Many American exporters use agents or distributors to serve the Singapore market and other markets in Southeast Asia. Finding prospective partners usually presents no problem as Singapore firms are aggressive when it comes to representing new products and typically respond enthusiastically to new opportunities. Most American companies that use the U.S. Commercial Service (CS) Singapore matchmaking and promotion services in Singapore find several interested agents or distributors. Because of the relatively small size of the Singapore market, potential partners often ask to cover regional territories. With a strong history of trade, Singaporean companies are particularly successful in taking products to the region. CS Singapore offers a wide range of programs and has an excellent record of success in introducing U.S. firms to the market. A list of services offered by CS Singapore can be obtained from our website at www.export.gov/singapore.
American firms wishing to establish a presence in Singapore have several straightforward options to do so. They can establish a Representative Office (RO), register as a Branch of the parent, or incorporate as a Singapore company. General information on establishing an office can be found at http://www.enterpriseone.gov.sg/en/Business%20Stages/Start.aspx.
If an American company wishes to carry on operations in Singapore, it should register a branch office or incorporate a local company with the Accounting & Corporate Regulatory Authority (ACRA) – http://www.acra.gov.sg. ACRA publishes an excellent guide that takes the first time registrant through the process of establishing a branch office or incorporating in Singapore.
Setting up a Representative Office in Singapore can be a good way for American firms to explore business opportunities in Singapore or the region. ROs in banking and insurance need to register with the Monetary Authority of Singapore (MAS) and meet the guidelines or requirements lay out by the MAS. ROs in all other industries need to register with International Enterprise (IE) Singapore.
ROs can only carry out market research, conduct feasibility studies or work as a liaison on behalf of the parent company. RO may not conduct business directly or on behalf of the parent company. ROs cannot ship, transship or store goods in Singapore. American firms can either work through an agent or distributor to do so or establish their own commercial presence.
For Branch Offices, the Companies Act requires a foreign company to appoint two local agents in Singapore to act on behalf of the company. The agents must be ordinarily resident in Singapore i.e. a Singaporean Citizen, a Singapore Permanent Resident, or a person who has been issued an EntrePass/Approval-In-Principle letter/Dependent Pass.
Establishing a Singapore Business
American firms can also register a sole-proprietorship, partnership, limited liability partnership or incorporate a company in Singapore. For a sole proprietorship the process takes about one day, while more complex business entities can take up to six weeks and require lawyers and accountants to assist with incorporation documents. A point to bear in mind is that registration/incorporation of a company does not automatically mean that expatriate staff can be assigned to Singapore. Foreign staff must obtain employment passes from the Singapore Ministry of Manpower, although this is generally quite routine.
Singapore is home to a wide variety of franchise concepts with more than 500 concepts and over 30,000 franchisees operating in the country. Foreign franchises are well received and the United States is by far the largest supplier of foreign franchises in the country. There are American franchises in practically every industry. McDonald's, Burger King, KFC, Subway, Starbucks, Ben and Jerry’s, Gymboree, New Horizons, Mister Minit, Avis, Toys R Us, On-line Trading Academy, Comfort Keepers, Contours Express, and many others have operations in Singapore. American franchises that opened recently in Singapore include Krispy Kreme and Wing Zone.
Singaporeans continue to seek out new franchise concepts to introduce into the country. The success of selling a franchise in Singapore is based on a number of factors including brand name, up-front costs and royalties, the concept’s uniqueness and the flexibility of the franchise agreement. U.S. franchisors should note that real estate in Singapore is prohibitively expensive and getting good locations is a challenge, especially for those in the retail and F&B business.
With its strategic location and well-developed infrastructure, Singapore serves as the regional showcase and distribution center for U.S. franchisors wishing to enter the markets of Asia. There have been instances where visitors from the region saw a franchise concept in Singapore and were interested to bring it back to their own countries. In 2013, Singapore attracted over 15 million visitors from around the world. The country’s multi-ethnic society also makes the country an ideal location for foreign franchisors to test their concepts and use the reaction to gauge the acceptance of their franchise in Asia. There are also opportunities for U.S. franchisors to work with Singapore companies to access markets in nearby countries. Singapore investors may buy franchise licenses for additional markets in the Southeast Asian region and not for Singapore alone.
The direct marketing industry in Singapore began in the early 1990s and now includes direct mail, telemarketing, television sales, mail order, call centers, fulfillment and e-commerce firms. The Direct Marketing Association of Singapore represents both users and service providers. The direct marketing industry is well supported by service companies including: Singapore Post, Singapore Telecom Call Center, Teledirect, TNT International Mail, Ogilvy One and MMS Consultancy, among many others. The Singapore government also actively supports the industry by assisting companies (through financial incentives) in using direct marketing for their trading activities through its Direct Marketing Program.
