With the UK separating from the European Union, the services powerhouse is now embarking on its own set of agreements with key trading partners. In October, it signed an agreement with Japan and there have been reports of other imminent agreements including Vietnam and Australia.
The UK-Singapore Free Trade Agreement’s (FTA) signing, the UK’s first in Southeast Asia, reflects the importance of the trade and investment corridor for both Singapore and UK.
Total trade between the UK and Singapore was SGD30 billion last year1. In 2019, more than 10,000 UK businesses exported goods to Singapore2 and nearly 5,000 British businesses are already present in Singapore3 engaging in wide-ranging industries or as a regional Head Quarters for their operations across Asia.
Looking at the detail, the FTA provides a continuation of several benefits that are available through the existing EU-Singapore FTA including maintaining services liberalisation, removal of non-tariff barriers like standards harmonisation and simplified customs procedures, particularly for SMEs.
Non-tariff barriers will also be addressed to remove burdensome administrative and double-testing procedures. For example, ensuring there are common safety and quality standards across certain sectors which will, therefore, remove the need for testing at both sides of the trade corridor4. This will benefit key sectors including electronics, motor vehicle and vehicle parts, pharmaceutical and medical devices5.
These industries collectively make up around 10% of Singapore GDP6.
The FTA affords Singapore and UK companies the opportunity to build strong partnerships in e-commerce with a focus on Southeast Asia’s burgeoning digital economy.
For many, this will be the jewel in the FTA’s crown.
Digital will be the driver of Southeast Asia’s economic recovery and already we’re seeing sweeping digital adoption across most industries on account of physical lockdowns.
A recent Google, Temasek and Bain study found that Southeast Asia saw 40 million came online in 2020, compared to 100 million over four years between 2015 and 2019.
Singapore is an innovation hub for Southeast Asia and the UK is already a very well-known global tech player, including in this region. For example, UK tech companies have already established a solid beachhead in the region with at least 220 UK tech companies and 6 UK tech unicorns already in the region.
Drawing on Singapore and the UK’s capabilities and tech ecosystems, it makes sense that the region’s growing digital demand can be met by Singapore and UK supply.
A major plus for the FTA will be the continuation of the cumulation principles afforded under the existing EU-SG FTA.
This means that inputs sourced by Singapore-based UK businesses, from other ASEAN member states, will be considered as domestic content for the determination of the origin of the final product made in Singapore7.
It’s an important point as a high proportion of Singapore’s products have parts produced in other ASEAN countries including medical devices or electronics.
Or to put it another way, inputs that from across Southeast Asia for these types of sectors but assembled in Singapore, will come under Singapore’s zero tariff regime, making them very cost competitive.
The benefits also extend to how we can support our customers as a bank.
Whilst already a strategic priority market for HSBC, the FTA will further enable HSBC to invest in its people, presence and product capability to further elevate Singapore as a regional hub for its wholesale and wealth customers across South Asia. For example, as a British domiciled bank, the FTA enables HSBC to be granted additional customer service locations within the City State which can be used to open up new branches or ATMs.
The signing of the UK-SG FTA is a harbinger for this already strong economic corridor. It impacts key sectors within Singapore’s economy including digital innovation, electronics, pharmaceuticals, and chemical manufacturing. While signing the trade agreement is an important step, we need to continue to support our clients in their growth ambitions across this key economic corridor.
A contribution piece by Tony Cripps, CEO HSBC Singapore, was first published in The Business Times on 11th December 2020.
1Ministry of Trade and Industry Singapore
2HMRC UK trade in goods by business characteristics, 2019
4European Commission: The EU-Singapore agreements explained
5European Commission: Key elements of the EU-Singapore trade and investment agreements
6Singapore Economic Development Board (EDB), HSBC
7European Parliament: EU-Singapore trade and investment agreements closer to conclusion