By Marcos Salgado Sanchez, Dezan Shira & Associates Singapore
Marcos is the Head of ASEAN Advisory for Dezan Shira & Associates and is based in our Singapore office. He is responsible for advising international investors on market entry and business expansion across Southeast Asia, including Singapore, Philippines, Indonesia, Thailand and Malaysia. His specialization lies on corporate law, international tax planning and foreign direct investment with a focus on the ASEAN region. Marcos holds a Bachelor’s Degree in Law from the Complutense University of Madrid, a Bachelor’s Degree in Business Management with a specialization in Finance from Edinburgh Napier University and a Master’s Degree in Business Management from the University of Huddersfield. He is a member of the Spanish Bar Association.
Although 2020 has been a complicated year, we are all facing 2021 with great optimism. Singapore’s economy is expected to grow between 4% to 6% in 2021 – which marks the biggest increase since 2011, when the economy grew by 6.3%.
In line with this, 2021 is set to be a excellent year for foreign investors, with multiple business sectors ready to accelerate their recovery and unfold interesting opportunities.
The manufacturing sector will benefit from the 5G market and the increasing demand for semiconductors, electronics and precision engineering.
The easing of global travel will enable the aviation and tourism sectors to witness a steady recovery. Along with them, the retail and hospitality industry will present an upward trend throughout 2021.
Singapore’s internal demand is expected to grow in 2021 with an increase in private consumption expenditure. This growth, coupled with the economic recovery of Singapore’s key trading partners such as China, Indonesia and the United States, will bring fresh opportunities for trading businesses.
Singapore as a Tech Hub
Singapore also intends to reinforce its leading position as an uncontestable tech hub in the region – it is noteworthy to remark that Singapore is hosting the regional HQ of 59% of tech MNEs and is home of more than 270 VC funds and 4,000 tech startups. Singapore will issue a new work permit in January 2021, named Tech.Pass, aimed at attracting technology entrepreneurs and experts. The Tech.Pass scheme does not require the sponsorship of a local employer, giving the professional greater flexibility in their activities, such as being an employer, investor, starting a business, or becoming a director or consulting in one or more Singapore-based tech companies.
Supply Contracts
Singapore passed a new legislation in April to provide temporary relief to businesses and individuals who are unable to fulfil their contractual obligations, including construction contracts, supply contracts, performance bonds, leases or licences for non-residential property, event contracts, tourism-related contracts, and certain types of secured loan contracts, hire-purchase agreements and conditional sales agreements. These temporary relief measures are still ongoing, and it is important to take them into account when working on the financial planning for 2021.
Immigration
Singapore is a hub that attracts talent from all over the world. Many expats come to Singapore attracted by its professional opportunities and living standards. Nonetheless, the Government has set stricter requirements to obtain Employment Passes in order to promote local employment. From 1 September 2020, the salary requirement will be raised further to $4,500 for all new applicants and from 1 December 2020, the minimum qualifying salary for EPs in the Financial Services sector will be further raised to $5,000 for new applicants.
Labor Cost Management
The Jobs Support Scheme (JSS) has helped enterprises retain their local employees by co-funding the first $4,600 of gross monthly wages – including employee’s CPF contributions. This measure has allowed many businesses to reduce their payroll costs significantly throughout 2020. However, payroll costs are expected to increase again next year, and proper financial planning is of utmost importance.
Corporate Income Tax (CIT) Rebate
Singapore will offer a CIT Rebate of 25% of tax payable, capped at $15,000 per company for Year of Assessment (YA) 2020 to help companies with their cash flow.
ASEAN Foreign Investment Outlook
The ASEAN economy is forecast to recover well in early 2021 from this year’s sharp contraction, with a strong domestic demand and an increasing capital spending.
Indonesia is determined to become a manufacturing hub in the region in line with the Making Indonesia 4.0 roadmap launched in 2018, which intends to implement automation, digital technology, and artificial intelligence across the manufacturing sector. In addition to that, the country offers many opportunities in digital-based businesses such as telemedicine, online education and fintech.
Thailand’s manufacturing sector is still of great attractiveness for foreign investors. The government intends to bring new technologies to the manufacturing sector such as cloud computing, the Internet of Things (IoT), and robotic automation. The Thai economy is expected to be partially recovered by the second quarter of 2021 due to a rebounding purchasing power and confidence among households.
Malaysia is looking at retaining its position as a growing tech hub with its digital economy already contributing to one-fifth of the GDP. Not surprisingly, the Government has set a Digital Service Tax (DST) of 6% in January 2020. Mobile applications, fintech and software are great examples of some of the opportunities the country has to offer.
Last but not least, foreign investments may reach pre-pandemic levels in the Philippines in 2021. Business Process Outsourcing still generates a great deal of interest among foreign investors. Besides, public-private partnerships and infrastructure projects may bring new substantial opportunities for larger corporations.
Best regards;
Marcos Salgado Sanchez
Dezan Shira & Associates
Singapore Office
E: marcos.salgado@dezshira.com
W: www.dezshira.com
Disclaimer
Any views or opinions represented in this blog are personal commentary, belong solely to the contributor and do not necessarily represent the views of Asia Briefing Limited or Dezan Shira & Associates.
