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EXPORT RECOVERY SERIES | MARKET INSIGHTS | SINGAPORE

Two Steps Forward – Two Steps Back?

Singapore didn’t initially ‘lockdown’ its economy to nearly the same degree as other countries as a result of C19, but a second wave of infections hitting the country has seen its early international recognition in the handling of this crisis evaporate. The country’s current grip on the situation is unclear – what does this mean for exporters to Singapore when the tide keeps turning?

At the beginning of the year Singapore was particularly effective in managing C19 off the back of robust contact tracing methods and rigorous testing, and its approach was highlighted as the model to follow by many countries around the world, including our own. Singapore’s previous experience in dealing with SARS/MERS provided a pedigree for ‘best practice’ crisis management that was hard to ignore.

That was until late March, when things changed. The country is now struggling with a significant second wave of infections, creating complex challenges the nation is finding harder to bring under control.


What is being said?

Last week ‘Stuff’ reported that “…infections in Singapore, an affluent Southeast Asian city-state of fewer than 6 million people, have jumped more than a hundredfold in two months – from 226 in mid-March to more than 23,000, the most in Asia after China, India and Pakistan. Only 20 of the infections have resulted in deaths”. 

The cause? The city-state houses thousands of foreign workers in confined,  unsanitary and overpopulated dormitories, which have become the flashpoint for C19 infections. Approximately 90% of Singapore’s cases are now linked to these facilities.

Reuter’s recently stated “…there are 43 such purpose-built dormitories in Singapore, housing 200,000 workers, 1,200 converted factories housing 95,000 workers and various other smaller temporary quarters, according to the Ministry of Manpower.” 

MInistry of Manpower? Almost 300,000 migrant workers have been told not to leave the overpopulated makeshift dorms, and the Ministry’s governance has lead to Singapore being heavily criticised for its neglect of these marginalised communities, which is not only a major weak link in Singapore’s containment effort of C19, but is prompting broader questions from human rights groups on Singapore’s treatment of these communities in general.

On C19’s impacts on the Singaporean economy, the Monetary Authority of Singapore recently stressed the current uncertainty and volatility could see Singapore’s economic growth dip below the forecast range of -1 to -4%, which would be its worst-ever economic contraction. Opportunities for growth in the city state are limited by border restrictions, labour supply challenges, and logistics and supply chain availability, with airfreight significantly impacted. Sea freight in and out of Singapore, with one of the world’s largest ports, has been relatively unaffected.

On a positive note – aligning with the discussion and optimism of our last Export Recovery  Panel webinar | Voices from Asia (link to video replay and outtakes from the session here) –  NZTE conducted research in April which predicted significant opportunities for New Zealand exporting companies through leveraging brand New Zealand with the greater focus our country is receiving from it’s management of C19. The research found that over 75% of Singaporeans trust products from New Zealand, with NZTE suggesting that “…New Zealand’s image can help New Zealand companies trade off natural, organic and sustainable claims in Singapore, with perception of its ability to produce natural products very high in Singapore at 79%. Singaporean consumers were also the most likely in the survey to claim to favour sustainable products at 73%.”


What is being done?

Singapore and New Zealand committed to a ‘Declaration on Trade in Essential Goods’, agreed to on April 15, 2020. The Declaration identifies over 120 essential goods in combating the C19 pandemic, for which Singapore and New Zealand will remove all tariffs. This list includes PPE equipment, medical equipment, nutritional products, medicines and hygiene supplies. The Declaration also calls for participants not to apply export restrictions on food and beverage products, and to assist the facilitation of  trade in food and beverage. NZ and Singapore also signed an ‘Enhanced Partnership’ agreement last year, which built a framework for cooperation across defence and security trade, and science and innovation trade, between the countries. 

Singapore implemented it’s version of lockdown, called the ‘Circuit Breaker’ on April 7th, with stricter restrictions progressively introduced:

  • All workplaces were closed, except for essential services (food outlets, markets, supermarkets, clinics, hospitals, utilities, transport, key banking services) and services that are strategic or part of global supply chains. Staff that can work from home must do so.
  • Circuit  Breaker ends June 1st, but there will be a staggered return to normality. 
  • Schools, preschools, universities and student care sites are closed.
  • All food-related services (apart from dine-in services) and all supply chain activities related to essential services are allowed to continue. These include non-manufacturing, storage and logistic service providers.
  • Some businesses, like barbers, home-based bakers and laundry services,  resumed operating on the 12th of  May.

Government funding:  

The ‘Resilience Budget’, a package of around  S$48 billion (US$33.7 billion) was announced in April, and is designed to mitigate impacts of C19 for businesses and households.

