Required Report - public distribution

**Date:** 11/10/2004

**GAIN Report Number:** SN4008

SN4008

**Singapore**

**Exporter Guide**

**Singapore Exporter Guide**

**2004**

**Approved by:**

![](media/image1.wmf)Jonathan Gressel

U.S. Embassy

**Prepared by:**

Bernard Kong

**Report Highlights:**

The Singapore economy is slated for 8% growth for CY2004 and 6% growth
for CY2005. Demographic factors, including an aging population and
increasing number of women in the work force, favor shifts in food
consumption to convenience foods, ready-to-cook meals and away-from-home
dining.

Includes PSD Changes: No

Includes Trade Matrix: No

Annual Report

Singapore \[SN1\]

\[SN\]

**SECTION I. MARKET OVERVIEW**

# Economic Situation

Singapore's economic recovery, which started from mid CY2003, was led
principally by external demand while domestic demand continued to be
weak. Despite the weak first half performance attributed to external
factors like the SARS epidemic and the uncertainties surrounding the
Iraq war situation, overall the economy registered a credible 1.1%
growth in GDP.

External demand rose by 9.5% in 2003 with the strong rebound in the
second half of the year as external demand for Singapore 's key
manufactured exports- electronics, pharmaceuticals and chemicals-as well
as for trade related services such as logistics and transport expanded
rapidly.

Non-oil domestic exports for CY 2003 recorded a rise of 15% to a record
US\$66.5 billion.

The strength of external demand also registered in several key services
sectors, including logistics, transport and travel related services. The
transport and the hotel/restaurant industry recovered from the SARS
epidemic only in the last quarter of 2003. As a result, visitor arrivals
for the year as a whole fell by almost 20% to 6.1 million tourists.

The Singapore economy is projected to grow by 8-9% in CY2004 based on
robust economic performances in the first three quarters of 2004.
Unemployment levels have fallen to 3.4% while manufacturing exports and
as well as services related sectors have all shown strong growth in the
first three quarters of 2004. The manufacturing, financial and service
sectors all experienced strong growth rates, creating 16,000 additional
jobs in the third quarter of 2004 alone. The food service industry is
reported to have experienced significant business improvement as tourist
arrivals have bounced back to pre-SARS levels and Singapore consumers
are now eating out more frequently at restaurants.

The economic outlook for CY2005 remains bright despite the projected
slowing down in the pace of economic recovery in the second half of
CY2005. Economists predict a growth rate of 6% for CY2005. Based on
current rates of increase of U.S. exports and the rising export trends,
we would project U.S. consumer oriented food exports to Singapore to
increase by 7% for CY2004 and 6% for CY2005.

# Food Imports

As Singapore is practically entirely dependent on imports of all the
foods that the population of 4.2 million citizens and foreign residents
consume, it is not surprising that the value of the total consumer
oriented foods stood at US\$2.3 billion in CY2003. Major product
categories include dairy products, fresh fruit and fresh vegetables, red
meats, poultry, wine and beer, snack foods and other consumer oriented
products. Growth rate for the consumer oriented foods category is
estimated at 2% per annum over the last three years. The U.S. market
share of the consumer oriented foods category in the same year was 11%.
Fish and seafood products imported into Singapore for CY2003 were valued
at US\$472 million.

# Demography and Socio-economic impact

Like most developed and highly urbanized economies, Singapore's
population growth rates have been falling rapidly in the last decade.
The rate of natural increase in the population of Singapore was a low
0.6% in 2003. However the increased number of foreigners being granted
permanent residence in recent years augmented the slow population
growth. The total population of 4.2 million comprised of 3.4 million
citizens and permanent residents and 800,000 foreign workers (and their
dependents) on employment passes, work permits or long term social visit
passes.

