Singapore – Australia Announce Updates to Existing FTA
By: Andrew Kaung
The Singapore-Australia relationship was recently strengthened by the joint announcement of a Comprehensive Strategic Partnership on 6 May 2016. The partnership is based on the third review of the 2003 Singapore-Australia Free Trade Agreement (SAFTA), aimed at addressing current business needs of the two economies and furthering integration.
The third review will address education, science and innovation, labor mobility, and defense collaboration between the two countries. Importantly, the agreement will also cover the partnership between Singapore and Northern Australia on agribusiness and encourage Singaporean and Australian companies to work on securing reliable supply chains in the agribusiness sectors. The most significant upgrade of the agreement is the facilitation of government procurement contracts through the reduction of red tape.
On the whole, the Comprehensive Strategic Partnership is thought to pave the way for business opportunities in both countries. For a detailed look at the history of the Australia-Singapore Free Trade Agreement please click here
Singapore – Australia Trade
Currently, Singapore is the largest trading partner of Australia in Association of Southeast Asian Nations (ASEAN), and Australia’s fifth largest trading partner in the world. Singapore currently invests more than US $60 billion in Australia, making it the nation’s fifth largest foreign investor. In 2015, bilateral merchandise trade between Singapore and Australia amounted to more than US $14 billion. The total goods and services trade between Singapore and Australia amounted to US $30 billion.
According to the Department of Foreign Affairs and Trade (DFAT), major Australian exports to Singapore in 2015 included gold, crude petroleum, refined petroleum and animal oils and fats, due to the country’s rich mineral resources. On the other hand, Australian imports from Singapore in 2015 were refined petroleum, edible products and preparations, computers and chemical products. The table below shows each export and import type with the respective amount in both Australian and US currencies.
Singapore’s foreign investment in Australia accounted for about US $23.85 billion in 2014. ASEAN countries accounted for 6.1% of total foreign investment in Australia (FIA), or US $24.97 billion in new direct investment. Singapore injected about US $23.85 billion, making it the largest country among ASEAN. The total net inflows of direct FIA were valued at US $43.27 billion – the largest being the United States (US $24 billion), followed by Singapore (US $23.85 billion) and the European Union (US $21.2 billion). The net inflow was increased by US $41.25 billion or 8.7 per cent from 2013.
The annual growth of inbound FIA from ASEAN has slowed down in recent years to around 10 per cent. Although growth is projected to further slow to around 5 per cent per annum, according to the Australia and New Zealand Banking Group, the amount will still be equal to an additional US $50 billion by 2030.
Opportunities for Investment
This new cooperation package between Australia and Singapore is a substantial first step in a decade-long plan to enhance bilateral links and boost investment. Elements of the agreement will encourage economy growth, and lead to wider integration by forging new business frontiers.
For companies currently managing pan ASEAN operations from Singapore, improving trade ties with the Australian economy provide a unique opportunity for future expansion. Given the recent slump in energy prices and subsequent shocks that have been reverberating throughout the Australian economy, it may well be possible to lock in bargain prices from Australian suppliers. Furthermore, as the TPP comes into force in the next few years, the linkage between Singapore and Australia is only set to become more pronounced.
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