Within the migrant dormitories: 

  • With all construction sites locked down, the foreign workers mainly employed in that sector were largely confined in their rooms within the dormitories.
  • With the prevalence of CI9 infections within these facilities, there are now  governmental advisors onsite actively monitoring and testing any illness. Testing throughout all dormitories has also been significantly scaled up to include people with no symptoms.
  • More than 10,000 foreign workers in essential services were moved to safer sites (public housing, military camps, repurposed ships) to reduce crowding.

Singapore insights from NZTE:

Airlines:    Passenger capacity reduced by more than 90%. However, Singapore Airlines secured up to S$19 billion (US$13 billion) of funding to help see it through the pandemic and expand afterward, in a sign of confidence travel demand will return.

Construction:    Disruption of supply chains and labour availability will challenge the industry. The  new Circuit Breaker measures may delay construction projects by months, with a likely labour crunch when it becomes possible to clear the backlog.

E-Commerce:    E-retailers are operating at full capacity, with some reporting a 300% spike in orders, and the focus is on increasing fulfilment capacity. At this stage the likelihood of listing new products with e-retailers is very low. Platforms are doing very well as consumers switch to online purchases to minimise social contact. Online purchasing was very popular in Singapore, and is scaling new heights. 

Food and Beverage retail:   Online orders and supermarkets are booming, however online supermarket site RedMart is facing significant logistical challenges with the  surge of orders and it’s inability to cope. To manage, Redmart has delisted products if classified as ‘non-essential ‘, including some New Zealand products. 

General retail:    Most retail categories registered a double-digit decline in sales over the first quarter , with apparel and footwear sales recording the largest drop, at 41.6%, while the sales of food and alcohol declined, by 41%. According to Maybank Kim Eng economist Lee Ju Ye, the decline in April and May will likely be far worse due to the Circuit Breaker measures. There is an overall lack of interest in introducing new brands into the market, and product launches are being postponed to the end of the year. Consumer demand has  shifted to health-related products.

Hotels and Restaurants:   Substantially impacted, with only budget hotels and hostels showing an uplift in revenue in the sector due to a sudden demand surge from Singaporean companies looking to accommodate their Malaysian employees due to Malaysia-Singapore border closures.

Supermarkets:   Singapore imports 90% of the food it consumes, and with the recent panic buying over the last month, Minister for Trade and Industry Chan Chun reassured citizens the nation has three months’ worth of stockpile if Singaporeans buy responsibly. Generally, supermarket buyers are not looking to list new products until the crisis is over. There is the potential to increase market share of selected New Zealand food and beverage (particularly premium meats) due to the Singapore-New Zealand Connectivity Partnership in Air Freight.


The Upshot

The second wave of C19  forced Singapore’s leaders to take drastic action, later than its contemporaries. The ‘Circuit Breaker’ will inevitably impact the economy significantly, and in most of the country’s industries the opportunities for New Zealand exporters look to be few and far between.  

But on the side of the ‘few’, the ‘Declaration on Trade in Essential Goods’ between our two countries is beneficial to have in your corner, especially if you are an existing food and beverage exporter to Singapore. Facilitation of your products to market should be made easier, and the trustworthiness of brand New Zealand can be leveraged in a market prioritising health and wellness products.


If any of these aspects – on partner, channel or market assessment – are whirling around in your head, contact us on how we can help to provide clarity.  Don’t hesitate to email  christopher.boys@katabolt.com or click here


SOURCES

NZTE – https://covid19.nzte.govt.nz/page/singapore

Stuff – https://www.stuff.co.nz/national/health/coronavirus/300009991/a-tale-of-two-covid19-outbreaks-singapore-tackles-a-costly-setback

Reuters – https://www.reuters.com/article/us-health-coronavirus-singapore-migrants/the-s11-dormitory-inside-singapores-biggest-coronavirus-cluster-idUSKBN2230RK

The Guardian – https://www.theguardian.com/world/2020/apr/23/singapore-million-migrant-workers-suffer-as-covid-19-surges-back

Time in – https://www.timeout.com/singapore/things-to-do/things-you-need-to-know-about-singapores-circuit-breaker-measures

The Straight Times – https://www.straitstimes.com/singapore/health/life-will-not-go-back-to-normal-after-the-end-of-circuit-breaker-lawrence-wong

The Straight Times – https://www.straitstimes.com/singapore/new-rules-from-may-12-as-singapore-eases-tightened-covid-19-circuit-breaker-measures


Trade declaration – https://www.beehive.govt.nz/sites/default/files/2020-04/FINAL%20TEXT%20Declaration%20on%20Trade%20in%20Essential%20Goods.pdf



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