The proportion of elderly residents has increased rapidly over the last
ten years. Elder residents aged 65 years comprised about 7.3% of
Singapore's resident population. This proportion is expected to increase
to over 20% by 2050. On the flipside, the youth population(aged 15-29
years) as a percentage of the population declined from 25 percent in
1993 to 20 percent in 2003. On the positive side, the educational level
of the youth population grew from an average of 10 years of schooling in
1993 to 12 years in 2003.

With better education there is a growing share of youths holding
professional, managerial or technical jobs. This proportion grew from 25
percent in 1993 to 37 percent in 2003.

The number of singles has also risen in the country with the fall in the
number of persons getting married over the last ten years. The age at
which both grooms and brides get married have also risen.

Summary of the socio-economic impact of the changing demographic
structure:

1\) Slow growth in domestic demand

2\) Growing personal disposal income due to better-educated workforce.

3\) Smaller household sizes due to falling marriage and birth rates.

4\) Demand for food products for the mature age groups growing.

5\) Growth in international consumer tastes with increase in the number
of more educated and more traveled population. The increased number of
visitors and foreign workers has also contributed to the wider variety
of consumer tastes.

6\) With the rise in the number of women working, there is a
corresponding growth in demand for convenience foods and ready to cook
prepared meals.

**[Advantages and Challenges for U.S. Suppliers]{.underline}**

  ---------------------------------- ------------------------------------
  **Advantages**                     **Challenges**

  Fast growing incomes and highly    High costs of entry into major
  educated population                supermarket chains

  Increasing preference for higher   Lower prices of competing products
  quality products                   from other countries

  Proliferation of western           Inadequate knowledge on use of U.S.
  family-style restaurants and fast  products
  food chains                        

  High consumer regard for U.S.      High promotional and advertising
  brands                             costs for introducing new products
  ---------------------------------- ------------------------------------

SECTION II. EXPORTER BUSINESS TIPS

Local Business Practices and Custom

In the arena of international trade, Singapore business practices tend
to follow those in the more developed and highly urbanized economies.
The country's laws are patterned after the British legal system. There
is considerable reliance on international trading practices and
contracts. Letters of credit are normally used for first time
transactions and only after a long history of business relationship is
established, the terms of payment may then change to an open trading
account. It is not uncommon for buyers to request for samples from first
time suppliers. In some cases, U.S. exporters may request that buyers
pay for airfreight charges and handling costs of samples if they become
prohibitive.

U.S. exporters who are exporting for the first time to the Singapore
market would be advised to consider making use of local distributors or
at least a local representative to help them guide through the
requirements of the Singapore Food regulations and local trading
practices.

However, the financial and credit arrangements in the domestic economy
is very different. With few exceptions, supermarket chains, restaurants
and other retail customers expect suppliers to give 60 days credit.
There is also an implicit understanding to accept return of damaged and
unsold goods. On the other hand, some small retailers like Mom and Pop
stores pay cash on delivery, as their order sizes are very small. Hence,
if U.S. exporters decide to carry out their own distribution, they would
have to expect to meet the usual credit terms demanded by local
supermarket chains.

General Consumer Tastes and Preferences

With rising consumer incomes, Singaporeans are prepared to pay for
higher quality food products or products that will provide savings in
labor and time. Hence, on the supermarket shelves we tend to see an
increasing number of prepared and convenience foods. Diced vegetables
and seasoned portion-control meats and poultry are in increasing demand
as both spouses work.

As almost all Singapore households are of Asian origin, imported foods
that are to be used in local cooking have to be able to lend themselves
to Asian cuisines. Asian dishes tend to be stir fried, prepared in
curries or marinated in chili sauces.

Food Standards and Regulations

Singapore food laws are delineated in the Food Act and all packaged
foods sold in retail outlets have to comply with the allowable
ingredients and preservatives listed in the abovementioned Act (see the
FAIRS Report).

Singapore has a very open import regime and all foods, with the
exception of alcoholic beverages and tobacco products are imported duty
free. There are practically no non-tariff restrictions since there is
very little local production and the current government policy is to
source food products from all over the world. Customs clearance of
imported food products is carried out electronically and the process is
completed in less than 48 hours.

