The Star, January 18, 2012

Taxes cut to attract foreign companies

SINGAPORE: Singapore aims to attract as much as S$15bil of investments in manufacturing and services this year to create jobs and bolster a slowing economy.

The city state lured fixed-asset investments of about S$13.7bil last year, the Economic Development Board said yesterday. The government also targets as much as S$7.5bil in business spending this year from manufacturing and services industries such as information, education and health care.

Singapore has cut taxes in recent years to encourage companies to set up operations or expand in the South-East Asian nation as it faces competition from neighbours including Indonesia and Malaysia in attracting investment. Merck & Co and Swedish retailer Hennes & Mauritz AB are among companies that are adding capacity in the island ranked by the World Bank as the easiest place to do business.

“We see companies continue to invest in Asia to tap on pan-Asian growth opportunities,” Leo Yip, the board’s chairman, said at a press briefing yesterday. ”Singapore remains competitive. We continue to have strong economic fundamentals to be able to capture some of these investments.”

Investments this year should help generate 18,000 to 21,000 skilled jobs and add as much as S$17bil to gross domestic product (GDP) annually when completed, the board said. Projects that were committed in 2011 would create about 20,300 jobs and add S$15.5bil to GDP every year, it said.

Malaysia said private investment exceeded RM90bil in 2011, beating the Government’s target, and might increase 15.9% in 2012.

Singapore topped 182 economies to take first place in the World Bank’s ranking of business conditions last year, which looks at property rights, taxes, access to credit, labour laws and regulations on customs and licences.

Meanwhile, Singapore’s trade promotion agency said exports unexpectedly rose in December as pharmaceutical shipments surged, countering a drop in sales of electronics goods.

Non-oil domestic exports climbed 9% from a year earlier, after a revised 1.4% increase in November, it said in a statement. The median of 14 estimates in a Bloomberg News survey was for a 1.2% decline.

The advance in overseas sales may be short-lived as Europe’s sovereign debt crisis curbs demand for Asian goods, with purchasing manager’s indexes in export-dependent economies including Singapore and Taiwan signalling manufacturing is still contracting. Non-oil exports might increase 3% to 5% this year, the agency said in November.

Singapore’s electronics shipments by companies such as contract manufacturer Venture Corp fell 4.6% in December from a year earlier, after rising 0.1% the previous month.

Non-electronics shipments, which include petrochemicals and pharmaceuticals, increased 16.7%. Petrochemicals exports fell 22.4%, while pharmaceutical shipments climbed 38.6% after gaining 21.5% in November. The performance of Singapore’s pharmaceutical industry is volatile as production swings by companies such as GlaxoSmithKline Plc can cause industrial output to fluctuate from month to month. Drug companies sometimes shut plants for cleaning before making different products. –Bloomberg