Singapore businesses still show interest with emerging markets

It was late 2019, and Singapore biotech startup Stratificare was all set to begin clinical studies in partnership with experts in Mexico, for a test that might prove able to predict severe cases of dengue.

The tie-up arose from Stratificare's participation in a business delegation accompanying Prime Minister Lee Hsien Loong on his official visit to that country.

But the novel coronavirus hit – and that made it “very difficult for us to run any clinical study there”, Stratificare chief executive Anthony Chua told The Business Times.

The startup had to fall back on dengue trials in Southeast Asia, and also started to look at cancer-related studies in China.

The ongoing Covid-19 pandemic is just one of the recent challenges to have stymied Singapore companies’ plans in far-flung markets, as overseas travel all but disappeared in the last 2 years.

As recently as late 2021, three-fifths of Singapore's small and medium-sized enterprises (SMEs) had reservations about international expansion plans for the next 12 to 24 months, according to a poll of roughly 440 small businesses commissioned by insurer QBE.

But work trips are back on the calendar for 2022, according to key bodies that promote business interests abroad – and, despite certain risks, emerging markets have not lost their appeal.

Back in business

Jonathan Ho, head of governance and risk advisory and private enterprise at KPMG Singapore, noted that SMEs may lag larger firms in venturing to emerging markets, as they must consider “if they have sufficient knowledge of these markets to avoid having to make a U-turn midway”.

For respondents to the QBE survey, Malaysia, the Philippines and mainland China were the main destinations, rather than regions farther afield. Similarly, Lam Yi Young, CEO of the Singapore Business Federation (SBF), noted that Singapore companies may favour the “economic hinterlands” of ASEAN and China, based on physical proximity and cultural affinity.

Yet “emerging markets have been and remain a key focus for the SBF”, Lam added.

Tan Soon Kim, the assistant CEO of global markets at statutory board Enterprise Singapore, said these regions can help companies reduce concentration risk and diversify their stomping grounds.

Enterprise SG facilitated overseas projects for 315 companies in 2020, with 30 percent of these companies going to the Middle East and Africa; Central and Eastern Europe and Central Asia; and Latin America and the Caribbean, the agency told BT.

Interest in such emerging regions has risen. From 2017 to 2021, there was a 25 percent rise in the number of enterprises with Enterprise SG-facilitated projects in these markets.

Meanwhile, travel and large-scale events – business casualties of the Covid-19 pandemic – are on their way back.

The SBF used to hold an average of 20 to 30 overseas business missions a year. With trips set to resume later in 2022, “we could be looking at about 5 to 8 trips this year, on an optimistic basis”, said Lam.

Similarly, Enterprise SG previously led companies on an average of 200 trade fairs and business missions annually, with 10 percent heading to emerging markets.

As borders reopen, the agency has now restarted physical events where possible, such as bringing companies to Gulfood in Dubai in March and Anufood Brazil in April.

Plans for the rest of the year include participation in the Wetex and Dubai Solar Show in October and the Abu Dhabi International Petroleum Exhibition and Conference in November, as well as missions to Ghana and Mexico.

Though the bulk of SMEs remains reluctant to venture abroad, interest in international growth did pick up last year, according to the survey by QBE. Some 34 percent of respondents had an international presence and intended to expand, up from 28 percent in 2020. Another 19 percent operated only domestically but intended to go abroad, up from 17 percent in 2020.

The figures were 39 percent and 22 percent, respectively, in the pre-pandemic 2019 survey.

“Emerging markets offer the promising potential to Singapore companies as an alternative revenue source,” said Tan, adding that “Singapore companies stand to gain first-mover advantage” in these regions.

“But, being further away, companies may not be as familiar with the operating environments in these markets.”

To address this, Enterprise SG will offer platforms such as webinars, roundtables and business-matching sessions through which companies can connect with potential partners.

The SBF also has about 40 memoranda of understanding in force with international business partners, of which half are in emerging markets such as Egypt, Kenya, Poland and the Czech Republic.

The right bedfellows are key. As noted by Wee Han Tah, Singapore head of management consulting at professional services firm Mazars, emerging markets “are likely to pose higher and more complex risks to businesses”, such as regulatory issues and poor governance practices.

Companies could work with in-market partners to bridge their gaps in market know-how, or consider M&A as a means to enter markets quickly, he suggested.

Ho, from KPMG, cited a Singapore industrial products and equipment company that successfully built its operating presence in Latin America, Eastern Europe and the Middle East: “The company managed to lower its credit risk by dealing only with a network of established dealers that they are already familiar with.”

