Press Release

September 2, 2021
ASEAN-Japan Centre
Non-equity Modes of Trade in Singapore
seen to promote financial technology, data centers, and biopharmaceutical industries
in the time of pandemic according to the study by ASEAN-Japan Centre“Non-Equity Modes of Trade in ASEAN” on Singapore is available for download on AJC website

ASEAN-Japan Centre (AJC) issued the paper 8 of the “Non-Equity Modes of Trade in ASEAN: Promoting New Formsof Trade between Japan and ASEAN” series focusing on Singapore in July 2021. According to the paper, non-equitymodes (NEMs) of trade in Singapore complement foreign direct investments (FDIs) through positive network effects thatcreate a strong feedback loop between NEMs and FDI. Singapore receives some of the world’s largest amounts of FDI
with more than S$1.5 trillion FDI stocks in 2018. Transnational companies (TNCs) enjoy Singapore’s business-friendlyenvironment, supportive government policies, strong intellectual property regime, and strategic geographical location,
which create a strong ecosystem and make Singapore a robust export hub to the rest of the world.
NEMs in Singapore are prevalent in new industries that require high technology. The paper identifies and focuses on
the following five modalities and industries: subcontracting in electronics and supply chain management, licensing inpharmaceutical companies, franchising in food and beverage industries, management contracts in hotels, and leasing
in data centers. The paper shows that NEMs include both TNCs and local small and medium enterprises (SMEs). For
example, in contract manufacturing of pharmaceutical products, GlaxoSmithKline (GSK) a TNC, and Beacons, a local
SME are both engaged in NEMs trade. Subway, a large US fast-food restaurant, and Ya Kun Kaya Toast, a local SME
are also both active in franchising in the country and abroad.
Singapore aims to become a global hub for businesses and has established strategies to drive the growth andtransformation of its economy. In the electronics industry, the government developed a skills framework for continual
learning with two career pathways for management and technicians and engineers. Companies are also encouraged toadopt robotics and automation and provide incentives for high value-added manufacturing. The Industry Transformation
Map for electronics is seen to support the growth of NEMs by enhancing the skills of workers, increasing productivity
and encouraging innovation. The Singaporean government also offers financial support for continuous learning throughthe SkillsFuture which provides a starting credit of S$500 to young professionals and mid-career professionals to learn1new skills. These initiatives seek to help workers develop new capabilities and support the growth of NEMs in newindustries.
Despite the relative favorability of Singapore for FDIs and NEMs, there remains some room for improvement. As thecost of labor and living in Singapore is high, some foreign companies have moved to Malaysia and other neighboring
countries for cost considerations. The paper suggests that the country cannot be overly reliant on one sector, and that
Singapore firms should consider internationalizing and setting up external wings so that they would not be vulnerable tothe demands of TNCs.
Taking into consideration the COVID19 pandemic situation, the paper sees NEMs playing an important role in the newnormal. With the growing use of electronic transactions, NEMs can take place without physical meetings and can support
industries in expanding quickly through subcontracting or outsourcing. The remote work set-up has also increased thedemand for the data center industry, and Singapore is fast becoming an important entry point to Southeast Asia forTNCs, such as Zoom, which has opened a data center in Singapore in 2020. Biopharmaceutical companies in Singapore
are also attracting more NEMs, as TNCs are developing vaccines and medicines against COVID19. Singapore is tapping
on its comparative advantage in a post-pandemic world, especially in the areas of technology, data centers and artificial
intelligence, where NEMs are poised to support the growth of these industries.
“Non-Equity Modes of Trade in ASEAN: Promoting new forms of trade between Japan and ASEAN: Paper 8 Singapore”
is available for download on AJC’s website as below.

https://www.asean.or.jp/en/trade-info/nem_papers/

Contact:
ASEAN-Japan Centre (AJC) PR Unit
Tomoko Miyauchi (MS)URL: https://www.asean.or.jp/en/
TEL: 03-5402-8118
E-mail: toiawase_ga@asean.or.jp

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