The Direct Selling Association of Singapore (DSAS), a self-regulatory body, was established in 1976. It provides a forum for all direct-selling companies in Singapore to discuss problems of common concern and to codify a high standard of business practices throughout the industry. The DSAS has adopted a Code of Conduct by which member-companies in the Association must abide by every aspect of business. Through the Code of Conduct, DSAS aims to further inculcate the spirit and practice of ethical direct-selling within its member-companies, setting examples for others to follow.
Foreign investors are not required to enter into joint ventures or cede management control to local interests. In Singapore, local and foreign investors are subject to the same basic laws. Apart from regulatory requirements in some sectors, the government screens investment proposals only to determine eligibility for various incentive regimes. Singapore places no restrictions on reinvestment or repatriation of earnings or capital.
Licensing is also a viable alternative in Singapore. With one of the strongest IPR protection schemes in Asia, a well-developed legal framework and an advanced manufacturing base, Singapore is an attractive location for American licensors.
Singapore is a signatory to the WTO Agreement on Government Procurement. The U.S.-Singapore FTA provides increased access for U.S. firms to Singapore’s central government procurement. U.S. firms generally find Singapore to be a receptive, open and lucrative market. The Singaporean government procurement system is considered by many American firms to be fair and transparent. However, some U.S. and local firms have expressed concerns that government-owned and government-linked companies (GLCs) may receive preferential treatment in the government procurement process. Singapore denies that it gives any preferences to GLCs or that GLCs give preferences to other GLCs. Procurement recommendations are made at the technical level and then forwarded to management for concurrence. Bidders should work closely with the project manager to determine the relative importance of decision criteria such as technical capability and price. Bidders must meet the specifications set out in the tender. Post mortem hearings or meetings for losing bidders are not required or common. Government procurement regulations are contained in Instruction Manual 3, available from the Ministry of Finance. The Singapore Government also advertises its tenders on its website at www.gebiz.gov.sg.
Singapore's distribution and sales channels are simple, direct and open to the participation of foreign firms established in Singapore. Because of Singapore’s role as a regional hub, most local distributors will also have knowledge of regional distribution rules and regulations. Most consumer goods are imported by stocking distributors who resell to retailers. Some goods are imported directly for sale in the importer's own retail outlets.
Price, quality and service are the main selling factors in Singapore. Prospective exporters to Singapore should be aware that competition is strong and that buyers expect good after-sales service. Selling techniques vary according to the industry or the product involved, but they are comparable to the techniques used in any other sophisticated market.
Singapore is one of the first countries in the world to enact a law that addresses issues that arise in the context of electronic contracts and digital signatures. The Electronic Transactions Act (ETA) (Cap 88) was enacted to provide a legal foundation for electronic signatures, and to give predictability and certainty to contracts formed electronically. The Singapore ETA follows closely the UN Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce, which sets the framework for electronic laws in many countries. The full text of the ETA can be found at the Singapore Statutes Online website (http://statutes.agc.gov.sg).
There are many specialized trade magazines in Singapore and scores of trade fairs that can be used to promote U.S. goods and services. The major English-language daily newspapers are the Straits Times and the Business Times. They are available at http://www.straitstimes.com and http://www.businesstimes.com.sg. The major Chinese daily is Lianhe Zaobao (http://www.zaobao.com). Leads for local advertising and promotional service agencies can be found at http://www.yellowpages.com.sg. Major trade fair organizers include Singapore Exhibition Services (http://www.sesallworld.com/), Reed Exhibition Services (http://www.reedexpo.com.sg/), Experia Events (http://www.experiaevents.com) and Koelnmesse (http://www.koelnmesse.com.sg).
Pricing is very competitive. Major department stores and retail chains offer fixed-price merchandise, while the smaller shops expect buyers to bargain. Hard bargaining is common in the commercial and industrial sectors as well, where buyers usually want a discount and vendors inflate their initial offers accordingly. Credit terms of 30-60-90 days are common. Buyers will often retain 10% of the sales price for major electronic equipment purchases until the vendor has installed the machine and it is performing according to specifications.
Typical Product Pricing Structures: Depending on the type of product, importer mark-ups range from 20-40%, while retail mark-ups are often more than 100%. Industrial goods are brought in by stocking distributors, who add on at least 20% before sale to end-users, or by agents whose commissions generally run about 7-10%. These mark-ups are approximate, and will vary widely, depending on the product and the contractual relationship in question.
Good sales and customer support are vital in Singapore. The market is so price competitive that client-focused sales support or customer service can make a big difference. Singapore distributors respond well to training on new products, and if properly supported by the U.S. manufacturer will do a good job cultivating old customers and developing new ones.
