Monday, February 13, 2017

Can Singapore companies be globally competitive?


Larry Sim
See Wei Hwa

February 9, 2017

The United States has Apple. China has Alibaba. Japan has Toyota. Korea has Samsung.

Why doesn’t Singapore have a company or brand that is equally recognisable, globally?

The current tax regime encourages our business culture to lean towards the acquisition or sale of successful brands, rather than development.

A company that acquires a brand qualifies for tax amortisation, but a company which has developed its own brand does not.

This culture is evident in the list of strong, homegrown brands that are no longer owned by Singapore companies, such as Tiger Beer and Raffles Hotel.

Over the years, Singapore has extended financial benefits, such as tax concessions to attract foreign multinational corporations (MNCs), while the MNCs have brought in fixed capital investments and jobs. There is, however, a limit to the incentives that can be dangled in front of foreign MNCs, which are always on the lookout for lower operating costs in competing economies like China, Cambodia and Sri Lanka. It is in Singapore’s interest to have a strong core of homegrown companies headquartered here. 

[Say I don't disagree from a personal perspective. But why? Would homegrown companies headquartered here resist moving their operations to countries with cheaper operating costs because of "loyalty" to Singapore? And in doing so, would they become less competitive and eventually die? So this "Singapore interest" is to kill off local brands?

Here's another question: Does it matter if you are employed by Tiger Beer (if still owned by Singaporeans) or Heineken (owned by foreigners)?

And another question: Is it better for Tiger beer to continue as a brand, but owned by a foreign company, or better for Tiger to just die then be a brand owned by a foreigner?]
The recent economic outlook for Singapore has been subdued. Unlike previous downturns which were followed by rapid recovery, there is now a fear that Singapore might be bracing for a protracted period of flat or stagnant growth.

Expanding overseas can help Singapore businesses diversify risks and lower the cost of products/services. Internationalising could also create career opportunities for Singaporeans taking on overseas leadership roles.

While this goes against the anti-globalisation rhetoric that rallied Trump supporters in the United States and conservative groups in the West, the Singapore economy has to look outward for growth.

We present four areas in which the Singapore government can do more to help companies.


Often, we see Singapore businesses falling short on strong brand recognition. Having a recognisable brand can help differentiate businesses from foreign competitors, cultivate brand equity, encourage customer loyalty, attract better talent, and ultimately boost revenue growth – even make it easier for other Singapore businesses to penetrate foreign markets.

A new tax incentive to provide tax amortisation based on the market value of internally developed brands that have ventured overseas could help. Such an incentive would recognise the significant time, resources, effort and risks involved in developing a brand. A “claw-back” provision (similar to those provided in the Income Tax Act in respect to capital allowance) might significantly help to discourage businesses from selling.

[I have no idea what the hell they are talking about. My gut feel is that if I don't understand something, it's probably a scam. Or more intellectually correct, if  someone is unable to explain their argument sufficient for comprehension, they are either speaking to the wrong audience, or they are intellectually lazy and did not bother to make their argument comprehensible.]


The government already has several schemes, such as the Market Readiness Assistance grant, the Global Company Partnership plan, the Double Tax Deduction for Internationalisation, and the International Growth Scheme, which offer a range of support and resources from information to manpower development and tax concessions for overseas expansion. There are also grants for brand strategy development and intellectual property management, administered through IE Singapore.

While each of these schemes serves a unique purpose, consolidating, simplifying and enhancing them under a single umbrella scheme will help make internationalisation our next success story.

We propose a “Business and Brand Internationalisation” scheme to streamline and offer a creative, integrative pathways for internationalisation, in parallel with the government’s push for productivity and innovation. Additional measures could be introduced under this umbrella scheme to further incentivise local brands to venture overseas and support local businesses to explore new markets. These are discussed below.

["Creative, integrative pathways for internationalisation"? Now they are just using the power of jargon to overwhelm critics, and obfuscate their arguments. Lazy. Lazy. Lazy. If not simply intellectually dishonest.]


Larger grants for small and medium-sized enterprises (SMEs) that are venturing abroad will help them defray costs such as those relating to feasibility studies on foreign markets. For example, the Market Readiness Assistance grant could be doubled from the current cap of $20,000 per fiscal year. The next step in providing support can be an “International Expansion Acceleration Programme” that funds consulting firms or trade associations to take SMEs overseas and/or find suitable international business partners for them. And finally, a list of accredited consultants, in each overseas country, who can help SMEs assess foreign markets and regulations (e.g., corporate law, accounting and tax) will provide the necessary fillip to companies looking to internationalise.

Singapore has a wide network of 20 FTAs with 31 trading partners, including China, India, Japan, Korea, US, Australia, and ASEAN. However, many SMEs are still underutilising these FTAs, as they are either unfamiliar or do not fully understand the benefits. One way to address this is to introduce a specific grant of up to S$20,000 to help SMEs learn how to apply the FTAs to lower their costs.

