Thursday, December 06, 2007

Is Singapore the new melting pot for international research and development?

With more than 2,700 Indian firms operating in the country, Singapore has emerged as the favourite destination for Indian domestic corporates looking to internationalize their business. While bilateral trade between the two nations has gone up as expected post-Comprehensive Economic Cooperation Agreement (CECA) in 2005, it is Singapore's might as a leading hub for innovation and research and development (R&D) that has attracted Indian companies to set up shop there.

"Singapore is increasingly being used as a platform for Indian companies looking to internationalize their business, with the number of Indian companies venturing there growing at an annual rate of about 10 percent," said International Singapore Economic Development Board Director (Asia Pacific) Aylwin Tan, "The number has more than doubled in just five years from 1,100 in 2001 to more than 2,800 companies as of the third quarter in 2007, making India the fourth largest contingent of foreign companies in the city nation."

Most of the companies that have invested there are either Information Technology (IT) companies or manufacturing firms largely dependent on technology. Some of the Indian prominent companies that have invested there include Tata Consultancy Services (TCS), Tata Steel, Tata Precision (TPI), Satyam Computers, NIIT Technologies, Tech Mahindra and Godrej.

The surge in bilateral trade and the fact that India-Singapore is the first and so far the only fully operational CECA has helped increase investor confidence. Bilateral trade has tripled in the past five years from 6.9 billion U.S. dollars (186 billion Indian rupees) in 2001 to 19.9 billion U.S. dollars (537 billion Indian rupees) in 2006.

India has emerged as the fastest-growing trading partner for Singapore and is now its 12th largest trading partner. Singapore was India's third largest export destination and fourth largest investor in 2006, with cumulative investments of 1.56 billion U.S. dollars (61 billion Indian rupees) since August 1991. In 2006 alone, Singapore's total investments amounted to 620 million U.S. dollars (24,462 million Indian rupees), comprising 5.6 percent of all FDI into India.

Singapore's free trade agreements (FTAs) with other countries are an added bonus. The U.S., Japan, Australia and South Korea are among the 13 countries it has FTAs with and another is being negotiated with China. "For four decades, Singapore has been the gateway for international companies, especially those from the United States, Europe and Japan to venture into Asia. Now it is playing that role also for Asian companies internationalizing. As a result, more than 12,000 U.S., European and Japanese companies, and more than 14,000 from India, China, the ASEAN and Australia are here. They represent interests and opportunities from all corners of the world," Tan said.

What price will Singapore pay in becoming the hub of all things important?