Singapore a hub and bridge to the region
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You are hereHome > Hub > The Day Of German Unity 2018 Singapore a hub and bridge to the region Interest from German Mittelstand companies is certainly not one-way, Singapore's SMEs are venturing to Germany too. Wed, Oct 03, 2018 - 5:50 AM Teh Shi Ningtshining@sph.com.sg@TehShiNingBT "One clear trend we are noticing is the increased number of medium-sized companies, in particular out of the IT sector, coming to Singapore." - LBBW's Jens RÃ¼bbert
IN 1 840, Behn, Meyer & Co became what was likely the first German firm to be established here. Trading in tropical produce such as coconut oil, pepper, camphor and rattan, it later branched out into shipping and insurance.
Today, 178 years on, it is still in Singapore as the Behn Meyer Group and has been joined by numerous other German firms. But the surge in German business interest in Singapore was a more recent phenomenon - the number of German companies here more than tripled over the last decade.
Now 1,700-strong, the contingent of German firms here ranges in size from large multinationals like Siemens, which has been here since 1908, to the fledgling startups that have just arrived under the new German Accelerator.
They hail from a wide range of industries too. Manufacturing and financial and insurance services made up more than half of the total S$17.7 billion in German foreign direct investment (FDI) here at the end of 2016 - latest available data from t he Department of Statistics shows. Investments in Singapore's wholesale and retail trade, and professional, scientific, technical administrative and support services sectors made up another 35 per cent of German FDI here.sentifi.com
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"Today, Singapore is an important strategic location for German companies as it provides an ideal environment to implement and advance the Industry 4.0 concept in production, logistics, plants and workshops," says Lim Kok Kiang, assistant managing director of Singapore's Economic Development Board (EDB).
Many German companies that have settled in Singapore use it as a base to enter the Asian market, he adds. This is no surprise, given Southeast Asia's population of 600 million people and a consumer market that, by Nielsen's estimates, could grow to US$2 trillion by 2030.
"This growth is expected to spur opportunities in consumer prod ucts, infrastructure, mobility, energy, healthcare and food. Digital transformation is accelerating the way global multinational companies are rethinking their supply chain and production strategies. In this regard, Singapore can be a hub to access opportunities in the region," says Mr Lim.
These are trends that Jens RÃ¼bbert, managing director and regional head Asia/Pacific at Landesbank Baden-WÃ¼rttemberg (LBBW), has noticed among newer German entrants to the Singapore market too.
LBBW's Singapore branch - set up 23 years ago - serves the financial and banking needs of a mix of small and medium-sized companies from Germany's Mittelstand, alongside MNCs and financial institutions. "Our newer clients are particularly interested in Singapore as a regional hub for trade, R&D, technological innovations and, of course, for finance," says Mr RÃ¼bbert.
In fact, LBBW itself this year designated Singapore as its regional hub to manage its ot her Asian locations - a branch in Seoul and representative offices in Hanoi, Beijing, Shanghai, Mumbai and Tashkent. LBBW also operates the German Centre in Singapore, which houses close to 150 German, Austrian, Swiss and other European companies. Since its opening in 1995, the centre has supported over 500 companies in their regional business activities.
EDB's Mr Lim believes that Singapore's efforts to deepen and strengthen its manufacturing ecosystem have generated demand for Industry 4.0 solutions, making it a suitable partner and location for German leaders in Industry 4.0 technologies that are looking to expand in this region.
As Germany's Global Mittelstand Champions (GMC) - the larger, globally active Mittelstand companies known for carving out for themselves a highly-specialised niche in which they dominate globally - pivoted to Asia in recent years, Singapore has been firmly on their radar.
Mann+Hummel, which first invested in Singapore with the water filtration company Ultra-Flo in 2013, has since grown its presence with an Internet of Things lab to offer smart filtration as a service and roll out new business models - either on its own or in collaboration with startups.
