Economic power house Singapore looks to Russia for business

Business leaders in Singapore, the economic power house of Southeast Asia, have announced Russia could become one of their main trading partners of the 21st century. Despite the impact of Western sanctions on Moscow and the economic downturn, many on the influential island state see major opportunities for investment.

The news comes as Russia seeks to angle its economy towards more links with businesses in Siberia and the booming Far East and Southeast Asia.

Direct investment from Singapore is already on the rise, totalling some 2.5 billion roubles (US$57 million) in 2012, compared to 2 billion roubles in 2011 and 1.8 billion roubles in 2010.

International Enterprise Singapore put bilateral trade between the two countries last year at 240 billion roubles – and it is set to reach record-breaking levels with figures showing it already stands at 251 billion roubles this year. The majority of the trade has been in agriculture, consumer products and property development.

Not many Singapore firms currently operate in Russia but those that have ventured north have done well, with business leaders urging more companies to grasp the opportunity.

Russia has become the biggest single market for Food Empire Holdings, contributing about 5 billion roubles in annual revenue to the company. Sudeep Nair, executive director of the Singapore-based firm, which is the market leader in 3-in-1 instant coffee, said: 'Russia has always offered great opportunities for companies that have shown commitment.

'It offers a large consumer base with good relative purchasing power, and consumers who are willing to try new products and new brands.'

Another major firm, Tanstarr, which supplies crude oil and petroleum products, has seen its business grow by 30 to 40 per cent since entering Russia five years ago.

Singapore-based agri-business Olam has also been buying stakes in Russian companies, in the dairy and instant coffee packaging industries over the past three years and is beginning to see positive results. The firm is also now amongst the top three grain exporters from Russia.

Businesses that have done well have acknowledged that it is important to overcome both cultural and language differences and understand the sheer scale of the country. For many in one of the world’s smallest nations that can be a daunting task.

Mr Nair said: 'The large geographical size of the country makes logistics difficult and time-consuming, and there are regular changes in the tax environment as it is still evolving.

'The country is so huge it covers over nine time zones. So a company that knows the southern part of Russia may have no understanding or expertise of, say, the Urals or the Siberian region.'

Gordon Tan, the group chairman at Tanstarr, agreed and said: 'Doing business in Russia is completely different. You have to learn and respect what the Russians like. They are artistic, and into music and ballet, and you have to be part of this family.'

Located just 85 miles north of the equator, Singapore is a tiny island nation with a population of 5.5 million. But its respected economy has been ranked as one of the most open and pro-business in the world, with low tax rates and the third highest per-capital GDP.

In addition to tourism and financial services, exports - particularly electronics and chemicals - provide the main source of revenue for the economy.