Singapore:
Potential Export Markets In China And Thailand

By Nicole Liang

As the ASEAN-China and China-Singapore free trade agreements come into force on January 1, Singaporean exporters have more reasons to penetrate this market which has just posted a double-digit economic growth, and a growing appetite for imported food. The demand from Thailand is also encouragingly positive, judging by the favourable results from a mission trip led by Sunny Koh, Chairman, Singapore Manufacturers' Federation, F&B Industry Group.

Local food manufacturers should explore export opportunities within the region, now that the ASEAN-China Free Trade Agreement (ACFTA) has kicked off since January 1, 2010.

This is on top of the China-Singapore Free Trade Agreement (CSFTA), which has been in force since January 1, 2009, when more than 85 percent of Singapore exports to China began shipments at zero-tariff. An additional 10 percent have become duty-free on January 1, 2010 – the same date for China’s ASEAN commitments in free trade. Key exports that will benefit include petrochemicals, processed foods, and electronics and electrical products.

Singapore and China have agreed to simplify our customs procedures to facilitate Goods trade. The key facilitative commitments include Third Party Invoicing, Advance Ruling to provide traders with more certainty and enhancement of the application of risk management to facilitate the clearance of low risk consignments.

The above will assist Singapore companies to strengthen their competitive position in the Chinese market.

China and the six founding ASEAN countries - Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand - are to remove tariffs on 90 percent of imported goods, covering 7,000 product categories. The other four ASEAN members - Vietnam, Laos, Cambodia and Myanmar - will have to do the same in 2015.

“With preferential trade benefits, Singapore products can be sold at lower prices now. In supermarkets, the price gap between products made in Singapore and China is drawn nearer,” said Sunny Koh, Chairman, Singapore Manufacturers' Federation, F&B Industry Group, in an exclusive interview on January 22, 2010.

“On the other hand, the price gap between ours and American or European imports sold in supermarkets is greater now,” he continued.

To qualify for tariff concessions under the ACFTA, local companies need to apply for a preferential certificate of origin, which specifies that the content of a product is at least 40 percent from ACFTA countries.

Preferential certificate of origin: How to apply

• Factory registration
The manufacturer applies for the registration of his factory with the Documentation Specialists Branch of Singapore Customs.

The branch visits the factory to take note of the machinery and manpower needed to manufacture the product in question, and that it keeps proper books of its operations.

• Prepare manufacturing cost statement
The manufacturer is required to prepare a manufacturing cost statement for each product it intends to export to respective free trade agreement countries, in order to prove the level of local value content.

Each approved cost statement is valid for one year and must be updated annually or earlier when there are changes.

• Apply for preferential certificate of origin and export permit
After Singapore Customs has approved the cost statement, the manufacturer will get the preferential certificate of origin for each shipment, usually valid for six months. More details can be found at www.customs.gov.sg.

On top of the opportune ACFTA and CSFTA, rising land, labour and raw material costs in China have caused locally manufactured food products to surge sharply as well, Koh pointed out, adding that this also helps to narrow the price gap between Singapore and local food products in China.

A report by The Telegraph newspaper in the UK on January 21,2010 described the rate of food price as “rising too fast for comfort”. Prices of white cabbage and river fish posted the highest jumps of nearly 50 percent compared with last winter, according to a spot-survey by The Telegraph.

And China’s consumer price inflation (CPI) leapt 1.9 percent in December 2009 – its highest in 13 months – following a 0.6 percent increase in November 2009. Food costs make up about one-third of the CPI basket.

Besides food costs and prices, the economy, Renminbi and spending power in China are on the rise too. The country’s GDP grew by 10.7 percent in the last quarter of 2009 to reach RMB 33.5 trillion (US$). Many see this rebound to double-digit growth as a clear sign of the economy’s “solid recovery”, the China’s State media, CCTV.com states.

Koh said this implies that the Chinese will have added inclination to splurge on imported and premium quality food. “Buying imported food may have become the trend for youngsters with rising income. And Singapore has the image and reputation for producing good quality, wholesome food”.

Singapore is also receiving more tourists from China. Many of them who have tried specialty Singaporean food are craving for more and are happy to see these products listed on shelves in China, Koh revealed. Visitors from Indonesia, China, Malaysia, Australia and India accounted for over half of the arrivals in November 2009, the Singapore Tourism Board said.

Given all these favourable conditions, Koh led a small group of Singaporean manufacturers to a Chinese International Food Fair in Wuhan on December 12-16, 2009. Located in the Hubei province, the Wuhan is right in the centre of other important cities such as Shanghai, Guangzhou, Chengdu and Beijing. The city consumes up to RMB 150 million and trades about RMB 180 million worth of food daily, according to the People’s Daily.

Thailand

Thailand is also a market with growing potential for Singaporean manufacturers. Like China, most of Singapore’s food products exported to Thailand are now duty-free, thanks to the ASEAN Free Trade Agreement. And since Chinese exports are gradually becoming more expensive, Singaporean products now seem less dear in price, but no less better in terms of quality, among the Thai community.

Also in December 2009, Koh led another consortium of 12 exporters to meet with local retailers in Thailand. Within just two months, 30 products from these participants were already being listed there. The shipment will arrive by end of January and be on the shelves in time for the Chinese New Year shopping season.

After the Chinese New Year peak season, Koh said more companies’ products would be listed. He is also organising the Singapore Food Fair in Thailand, to be held from July 28 to August 24, 2010. He hopes to have more than 200 Singapore products showcased there.

Koh said this was achieved so quickly because of the effective hunt-in-a-pack strategy. “By grouping ourselves together, we give retailers the choice to pick a wider range of products and then consolidate orders for different companies into one shipment.”

"This is a new trade platform which SMa offers to our exporters, who said they are very happy with the arranged programme. Those interested in this programme can contact the SMa directly,” Koh added.

A Chinese New Year food festival will be held in the Central World shopping centre in Bangkok on February 7-14, 2010. Koh said he has already secured display spaces and a cooking area for Singaporean companies to take part, and further promote the awareness for Singaporean food. Chinese New Year goodies and cuisine will be the main focus for this consumer showcase.

Improve, Upgrade, Compete

Singapore foods also have the added advantage in regional markets like China and Thailand because the food cultures and taste profiles of these countries are similar. Chinese and Thais are relatively familiar with Singaporean food products.

Notwithstanding this edge, Koh urges local food companies to invest in R&D so as to be the first mover in the industry. “Manufacturing processes and capabilities also need improvement and upgrading if we want to be cheaper, faster and better.”

As compared to our neighbouring countries, Singaporean companies have been conditioned to competing on a level playing field, based on open market rules, he said. “Food companies in other countries may enjoy government subsidies in purchasing raw materials but we don’t,” Koh revealed.

In addition, costs of raw materials are forever rising. So in order to maintain constant selling prices, manufacturers must look for ways to increase productivity, reducing damaged food is also a way to lower costs. While he agrees that it is important to retrain and retain labour force, the fastest way to achieve higher output is actually by upgrading one’s manufacturing capabilities, processes and technology, Koh said.

“By using new and more efficient technology, manufacturers can achieve higher yields of sellable products because we can reduce wastage from damaged and substandard food.”

“Manufacturers who can survive in the next lap must seriously look into this aspect. In fact, the company owners themselves must be actively involved to make this change. The decision must come from the top.”