Import and Inspection Procedures

Export health certification is required for the import of meat, poultry
products and shellfish products. In some cases, random inspection and
laboratory analysis of meat and poultry products are carried out.
Imports of all newly imported alcoholic beverages are subjected to
laboratory analysis for alcohol content.

SECTION III. MARKET SECTOR STRUCTURE AND TRENDS

Consumer-oriented Foods and Beverages & Edible Fishery Products

Singapore, which has the second highest per capita income in Asia, is
one of the most open economies in the world with no tariffs on all food
products except on alcoholic beverages. As a result, a wide range of
food products from all over the world can be found on supermarket
shelves in this island nation of 4.2 million people.

The major suppliers of fresh temperate climatic fruit to Singapore are
U.S., Australia, New Zealand, E.U., China, South Africa, Brazil and
Chile. Suppliers of tropical fruit are neighboring countries of
Malaysia, Indonesia and Thailand. Singapore households buy mostly fresh
leafy green vegetables from Malaysia, Indonesia, Thailand and China. On
the other hand, most of the imported temperate vegetables originating
from Australia, New Zealand, E.U. and the United States are supplied to
restaurants and selected up market supermarkets.

Singapore imports all the meats and poultry it consumes from all over
the world. Poultry and pork are the main meat items consumed in
Singapore. Freshly slaughtered chicken is obtained by importing live
poultry from Malaysia for slaughter in local abattoirs. About half of
the chicken requirements are fulfilled through the imports of frozen
chicken and chicken parts from U.S., Brazil, China and the E.U.

Since April 1999, the only source of live imported pigs (about 250,000
head annually) for slaughter comes from Indonesia. Most of Singapore's
pork requirements are fulfilled through the import of chilled pork from
Australia and frozen pork from E.U. and U.S.

Beef, while not as widely consumed as chicken, is sold principally in
the supermarkets. Major suppliers of beef include Australia, New
Zealand, Argentina, China and until recently, because of the discovery
of a single imported BSE case, the United States.

In the seafood category, Singaporeans consume mostly fresh and frozen
finfish caught and sold by neighboring countries, i.e. Malaysia,
Indonesia and Burma. Other major suppliers include Taiwan and Japan,
India, Australia, Vietnam and China. In 2003, a total value of US\$472
million was imported from worldwide sources.

Singaporeans are very fond of fresh seafood; especially fin fish, crabs,
lobsters and clams. While most of the finfish are purchased in the wet
markets for home consumption, Singapore consumers generally go to
restaurants for the consumption of crabs and lobsters.

Food Retail Sector

It is estimated that about 70% of the food retail sales of US\$4 billion
take place in supermarkets, the rest in convenience shops, mini marts,
petrol stations and wet market stalls. Traditionally Singaporeans shop
for their fresh produce, meats and fish in wet market stalls. However,
in recent years, more and more household are turning to supermarkets for
their fresh produce, meats and fish requirements. Generally, importers
who represent foreign brands will be responsible for the market
development of the brands, advertising and promotion and increasing
distribution reach to all retailers.

However, in recent years, some of the large supermarket chains and
several up market retailers import western-type products directly for
their own outlets. Products directly imported would include frozen
prepared meals, juices, jams, confectionery, biscuits, salad dressings,
prepacked deli meats and fresh temperate fruit. Products procured from
local importers would include products from the Asian region, dry
groceries, tropical fruit, frozen chicken and chicken parts, frozen
beef, local sauces and ethnic foods.

Two major supermarket chains dominate the Singapore retail industry. The
largest, NTUC Fairprice supermarket chain, has 77 outlets, almost all of
them located in major residential estates. NTUC Fairprice's target
audience is principally the middle and lower income groups. Competitive
pricing is one of the main factors determining whether a new product
should be procured for the Fairprice stores. The retail distribution
reach of the Fairprice stores is very extensive as they are located in
almost every large residential population concentration. Importers who
require their products to be distributed island-wide and with the focus
on the mass market prefer to work with NTUC Fairprice.

