(ATF) Singapore, as an island nation with few natural resources and an extremely open business climate, has always been a must-go place for Southeast Asia’s top companies and startups seeking to register their businesses. With this in mind the government has stepped up its efforts over the years to ensure a welcome to investors who finance the growth of tomorrow’s unicorns.
The city-state has long been striving to attract more foreign capital and talent to realise its goal of becoming a major technology hub in the region and beyond. More recently the tech sector has become the main investment beneficiary of government’s resources, especially as the Covid-19 pandemic drove even more the need for digital transformation, turning Singapore into the main tech destination for tech giants and for startups that want to achieve hyper-growth in the region.
Seeking growth drivers
The fast-growing Southeast Asian market of 650 million people has been hit hard by the pandemic and is seeking fresh drivers for growth, with tech companies leading the pack. Among them, Chinese companies have been the most active and aggressive.
Plug and Play APAC, the world’s largest open innovation platform, bringing together the best startups and the world’s leading corporations, has been one of the most influential players in the region, after launching in Singapore in 2010. Jie Lun Ong, who heads the ventures team for them, told Asia Times Financial: “Singapore offers an ideal location for globalising Chinese tech companies to locate their regional headquarters due to its business friendly environment as well as proximity to both China and the growth markets of Southeast Asia.”
Singapore is a natural choice, given its fast emergence as a hub for tech companies, as shown by how US tech giants such as Facebook, Google and Twitter have already set up their regional HQs and major data centres in the city-state. The likes of Tencent, Huawei and TikTok owner ByteDance have followed suit, becoming the latest addition among the biggest tech companies who set shop in the island nation.
However, historically Chinese investors have always bet on Singaporean unicorns, especially in their financial technology (fintech) giants. An important factor is that there is clear support for, and active efforts in, fostering innovation and attracting fintech companies, thanks also to the Monetary Authority of Singapore openings for bids for digital wholesale banking licenses to foreign firms.
Clear success story
It was announced in early December that Alibaba Group’s fintech arm Ant Group won one of the two licences, and the Greenland consortium, with Chinese state-owned real estate developer Greenland Group the other one. The digital full banking licences were reserved for local firms or joint ventures with local firms.
The winners are clear examples of the successful Singapore tech start-up scene: Singaporean unicorn companies Sea Limited (backed by Chinese tech giant Tencent) and Grab (which has recently been in talks with Chinese e-commerce giant Alibaba). The other unicorns based in Singapore include e-commerce platform Lazada (also backed by Alibaba), gaming company Razer and optical technology services provider Trax (backed by Beijing-based HOPU Jinghua Investment Management).
Chinese’ hunger to invest in Singapore is due to several factors. First of all, the city-state is increasingly seen as an ideal, safe and more stable location. Secondly, its neutrality made the city-state even more attractive when relations between US and China soured over technology clashes, such as the Tiktok and Huawei sagas. Singapore became a stronger candidate for Chinese tech-firms as the city-state boosts good ties to both the US and China, despite not being the only reason as some commentators point out.
“Even though the worsened US-China relations of the past four years, may have accelerated the global focus of Chinese tech firms and made them look for locations outside of the US to launch and expand their global operations, Chinese firms would have embarked on expansion outside of China anyway,” says Amanda Jakobsson, professor of economics at Singapore Management University.
There is a benefit for tech firms in being located near their peers and partners, where their business-to-business customers, competitors, labour pool are, and there are potential knowledge spillovers and an ease of forming new business relationships. Chinese companies have also been striving to establish themselves as international brands to shed negative views that come with being seen as a Chinese firm, and Singapore provides them with one of the best international settings for their rebranding operations.
Last but not least, as Jakobsson notes, “for tech firms, Singapore has the additional benefits of high quality IT infrastructure”, being one of the major subsea cable hubs in the world, providing robust connectivity to major South-east Asian population centres, including Indonesia, the Philippines, and Vietnam.
This goes hand-in-hand with this year marking the ASEAN-China Year of Digital Economy Cooperation to promote relations and investment between China and ASEAN countries in the digital economy, a forum strongly advocated by Singapore under its last ASEAN chairmanship in 2018.