Several general principles are important for effective management of intellectual property (“IP”) rights in Singapore. First, it is important to have an overall strategy to protect your IP. Second, IP is protected differently in Singapore than in the U.S. Third, rights must be registered and enforced in Singapore, under local laws. Your U.S. trademark and patent registrations will not protect you in Singapore. There is no such thing as an “international copyright” that will automatically protect an author’s writings throughout the entire world. Protection against unauthorized use in a particular country depends, basically, on the national laws of that country. However, most countries do offer copyright protection to foreign works under certain conditions, and these conditions have been greatly simplified by international copyright treaties and conventions.
Registration of patents and trademarks is on a first-in-time, first-in-right basis, so you should consider applying for trademark and patent protection even before selling your products or services in the Singapore market. It is vital that companies understand that intellectual property is primarily a private right and that the US government generally cannot enforce rights for private individuals in Singapore. It is the responsibility of the rights' holders to register, protect, and enforce their rights where relevant, retaining their own counsel and advisors. Companies may wish to seek advice from local attorneys or IP consultants who are experts in Singapore law. The U.S. Commercial Service can provide a list of local lawyers upon request: http://singapore.usembassy.gov/list_of_attorneys.html
While the U.S. Government stands ready to assist, there is little we can do if the rights holders have not taken these fundamental steps necessary to securing and enforcing their IP in a timely fashion. Moreover, in many countries, rights holders who delay enforcing their rights on a mistaken belief that the USG can provide a political resolution to a legal problem may find that their rights have been eroded or abrogated due to legal doctrines such as statutes of limitations, laches, estoppel, or unreasonable delay in prosecuting a law suit. In no instance should U.S. Government advice be seen as a substitute for the obligation of a rights holder to promptly pursue its case.
It is always advisable to conduct due diligence on potential partners. Negotiate from the position of your partner and give your partner clear incentives to honor the contract. A good partner is an important ally in protecting IP rights. Consider carefully, however, whether to permit your partner to register your IP rights on your behalf. Doing so may create a risk that your partner will list itself as the IP owner and fail to transfer the rights should the partnership end. Keep an eye on your cost structure and reduce the margins (and the incentive) of would-be bad actors. Projects and sales in Singapore require constant attention. Work with legal counsel familiar with Singapore laws to create a solid contract that includes non-compete clauses, and confidentiality/non-disclosure provisions.
It is also recommended that small and medium-size companies understand the importance of working together with trade associations and organizations to support efforts to protect IP and stop counterfeiting. There are a number of these organizations, both Singapore or U.S.-based. These include:
A wealth of information on protecting IP is freely available to U.S. rights holders. Some excellent resources for companies regarding intellectual property include the following:
Entities wanting to carry out business in Singapore must register with the Accounting and Corporate Regulatory Authority (ACRA). CS Singapore offers the International Company Profile (http://www.buyusa.gov/singapore/en/icp.html) service to American firms wishing to check the bona fides of existing or potential partners. Alternately, U.S. firms can run a check on Singapore companies by accessing the ACRA database via www.acra.gov.sg. Other credit agency includes Infocredit D&B (http://www.icdnb.com.sg).
Legal Services: As of end 2013, 12 of the 114 foreign law firms in Singapore were from the United States. In December 2008, Singapore granted Qualifying Foreign Law Practice (QFLP) licenses to six foreign law firms (including two U.S. firms) to practice Singapore law, although restrictions remain in certain areas, including conveyance, criminal law, family law, and domestic litigation. In 1Q 2013, Singapore awarded another four QFLP licenses during the second round of applications, which ended in 2012 and attracted twenty three applicants. Three of these firms were U.S. companies. In total, ten QFLP licences have been issued since 2008, with five of them issued to U.S. firms. They are Gibson, Dunn & Crutcher; Jones Day; Sidley Austin; White & Case; and Latham & Watkins. Foreign law firms can otherwise provide legal services in relation to Singapore law only through a Joint Law Venture (JLV) or Formal Law Alliance (FLA) with a Singapore law firm, in accordance with the relevant legislation. Details on the structure of the Singapore legal service can be found in http://www.lsc.gov.sg.
Accounting and Tax Services: The major international accounting firms operate in Singapore. Public accountants and at least one partner of a public accounting firm must reside in Singapore. Only public accountants who are members of the Institute of Certified Public Accountants of Singapore (http://www.icpas.org.sg) and registered with the Public Accountants Board may practice in Singapore. The Board recognizes U.S. accountants registered with the American Institute of Certified Public Accountants.
Engineering and Architectural Services: Engineering and architectural firms can be 100-percent foreign-owned. Only engineers and architects registered with the Professional Engineers Board, Singapore (http://www.peb.gov.sg) and the Board of Architects (http://www.boa.gov.sg) respectively, can practice in Singapore. All applicants (both local and foreign) must have at least four years of practical experience in engineering or architectural works, and pass an examination set by the respective Board.
Under the Architect Act, no person shall draw or prepare any architectural plan and design intended to govern the construction of any building in Singapore unless the person is a registered architect who has a valid practicing certificate issued by the Board of Architects (http://www.boa.gov.sg).