"We appreciate Singapore as a business location. The global city is an ideal bridge to the Asean countries and China, mainly because of its legal and financial security, its beneficial and trusted economic and political links with the Asian world, its digital assets and its skilled personnel," says Thomas Fischer, chairman of Mann + Hummel's supervisory board.
Pepperl+Fuchs is another GMC and a global manufacturer of industrial sensors that opened its Global Distribution Centre - the company's largest single investment ever - here in Singapore. The centre has an intelligent warehouse management software system, an automated storage and retrieval system, and manufacturing lines deploying Industry 4.0 technologies, to allow it to distribute Pepperl+Fuchs' 15,000 products worldwide efficiently and cost-effectively.
Developments in the key manufacturing pillar are generating demand for related services too.
LBBW's Mr RÃ¼bbert says more and more companies from the services sector are now interested in Singapore as a hub. "One clear trend we are noticing is the increased number of medium-sized companies, in particular out of the IT sector, coming to Singapore," he says.
Life in Singapore is not without challenges for the German Mittelstand. Competition in Asia and globally, in the fields of artificial intelligence, additive manufacturing and prototyping, is intense, says Mr Fischer.
"And, we are also in a war for talent, because of a strong demand for highly qualified people. The new tightened hiring guidelines in Singapore in order to consider locals fairly for higher-quality jobs make it more difficult for foreign companies to find the right s kills," he says.
But this is also why Mann+Hummel is a strong backer of the Poly-goes-UAS initiative, under which polytechnic students win full scholarships to pursue a degree at a university of applied sciences in Germany, while working at the sponsor Mittelstand company.
Since its launch in 2014, 50 polytechnic graduates have gone through the programme, and the number of Mittelstand companies participating has risen from four to 11. This reflects their growing interest and commitment to deepen their roots in Singapore, Mr Lim says.
Interest from German Mittelstand companies is certainly not one-way, Singapore's SMEs are venturing to Germany too. Direct investment from Singapore to Germany stood at S$1.35 billion as at the end of 2016.
"With strong networks and track records in Asia, Singapore companies make ideal business partners for German Mittelstand. At the same time, Germany - as a globally leading hub of innovation and technology - presents many opportunities for Singapore companies to explore and co-innovate in areas such as mobility, infrastructure and advanced manufacturing," says Natalie Choo, Enterprise Singapore's global markets director for North America and Europe.
One area that ESG believes holds opportunity for Singapore SMEs is e-commerce. As German brand and product owners grow keen to tap into Asia's demand for quality German goods, Singapore companies with platforms and networks in Asia are well-placed to meet their e-commerce needs, Ms Choo says.
DPEX Worldwide Express set up a sales office in Dusseldorf, Germany, earlier this year, precisely to offer German firms e-commerce logistics services to the 18 countries in DPEX's Asia network.
CEO Donald Tay says that the new German office currently supports UK customers that need to ship out from Germany. "Some major brand owners and merchants have set up their European distribution centres in Germany ahead of Brexit and require services from there," he says.
But the aim is to reach out to German SME retailers and merchants that have not started selling online to Asian markets. "German products are well known for quality and much sought after in Asia. Asian consumers are increasingly buying from German platforms," he says.
Another recent entrant, Pacific Integrated Logistics (PIL), set up an office in Duisburg, Germany, in May to host its container freight station service operations. Currently, the office coordinates the loading and unloading of rail containers to be delivered or collected by European shippers and consignees but Patrick Ho, PIL's strategy director, says there are plans to add on a sales function for air and sea freight next year.
"There are many German manufacturers which are also very active in China and Asean. They are still quite new to rail freight. We anticipate the demand for rail freight products will grow exponentially," Mr Ho adds.
But setting up an office has not been without its challenges, such as difficulties understanding German labour and taxation rules, managing cultural differences and coping with higher labour costs.
Ms Choo says ESG will continue to identify suitable German Mittelstand to collaborate with Singapore companies, particularly in the areas of clean and medical technology, infrastructure technology and advanced manufacturing.
ESG has also begun to explore specialised real estate projects in Germany - such as data centres and logistics assets - for interested investors and developers from Singapore.
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