NTUC Fairprice supermarket chain procures almost all their food products
from local importers. However, in recent years, NTUC Fairprice has
embarked on extensive house branding of basic essentials like rice,
bread, cooking oil, toilet paper, box tissue, sugar, dish washing liquid
and canned fruit.

The second largest in terms of number of outlets and sales turnover is
the Cold Storage supermarket chain with 42 outlets. This chain owned by
the Dairy Farm Group targets the middle and upper-middle income groups.
In the first half of 2004, Cold Storage supermarket chain took over the
ownership and management of the chain of 35 Shop N Save supermarket
outlets. A large percentage of products on their shelves are either
western-type products or procured from E.U., Australia, New Zealand and
the United States. Eight of their outlets are located in upper
middle-income residential areas and customers to these outlets are
principally expatriates and upper middle-income residents.

The procurement focus of Cold Storage supermarkets is on quality and
freshness. Besides procuring most of their products from local
importers, Cold Storage also imports significant volumes of fresh
temperate fruit and frozen foods from the United States, Australia and
the EU. Packaged and canned products manufactured in the Southeast Asian
region and in China and which the local residents consume are procured
locally from Singapore importers.

Dairy Farm, the holding company for Cold Storage supermarket chain
operates three hypermarkets under the Giant name. These hypermarkets
offer very competitively priced products targeted at the low to middle
income Singaporean shoppers. The only other hypermarket is Carrefour,
which has two stores in Singapore. Like Giant, Carrefour focuses on the
lower mass consumer market.

Besides Cold Storage and NTUC Fairprice supermarkets, there are several
independently managed supermarkets like Isetan, Meidi-Ya, Mustafa's and
Sheng Siong. With the exception of Sheng Siong, which has ten stores,
the other independently operated supermarket stores have only one outlet
each. Sheng Siong started out with one mini mart about fifteen years ago
and has expanded to ten stores, most of which are slightly larger than
min marts. Most of its products are low priced products from China and
the ASEAN region and are targeted at the lower income groups.

Besides the major supermarket chains, there are more than 23,000
mini-marts, convenience stores and grocery shops located in all
residential housing estates all over the island. As these shops tend to
be very small (in most cases no more than 600 square feet in retailing
area), products tend to be limited to the very basic household items and
to a small number of confectionery items and snack foods. Few of the
shops in this category sell frozen meats and prepared meals nor is fresh
produce retailed in this category.

Food Service Sector

It is estimated that Singaporeans spend about US\$2.24 billion annually
on cooked food. Since eating out in the numerous cooked food stalls
located in almost every corner of major housing residential estates is
relatively inexpensive, most Singaporeans eat out at least once a day.
As most households have working wives, Singapore families find it more
convenient and, in most cases, less expensive to eat out. It is not
uncommon each evening to see families walk to the nearest neighborhood
cooked-food stall to have their dinner.

According to government statistics, there are more than 5,500 cooked
food stalls in the whole island. Besides these cooked-food stalls, fast
food chains like McDonalds, Kentucky Fried Chicken, Burger King, Pizza
Hut are located in large shopping complexes all over the island.

The food service industry had been very badly affected by the SARS
outbreak in the first quarter of 2003. Faced with dwindling tourist
arrivals and lower level patronage by Singapore clientele, restaurant
chains closed unprofitable outlets and consolidated their operations by
cutting costs and trimming their labor force.

During the downturn attributed by the SARS outbreak in the first quarter
of 2003, Singapore customers turned away from eating out in restaurants
in general. Some consumers go further downscale, from QSR outlets to the
low priced cooked food market stalls. Some supermarket managers also
reported an increase in purchase of uncooked foods especially those in
the lower priced categories as more consumers resort to home cooking to
save on eating out expenses. Additionally, some office workers bring in
box lunches from home to cut down the cost of eating out.

