Singapore’s ambition to become the Silicon Valley of Consumer Insight in Asia

The Singapore Economic Development Board (EDB), the Government agency for attracting foreign investment, has recently set up a ‘Consumer Insights’ special division.  The objective is to develop the Singapore market research industry as the leading centre of regional consumer insights excellence in Asia.  Formerly, the care and development of the market research industry within the EDB fell under Professional Services Group, which encompassed a range of service and professional industries ranging from lawyers, management consultancies, HR, and education.  But the EDB took an unprecedented step to set up a Government department specifically to develop Singapore as a regional hub for consumer insight.

Although the large and developing research markets of India and China are creating ‘pockets of consumer insight best practice’, Singapore is seizing on an opportunity to further attract brands to Singapore who want local expertise in Pan-Asian consumer insight.  The EDB recognizes that Singapore itself is too small a market to develop a leading domestic consumer research practice of any significance.  Hence the focus of this initiative is to develop Singapore as the leading Pan-Asian for consumer insight and to manage and develop new products and brands specific for Asian consumers.

This initiative stems from several ‘mega-trends’ that have impacted the region in the last ten years.  Firstly and most importantly it is the growing affluence in Asia, the very fast growth in middle classes especially within the large markets of China and India, and also those in Indonesia, Vietnam, and the Philippines.  Secondly it is widely recognized that simply rolling out Western products to Asia does not always work.  Multi-National Corporations (MNCs) in Asia realize the specific needs, tastes, and cultures in Asia impact consumer buying decisions ranging from food, clothes, and consumer electronics.  And thirdly, it is the pace of innovation.  Very fast and frequent product development cycles have been common in FMCG categories, but are now extending to consumer electronics, and for the future perhaps consumer financial services where product innovation still lags behind most Western markets.

To date, many leading brands have chosen Singapore as their centre of excellence for research and as a result it has become a leading hub for commissioning regional research projects.  These brands include Proctor & Gamble (P&GG) who have centred their regional division for consumer and marketing knowledge to Singapore, Unilever whose market research function also extends to Africa, Central and Eastern Europe, and Standard Chartered Bank whose research extends globally.  Other brands choosing Singapore as their hub include Nestle, J&J, Kraft, and Diageo; those in the IT sector such as HP, Philips, Siemens, and Toshiba; and pharmaceutical giants such as GSK and Pfizer.

The vision set by the Singapore EDB could make Singapore the ‘Silicon Valley’ for the consumer insight in Asia.  The centre piece for this will be the setting up of an ‘Institute for Asian Consumer Insights’ likely to be incorporated within one of the local higher education establishments.  The Institute is expected to fund research projects of a purely academic nature, such as developing and testing new research tools developed in Asia for Asia, e.g. emerging research technologies and neuromarketing.  It is also expected to set up educational programs and collaborative programs with renowned academics, industry practitioners, and product designers.

Ultimately the academic push is to drawn in further brand owners to Singapore and develop a local talent pool, the latter widely recognized as being in short supply requiring most research buyers and suppliers to import talent from overseas. 

Singapore as a hub:

Historically Singapore has been known as a significant financial and commercial hub for Asia, and has traditionally competed head on with Hong Kong particularly in the financial services industry.  For market research, Singapore has very much taken the lead over Hong Kong, having far more regional market research buyers, with Hong Kong somewhat in the shadow of their enormous neighbor (China) that attracts far more attention for research.

However, along with many other industries Singapore still faces stiff competition from other Asian countries that often have the benefit of lower costs and proximity to large domestic markets – characteristics that are attractive to many keflex online order companies looking to set up regional HQs.

Rising costs in Singapore, as highlighted by both the MRSS and Kadence feature, represents a threat to the Singapore market research industry as well as many other industries vying to attract regional HQs.  In the last 10 years, Singapore has lost regional HQs to consumer and industrial brands to markets such as Thailand, China, and Malaysia.  There is sometimes an argument for having the HQ within a large domestic market so that local sales and marketing activities can benefit from head office support services.

But Singapore still sells itself to the world corporate community on values and standards of corporate governance that most of the Asia still falls down on.  The Corruption Perceptions Index (CPI) 2009 ranks Singapore 3rd globally (New Zealand and Denmark slightly ahead), but Singapore is far ahead of its Asian rivals with Malaysia 56th, Thailand 84th, China 79th, Indonesia 111th and the Philippines 139th.  For most of the rival ‘low cost’ markets, corruption issues and political instability hold back their development, ironically to Singapore’s advantage where their trusted legal and political framework works in its favour.  Since 1997, it has consistently ranked by the Political and Economic Risk Consultancy as having the most protective Intellectual Property (IP) regime in Asia.

Apart from the overall league tables the preference for Singapore for many service industries has been founded on three key factors:

Gateway to Asia:

Singapore is often viewed as the ‘Gateway to Asia’ with a unique blend of East and West.  With a varied cosmopolitan talent pool, diversified business landscape it has been the preferred base for professional services firms to create innovative solutions.

International Hub for Business:

Singapore is host to over 7,000 MNCs, and its strategic location between the Indian sub-continent, emerging SE Asian markets, and the huge markets to the North in Greater China gives companies convenient access to all these markets.  The sophisticated base of MNCs often centre high value-add activities such as IP and brand equity management, M&A and IPOs to Singapore.

Magnet for Talent:

Viewed as a reliable, clean, safe, and secure place to live with the added benefit of low tax and the English language, it has been viewed as the ‘Asia for beginners’ and is often the preferred destination for expatriates.

But despite the above representing the traditional selling points of Singapore, some new threats are emerging for Singapore’s future as an MNC hub.  One of these is the proposed changes to US corporate tax rules.  Part of his efforts to fix what he deemed to be a “broken tax system” President Obama has recently announced a tightening of what is known as the “deferral rules”. These rules allow a US company in Singapore to pay taxes in Singapore and ‘defer’ paying US taxes until its offshore profits return to the United States. Obama’s proposed changes would mean that US companies in Singapore would have to pay both Singapore and US taxes regardless of whether they repatriate their profits back to the US.  This would practically eliminate the tax advantages of being in Singapore.

While this would impact all US companies globally, the proposed changes could have a disproportionate impact on Singapore, given the large number of US regional headquarters in Singapore and the very low prevailing Singapore corporate tax rate.

The biggest worry though is that other countries will adopt similar measures at a time when large deficits at home need reducing through more tax revenues.

But observers point out that MNCs in Singapore have complex operations that cannot be uprooted easily.  But these uncertainties will reignite a long-running debate about the ‘MNC strategy’ that Singapore has adopted since the mid-1960s.  One argument is that Singapore has been too dependent on courting foreign multinationals at the expense of nurturing home-grown industrial giants in the same way as South Korea and Taiwan did.

And on the talent side, other destinations in Asia are sometimes viewed as more interesting and fun, so Singapore still has to maintain its drive to attract and retain foreign talent especially with the rising costs of living in Singapore.