Hai Phong and Da Lat in Vietnam and Surabaya and Medan in Indonesia are unlikely to be on the radar of Singapore companies planning to expand overseas.
But in a newly unveiled five-year plan, trade agency IE Singapore has set its sights on these second- and third-tier cities, urging local firms to look beyond the tried-and-tested capitals of Asia.
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In China, whose second-tier cities are already in the spotlight, it is areas deep in the nation’s heart – in provinces such as Henan, Hubei and Hunan – and less explored cities like Chongqing and Xi’an that now offer great potential, it said.
These new markets are part of the agency’s plan to double Singapore’s exports to emerging markets – as represented by the Bric coalition of Brazil, Russia, India and China – by 2014.
To help more companies venture abroad, IE Singapore will also start a new programme to subsidise their costs, and assist trade associations and business chambers in opening offices overseas.
Unveiling this five-year plan yesterday, the agency’s chief executive Chong Lit Cheong said local firms must expand overseas in order to sustain their businesses in the long run: ‘IE Singapore wants to widen the path for Singapore companies, both big and small, to access and leverage overseas opportunities to grow.’
While it is critical for Singapore to keep engaging with traditional major markets such as the United States, Europe and Japan, it is also important to ‘gain a fair share of the market in Bric countries’, added Terence Seow, the director of IE Singapore’s planning group.
The agency, which is in charge of promoting overseas growth and international trade, expects Singapore’s exports of goods to Bric countries to double to $108 billion in 2014, from $54 billion last year.
Services exports are tipped to grow even faster to reach $25 billion in 2014, more than double the $9.7 billion last year, said IE Singapore.
Chong told reporters the agency may set up new offices in lesser-known cities to help companies take the plunge. IE Singapore could set up its fourth China office in central China, and perhaps another in India’s Calcutta area, he said.
Apart from Asia, the agency is also eyeing non-traditional areas such as Brazil, Russia, the Middle East and Africa.
It has picked six key sectors to zoom in on: townships and housing, transportation, environment and water, energy management, health care services, and food.
IE Singapore also sees more scope to bring in ‘platform projects’ that require the participation of a bigger group of Singapore firms, such as the Integrated Ports and Logistics Zone in the Mekong Delta.
But new markets and sectors are only one of three prongs in its five-year plan. The agency also hopes to elevate Singapore from its status as a regional trading hub to a global one by developing a vibrant network of trade-related services.
The last prong is to help local small- and medium-sized enterprises (SMEs) become globally competitive. Almost seven in 10 SMEs ventured overseas last year, up from 65 percent in 2008.
IE Singapore is hoping to encourage even more firms to expand through its new SME Market Access Programme, in which it will pay some of the costs companies have to incur in venturing overseas.
The agency will fund 50 percent of third-party costs, such as fees involved in product listings, drafting and submission of legal documents, and finding distributors and partners.
Each firm can claim up to $100,000 and about 100 firms are expected to benefit each year. IE Singapore hopes the subsidy will lead to $3 million more in sales for these firms over three years.
‘For a start, we are setting aside $10 million for the programme,’ said Chong. ‘I don’t think that is a constraint for us. We’d be more than happy if we hit more than 100 companies.’
For mid-sized SMEs, a key hurdle is getting banks to finance their projects in emerging markets. This could be helped by the new export-import (Exim) bank.
Explaining the need for such an institution, Chong said many firms are now asking for aid in cross-border projects.
‘When they bid for a project…, they lose out to some of these other companies from other countries which have Exim banks to help them,’ he said.