The later half of CY2003 showed a marked improvement in restaurant
turnover as the Singapore economy improved during the year. However cash
flow remained rather tight as payments from restaurants to suppliers
were dragged out to as long as six months in some cases. During the
economic crunch in 2003, restaurants switched to lower cost food
ingredients to save costs. However, with the upswing in the later half
of 2003 and in early 2004, the food service industry is reverting back
to better quality but higher priced foods as customers resume their
original preference for quality food ingredients.

Food service companies in Singapore are widening their distribution
network to other countries in the Asian region to achieve economies of
scale in operation. As individual restaurant requirements are small,
Singapore food service companies provide an alternative supply chain to
customers who have small but frequent procurement needs for U.S. or
western-type products.

It is thus not uncommon to see a number of well-known U.S. brands being
transshipped or distributed from Singapore. Traders here are able to
provide credit terms to their counterparts in the region or to carry out
specific handling, packaging or documentation requirements. Generally
products which have a longer shelf life and which do not need
refrigeration are more easily transshipped.

Meat and poultry products, which require halal certification for Muslim
consumers in the region, are generally shipped direct to the country of
destination. Again, some Singapore traders may be involved in the
ordering process as well as in the provision of short-term credit to the
local importer in the destination country.

Food Processing Sector

Singapore's food processing sector is very limited and the major food
manufacturers are those in beer, non-alcoholic beverages, snack foods,
fish processing and ethnic food activities. As Singapore has no crop or
livestock production, practically all food ingredients are imported from
a wide range of countries worldwide.

According to the Singapore government statistics, there are more than
300 companies making up Singapore's food processing sector most of which
are small-scale operations with output barely sufficient for the local
market. These firms manufacture food products ranging from beverages and
snack foods to dairy and confectionery goods. With the exception of the
sole cigarette manufacturer, the number of employees for each
establishment tends to be less than 100 each.

The total output of the locally manufactured food, beverage and tobacco
sector was US\$2.23 billon in 2003, out of which it was estimated that
about 45 percent was re-exported. Products, which are exported, include
cigarettes, edible oils, chocolates, seafood, milk powder, condensed
milk, sauces and spices.

The source of competition varies depending on the nature of the product
manufactured. For example, Australia supplies most of the milk products
and dairy ingredients while China supplies most of the corn and soybean
products. Malaysia supplied nearly 20 % of the food ingredient market
and is the major supplier of live animals for slaughter, edible oils,
tropical fruit and vegetables. The U.S. has significant market share in
juices, juice concentrates, and fresh temperate fruit, nuts, flavorings,
spices and leaf tobacco.

SECTION IV. BEST HIGH-VALUE PRODUCT PROSPECTS

  -------------- ----------------- ---------- ------------------- -----------------------
  **Product**    **2003**          **2000 -   **Key Constraints** **Market**
                                   2003**                         

  **Category**   **Total**         **Ave      **over Market**     **Attractiveness**
                                   Annual**                       

                 **US\$Million**   **Import   **Development**     **for USA**
                                   Growth**                       

                                                                   

  Snack Foods    136               5          Intense competition Availability of wide
                                              from lower          variety of

                                              cost supplier       flavors. Quality of
                                              countries           U.S. products

                                                                  and packaging

                                                                   

                                                                   

  Poultry Meats  108               3          Market dominated by Jumbo size chicken
                                              low cost            parts. Market

                                              frozen poultry from niche in processed
                                              Brazil and          chicken parts

                                              freshly slaughtered and portion control
                                              chicken             chicken meals

                                              from Malaysia        

                                                                   

                                                                   

  Dairy Products 274               6          Lower priced dairy  Quality and instant
                                              products            brand recognition

                                              from Australia &    of leading U.S. brands
                                              New Zealand         like Krafts