Pandemic potential

Although the pandemic has made it harder to do business internationally, with quarantines and travel curbs, it has also raised awareness of the need for industry digitalisation and supply chain resilience. Some Singapore companies have thus found opportunities in these fields, including overseas ones.

“The pandemic has in fact accelerated the demand for digital solutions and opened new opportunities for Singapore companies in these regions,” said Enterprise SG’s Tan.

Close to half of the 18 agreements inked by Singapore companies at last year’s Africa Singapore Business Forum were technology-related, he disclosed.

New opportunities are also arising from Latin America's corporate demand for technology solutions to improve business efficiency and productivity, and firms there “are increasingly interested in sourcing from Singapore for the reliability and quality that we stand for”, he added.

As for firms here, they are looking abroad for diversification. Lam said that there has been more interest from Singapore companies in recent years in markets such as Africa, Central and Eastern Europe, Central Asia, Middle East, South Asia and Latin America, under the GlobalConnect@SBF initiative launched in November 2019.

“This could be due to greater awareness amongst companies of the need to diversify their risks and supply chains because of the pandemic,” he told BT.

Khoo Boo Hor, CEO of precision manufacturer Sunningdale Tech, is familiar with the concept, saying: “Our footprint matches our customer footprint, and that's very important. In the event that customers decide to do regionalisation instead of concentrating all the manufacturing in one location, we are ready too.”

Sunningdale can serve North America customers out of a plant in Mexico, where it has operated since 2001, and European customers out of Latvia, where it has been since 2011. The company has other sites in the United States, China and South-east Asia as well.

Hit or miss

Granted, companies may find themselves running into unexpected geopolitical hurdles, such as the diplomatic crisis that saw Qatar under a regional blockade between mid-2017 and early 2021, or Russia’s invasion of neighbouring Ukraine, which prompted fresh international sanctions.

Artificial intelligence solutions firm ViSenze, which serves the retail industry, has moved away from the Russian market in recent weeks amid concerns such as clients’ access to foreign exchange.

The company had earlier posted organic growth of more than 2 times since entering that market in 2018, with clients there reportedly contributing to about 5 per cent of overall revenue.

Other business difficulties are more prosaic. In 2017, technology solutions provider Napier Healthcare was part of a delegation from the SBF and Enterprise SG precursor IE Singapore that accompanied then President Tony Tan on a state visit to the Czech Republic.

On that trip, Napier made a pact to roll out its software at Czech firm Patritus’s luxury spa and wellness resorts, starting with locations in the Czech Republic, Slovakia and Poland.

The partnership was to be Napier's first step in a regional push aimed at capitalising on an ageing population, the management said then. But it petered out at the end of the 6-month pilot over pricing-related matters.

Still, companies that spoke to BT seemed no worse for the wear despite the setbacks.

Said Adrian Tan, Qatar general manager for facilities management company CBM: “During the blockade, as you’d expect, our business costs went up and operations were hampered by the shortage of manpower coming from overseas.

"However, we were able to weather that and, as you know, this is not an issue now.”

Meanwhile, ViSenze CEO Oliver Tan noted that the company’s cloud-based solutions are not dependent on any specific region, enabling his team to shift easily to other priority markets like Brazil.

“With global clients usually operating across multiple markets in mind, we don’t really look at any singular market – that is, country – for prioritization, targeting or localization,” he added.

And, though Napier does not have a presence in Eastern Europe now, it is mulling growth in the Middle East, which it entered in 2019 after Enterprise SG introduced it to a clinic management system deal. The firm also has customers in East Africa, such as Rwanda and Tanzania.

“If I go to a market which is developing or underdeveloped, then what I have to offer to them is a big reason for them to be talking to me, looking at me – the Singapore brand has a bigger role,” CEO Karthik Tirupathi said, sharing plans to expand from a regional office in Dubai into surrounding markets such as Oman.

Long haulers

Not every overseas project has to be a massive undertaking. Said Tan from Enterprise SG: “Some overseas projects could be short-term while others are longer, depending on the nature of the project and industry.

“Importantly, many of these are first steps into the market and companies value the relations and connections they make,” he added. “Other intangible aspects of internationalization are equally important, be it to build market knowledge and understand how the market works, or get business networks and contacts.”

Stressing that “internationalization is a journey”, he said: “In an environment where change is a constant, businesses will thrive when they are agile and adaptable.”

Despite its pre-pandemic setback, Stratificare, too, has not been permanently put off from expanding into Latin America, given the region's large population, high dengue incidence, and significant spending power.

“We will definitely be returning to Latin America as the market there is bigger than Southeast Asia,” said Chua, who named the region's countries as “definitely markets that we are interested in”.

Source: Enterprise Singapore