[In and of themselves, the proposals are good for SMEs. But how would this lead to a global brand? Does lower costs (through application of FTAs) lead to global brands? I guess that's why Apple is one of the cheapest brands in the world.]


Singapore also has a wide network of comprehensive tax treaties for the avoidance of double taxation with 81 other countries, some of which were concluded more than 20 years ago, such as with neighbouring countries Indonesia and the Philippines.

Singapore should seek to revise existing tax treaties that could bring it more up to date with the current business context.

Despite the withdrawal of the US from the Trans-Pacific Partnership, it would be in Singapore’s interest to forge a bilateral tax treaty with the US for the avoidance of double taxation, with a view to encourage cross border trade, especially given the prevailing high domestic tax rate in the US.

Internationalisation is a long-term play, and Singapore businesses are uniquely positioned to succeed. Local businesses have outperformed expectations in the past, but a new period of profit constraints will test their strength. With the appropriate support structure backing them, Singapore businesses that pivot to greater innovation and remain savvy in their risk taking will find themselves stronger and more competitive in the years to come.

[You know it is hard to disagree with that last sentence (highlighted in red). Mainly because I find it hard to disagree with something incomprehensible. But it has all the great words - "pivot to greater innovation", "savvy in their risk taking", "stronger", "more competitive". All great words.]


Larry Sim and See Wei Hwa are Tax Partner and Senior Tax Manager, respectively, at KPMG in Singapore. These are their own views.

[So... KPMG is distancing themselves from these two writers?
Online comment:
There are very few brands that are internationally known. If that is a criteria for being globally competitive, there are very few globally competitive company or brands.
Most global brands are US-originated - Coke, McD, Apple, IBM, KFC, Ford, etc. This is as much because of US "soft power" or cultural dominance, as it is marketing, and tech superiority.

The examples given by the writers are tech-based brands: "The United States has Apple. China has Alibaba. Japan has Toyota. Korea has Samsung."
And the 4 countries listed have large populations - larger than SG by many factors. S. Korea has the smallest population of the 4 countries cited by the writers, and their population is 10 times that of SG.

Why didn't they cite HK which is often compared to SG. Do they have an international brand?

What about Australia? They have 5 - 6 times our population. Do they have an internationally recognisable brand? And no, Hugh Jackman doesn't count. (Nor Jackie Chan for HK.) 
Finland has a similar population to SG. It had or has Nokia. It was also sold off, when they were in financial difficulties. The brand is trying to make a comeback. I hope they succeed. We'll see. 
Sweden has IKEA. And a population of almost 10 million. This is anecdotal evidence, but it seemed like this is the critical mass for an Internationally recognised brand. Are there any other brands from countries with small populations? 
As for Tiger Beer and Raffles being sold off and not being owned by Singaporeans, so what? That is the nature of global business. Are McDonald's franchisees "owned" by McD? Is Budweiser American-owned? Does the fact that Budweiser is owned by a Belgium(-Brazilian) conglomerate/company make the brand less "American"?

Are the authors of this article arguing for Singaporeans to retain ownership of local brands regardless of the business environment? That is not good business advice. It may be good nationalistic advice or advice to hang onto nationalism or some other reasons. But not good business advice.

The writers of the article are "Tax Partner and Senior Tax Manager, respectively, at KPMG in Singapore." Their perspective are purely on the subject of tax policy, and their hypothesis (or pet peeve) is that the "current tax regime encourages our business culture to lean towards the acquisition or sale of successful brands, rather than development."
I do not know enough about our tax laws to evaluate their assertions. And their article does nothing to educate and inform me other than their bald assertions which I presume comes with an implicit, "trust us, we're tax experts/tax accountants/tax lawyers. We know what we are talking about. Listen and accept our recommendations."
Perhaps it was a good thing that they did not explain how they arrived at their recommendations.

Just leave it at "Why SG got no international brand ah? Dem malu ok! And when we got one, we sell it away! I tell you we need to change our tax regime. Then we will have global brands, man! Trust us. We know tax regime."
I think it is notable that Singaporeans feel that SG should have an international brand. Notwithstanding the assertions of the writers, Alibaba is not a global brand (at least not in the top 100 according to Interbrand. China, with 1.3 billion people, does have a Top 100 global brand - Huawei. But India does not. Nor does Indonesia. Nor does Australia. And they have larger populations than SG, and in the case of Australia, are equal to if not better than SG in terms of level of development.

As for ownership of SG brands, it is misplaced nationalism masquerading as economic theory to argue (without any substance) that "It is in Singapore’s interest to have a strong core of homegrown companies headquartered here." 

What is in SG's interest is to have companies offering jobs to Singaporeans, and paying taxes here. Anything else is just an opinion.]

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