks largely to the global recession—Singapore’s economy posted stunning growth of 14.5% last year, the highest rate in Asia.

“Singapore is the most Western-like country in Asia,” says Brian Cole, president of the Canada Singapore Business Association, a Vancouver-based group that facilitates trade between the two countries. “Its legacy as an ex-colony of England makes you feel at home.” Such familiarity makes it relatively easy to do business in Singapore, he adds.

This perception is validated by the World Bank, which for the past two years has ranked Singapore as the easiest place in the world to conduct business. Its Doing Business report investigates the regulations that enhance business activity and those that constrain it, and ranks countries based on such indicators as starting a business, getting credit, protecting investors and enforcing contracts.

For Mad Rock Marine Solutions Inc. of St. John’s, Nfld., the decision to sell its lifeboat release-hook systems in Singapore was a no-brainer. From the get-go, Mad Rock president and CEO Dean Pelley knew that export markets would be essential to growing his firm. And, as the world’s second-largest cargo port and home to 120 shipping companies, Singapore quickly became a priority.

To smooth Mad Rock’s entry into the country in 2008, Pelley enlisted the help of existing clients. Mad Rock was already doing business with Vancouver-based shipping firm Teekay Corp., so Pelley asked for an introduction to that firm’s Singapore office. That paved the way for Pelley to open a dialogue with the appropriate contacts. Within three months, Mad Rock was outfitting three of Teekay’s ships in Singapore.

Likewise, to win business with Singapore-based BW Maritime, Mad Rock leveraged its contacts with the BW office in Norway. “Having someone vouch for you makes a big difference,” says Pelley. “There’s already a level of trust.”

The introductions proved advantageous in a culture in which personal relationships are the cornerstone of business relationships. Even as Singaporeans have increasingly adopted Western attitudes, they have retained the traditional Asian attitude of taking an initially cautious stance in their business dealings with foreigners, says Pelley. Knowing this, he spent a lot of face time with his new contacts in Singapore: “You have to get on a plane, see the place, meet people to build those relationships.”

Today, Singapore accounts for about 15% of Mad Rock’s revenue. To boost that share, the firm is now tapping the expertise of the Canadian Trade Commissioner Service in Singapore to help build Mad Rock’s customer base and establish local operations, which will make it easier to sell and service clients. Pelley’s advice on doing business with Singapore: “Go for it.”

Rob Simmons, chief representative for Southeast Asia at Export Development Canada (EDC), says the number of Canadian companies operating in Singapore has grown significantly in recent years, with a mix of firms setting up their own operations or developing joint ventures. There also has been a steady influx of multinational companies choosing to plant roots in Singapore—a trend that its government has strongly encouraged. In its latest budget, the country earmarked C$1.9 billion over the next five years for its Economic Development Board to persuade more foreign firms to use Singapore as a base from which to serve the rest of Asia.

This growing presence of multinationals is opening up a host of opportunities for Canadian firms that offer business-to-business services, says Simmons: “Canadians that can provide things such as technology applications or infrastructure to help these multinationals become efficient, lower costs and become more competitive can do well.”

The Singapore government also is encouraging growth in specific sectors, with information technology, biotech and medical technology at the top of the list. The government has several programs and incentives in place to encourage foreign companies in those industries to establish operations in Singapore. Aside from these sectors, says Simmons, there are huge trade and investment opportunities in environmental and engineering applications and services, transportation, aerospace, life sciences and telecommunications.

In a recent report, the Monetary Authority of Singapore identified tourism and financial services, especially wealth management, as fast-growing sectors that make up a rising share of the economy. The report forecasts that the expanding aerospace sector will boost demand for aircraft maintenance, repair and overhaul services. And, stated the report, Singapore will, as a convenient base for IT exports to Southeast Asia, enjoy increased demand for such consumer electronics as tablet PCs and smartphones.

To establish a footprint in Singapore, Simmons recommends contacting one of the many entities facilitating business there, such as the Economic Development Board, IE Singapore, SPRING Singapore, EDC or the Canadian Chamber of Commerce in Singapore. These organizations can provide research and help facilitate business introductions.

Still, Coastal Contacts didn’t wait for an introduction to the Southeast Asian market. Hardy says his firm had identified potential acquisition targets through its own online research. Once Coastal Contacts reduced the prospects to a short list of five, its business-development manager simply began making inquiries.

When talk with one firm became serious, says Hardy, “It became sort of like a courtship.” Over the course of a year, the two parties had ongoing discussions and met several times, each time expressing more and more interest in consummating the deal. But Coastal Contacts had to be patient. “In North America, we tend to say, ‘What’s the price?’” says Hardy. “But in Singapore, it’s not done that way.”

This cautious approach to forming business relationships also extends to suppliers, says Hardy. He recalls one instance in which Coastal Contacts thought it was getting a supplier’s best terms. Two years into the relationship, the supplier suddenly offered access to better products and prices—a sign that Coastal Contacts had finally gotten past the initial wariness.

Even when doing business in a country renowned for being almost corruption-free, Canadians should show a little wariness of their own. Mad Rock’s Pelley speaks from experience when he cautions others to do their homework. On the advice of a partner in Australia, Mad Rock hired a Singaporean company to service its lifeboat hook-release installations there. The firm vanished one day, says Pelley, who later learned that it was under investigation for money laundering. Although Mad Rock had no monetary exposure, it was left scrambling to service its customers.

Despite this experience, says Pelley, Singapore remains squarely in his sights: “It’s a bustling and multicultural city with lots of opportunities.”

Originally appeared on PROFITguide.com