                                                                   

                                                                   

  Fresh Fruit    230               -3         Intense competition U.S. has the reputation
                                              from                of being a

                                              China, South        quality supplier of
                                              Africa, Australia   fresh fruit

                                              and New Zealand      

                                                                   

                                                                   

  Tree Nuts      24                -11        Competition from     
                                              low priced          

                                              peanuts from China   
                                              and                 

                                              pistachios from      
                                              Iran                

                                                                   

                                                                   

  Fruit &        33                4          Strong competition  U.S. has a reputation
  Vegetable                                   from                for quality

  Juices                                      South Africa and    products and instant
                                              Eastern             brand

                                              Europe              recognition

                                                                   

                                                                   

  Pet Foods      12                11         Australia is well   U.S. brands have a
                                              entrenched          reputation for

                                              in the pet food     quality products
                                              market.             

                                                                   
  -------------- ----------------- ---------- ------------------- -----------------------

SECTION V. KEY CONTACTS AND FURTHER INFORMATION

Agricultural Affairs Office

U.S. Embassy

27 Napier Road

Singapore 258508

Fax:(65) 6476-9517

Tel: (65) 6476-9517

[Email: agsingapore@usda.gov]{.underline}

Agri-food & Veterinary Authority of Singapore

Ministry of National Development

5 Maxwell Road

#03-00 Tower Block

MND Complex

Singapore 069110

Fax: (65) 6220-6068

Tel: (65) 6222-1211

Website: www.ava.gov.sg

International Enterprise Singapore

230 Victoria Street #09-00

Bugis Junction Office Tower

Singapore 188024

Fax: (65) 6337-6898

Tel: (65) 6337-6628

Singapore Confederation of Industries

No. 1 Science Centre Road

The Enterprise #02-02

Singapore 609077

Fax:(65) 6338-3787

Tel:(65) 6338-8787

Email: scihq@sci.org.sg

American Chamber of Commerce in Singapore

1, Scotts Road

#16-07 Shaw Centre

Singapore 228208

Tel: (65) 6235-0077

Fax:(65) 6732-5917

Email: nick@amcham.org.sg

Singapore Retailers Association

76 Shenton Way

#17-01

Singapore 079119

Fax:(65) 6223-6621

Tel:(65) 6223-6221

Email: info@sra.org.sg

APPENDIX I. STATISTICS

A. Key Trade & Demographic Information

  ---------------------------------------------------------- -------- ------
                                                             2003     

  Agricultural Imports From All Countries (\$Mil) /U.S.      4159     7%
  Market Share (%)                                                    

  Consumer Food Imports From All Countries (\$Mil) / U.S.    2308     11%
  Market Share (%)                                                    

  Edible Fishery Imports From All Countries (S\$Mil) / U.S.  472      1%
  Market Share (%)                                                    

  Total Population (Millions) / Annual Growth Rate (%)       4.2      1.7%

  Urban Population (Millions) / Annual Growth Rate (%)       N.A.     N.A.

  Number of Major Metropolitan Areas                         1        

  Size of the Middle Class (Millions) / Growth Rate (%)      N.A.     N.A.

  Per Capita Gross Domestic Product (U.S. Dollars)           21,583   

  Unemployment Rate (%)                                               5.4%

  Per Household Food Expenditures (U.S. Dollars) Per Annum   5760     

  Exchange Rate (US\$1 = S\$1.74)                                     
  ---------------------------------------------------------- -------- ------

# TABLE B. CONSUMER FOOD & EDIBLE FISHERY PRODUCT IMPORTS

![](media/image2.wmf)

Source: FAS' Global Agricultural Trade System using data from the United
Nations Statistical Office.

# ![](media/image3.wmf)TABLE C. TOP 15 SUPPLIERS OF CONSUMER FOODS & EDIBLE FISHERY PRODUCTS

Source: United Nations Statistics Division.

END OF REPORT