Singapore’s trade with the U.S. in 2013 will probably exceed $50 billion for a third year after the nation attracted the most investment from American companies in the Asia-Pacific region.
“U.S.-Singapore relations are generally at an all-time high,” U.S. Ambassador to Singapore David Adelman said in a Bloomberg Television interview. He gave the trade target for the two countries, saying “Southeast Asia has become increasingly important to American multi-national corporations as they continue to increase their participation in the global economy.”
U.S. foreign direct investment into Singapore rose 17 percent to $138.6 billion in 2012, higher than to Japan and Australia, according to data from the Department of Commerce. Singapore was the first Asian nation to sign a free-trade agreement with the U.S. in 2003.
Ranked by the World Bank as the easiest place to do business seven years in a row, Singapore offered incentives and tax cuts to spur investment, luring U.S. companies from Google Inc. to Exxon Mobil Corp. to set up their regional operations on the island. Singapore’s shipments to the U.S., one of its top export destinations, rose for the first time in three months in July as a recovery in the world’s biggest economy gains traction.
Adelman will end his term next month and will be replaced by Kirk Wager, a Miami lawyer.
“I would see trade as continuing to grow as they deepen their ties on the investment side,” said Leif Eskesen, chief economist for India and Southeast Asia at HSBC Holdings Plc in Singapore. The U.S. will probably “get back on its footing over the next three to four years” and “export prospects from Singapore into the U.S. will gradually improve,” he said.
U.S. retail sales rose in July for a fourth consecutive month, showing American households are regaining momentum as employment climbs. A pickup in consumer spending, which accounts for about 70 percent of the economy, would help counter the fiscal headwinds of government cutbacks that have held back growth.
Pratt & Whitney, the jet-engine unit of United Technologies Corp., is spending almost $110 million on two new facilities in Singapore, including a 180,000-square-foot manufacturing plant that’s scheduled to be completed in 2014, it said in a Jan. 31 statement. The plan will boost its Singapore workforce to more than 2,500 over the next five years.
“Singapore’s thriving aerospace industry is mutually beneficial to the U.S.,” William Kircher, vice president of Pratt & Whitney’s Singapore overhaul and repair operations, said in an e-mailed response to queries. “It is a hub for U.S. exports and investment, and our presence in Singapore enables the company to reinvest in innovative technology while remaining competitive by performing the right work in the right places.”
The government is focusing on developing new sectors and attracting investment while it restructures the economy to wean companies off cheap foreign labor. Singapore’s economy grew 1.3 percent in 2012, the slowest in three years.
Singapore may be less attractive than its neighbors as labor costs and property prices rise, according to Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore.
“The reason why U.S. and other foreigners like Singapore is to gain access to the region,” Prior-Wandesforde said. “The advantages of that have been reduced and will continue to fall while other countries within the region are more open to foreign direct investment and offer significant opportunities.”
Overall foreign direct investment into Indonesia rose 18.9 percent last quarter from a year earlier, government data showed last month. The Philippines received $2.8 billion in 2012, and Thailand got $8.6 billion, according to the World Bank.
Located at the southern end of the 600-mile (965-kilometer) Malacca Strait, Singapore is home to one of the world’s busiest container ports. The city was ranked first among 221 cities in a survey of infrastructure by Mercer International Inc. released in 2012.
“U.S. firms are attracted by a strong and equitable legal system, stability and consistency across government, a strong, well-capitalized, and well regulated banking and financial system, high intellectual property rights,” said Greg Tirrell, executive director at Singapore’s American Chamber of Commerce.
U.S. companies are increasing investments in banking, energy, consumer products and aerospace, he said.
Citigroup Inc., the third-largest U.S. bank, has about 10,000 employees after a threefold increase from 3,600 a decade ago. The lender has regional operations in Singapore including retail banking, private banking and treasury and trade services, it said.
“Factors supporting our decision to locate our hubs here include the established credit bureaus, regulatory bodies and comprehensive dispute resolution options available,” Adam Rahman, a Singapore-based Citigroup spokesman, said in an e-mail, where he also pointed to the country’s tax structure and talent pool.
Singapore is targeting as much as S$13 billion ($10.2 billion) of investment commitments in manufacturing and services this year.
“Singapore, like every country around the world, has its basket of challenges,” Adelman said. “It’s a small country and small countries are always going to be challenged by their lack of resources and by the importance of getting the policies right, because the margins for error are much tighter.”