Agency opens doors for US businesses - in Singapore and beyond

Agency opens doors for US businesses - in Singapore and beyond

Link-ups for small businesses lead to multi-million dollar sales yearly
By CHUANG PECK MING

(SINGAPORE) Operating out of Singapore, US government officials have been clearing the way for US firms and hooking them up with markets in Asia, leading to multi-million dollar sales yearly for the numerous small businesses which provide the bulk of American jobs.
Most of the firms are small and are often novice exporters, according to Daniel Thompson, Commercial Counselor of the US Commercial Service at the US Embassy in Singapore.

Others are not new to selling abroad or Asia, but they have continued to rely on US Commercial Service in Singapore to screen and link them up with importers and distributors here and the rest of the region.

According to the Singapore office of US Commercial Service, which has offices in more than 80 countries and part of the US Department of Commerce’s International Trade Administration, Singapore is the easiest place to do business in Asia and a great gateway to Asia.

‘The US export data reflect Singapore’s important role as a major distribution centre, serving as the gateway to the region,’ US Commercial Service Singapore says on its website. ‘Many of the US products imported into Singapore are eventually re-exported as finished and semi-finished products to other markets in South-east Asia and worldwide.’

Singapore is the US’s 9th largest export market for manufactured goods and remains its 15th biggest trading partner.

 
 
With trade between the US and Singapore on the rise, US Commercial Service Singapore says there are enormous market opportunities for US firms here in many industry sectors. Among them: aircraft and parts, laboratory & scientific instruments, telecommunications equipment, oil & gas gear, medical devices, pollution control gadgets, construction tools, electronic components and testing equipment, education and franchising.

According to Mr Thompson, US Commercial Service Singapore last year helped 187 US exporters secure sales totalling at least US$70 million - up from US$61 million in 2005 and US$52 million in 2006.

He said such sales data are based on what the US exporters choose to report to US Commercial Service Singapore, which recently marked World Trade Week. They are not required to - and many have not reported.

In any case, the US Commercial Service does not use the sales numbers to measure its success rate in helping US businesses to export to Asia. It pays more attention to the number of firms that have secured sales in the region, especially those for the first time.

While the number of US firms the US Commercial Service Singapore successfully helped in 2007 was lower than in 2006, when 216 US firms clinched deals through the agency, Mr Thompson said the figure this year so far is on track to hit its target of 216.

Among the US successes in 2007 was Old Mother Hubbard, a leader in the natural pet food business in the US. Through US Commercial Service, it appointed a distributor for Singapore. The company projects about US$300,000 in sales in the first year.

Z-Medica Corporation, a developer and manufacturer of medical devices, similarly secured an exclusive distributor here with rights also to Brunei. Swabplus, which markets a unique range of patented personal care and health and beauty care products, appointed Teeni Enterprise as its distributor for Singapore, Malaysia and the Philippines.

Cosmetics firm Jon Davler established accounts with Sa Sa Cosmetic, Watsons, OG and John Little’s in Singapore with total retail value of US$280,000. Through Singapore, Slade, a manufacturer of high- technology valve and pump packing, made its first sale in China.

Source : Business Times - 09 jun 2008

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Shipping lines batten down their hatches -Singapore

Shipping lines batten down their hatches -Singapore

Operators face rising fuel costs but are not without options to relieve pressure on bottom line
By VINCENT WEE
(SINGAPORE) Two industries as different as air and sea, but confronted with some of the same gruelling market forces.

 
Last week, a global gathering of the airlines industry sounded an alarm, warning that a ‘perfect storm’ of negative factors could again plunge the industry into the red this year - this time possibly to the tune of over US$6 billion.

The shipping industry is under cost pressure too. But here the view is that shipping lines will survive as long as world trade continues to flow and supply and demand factors keep a healthy margin between freight rates and bunker prices. And while the rising price of oil will hit the bottom line, the impact will be nowhere near the proportions the airline industry has warned of.

Certainly, judging from the most recent first-quarter results of the main Singapore-listed shipping lines, revenue and profits continue to be healthy. Neptune Orient Lines (NOL) saw a four-fold increase in Q1 profits from US$28 million to US$108 million. Regional feeder line Samudera Shipping Line also saw Q1 gains rise, up 27 per cent from US$6.3 million to US$8 million.

But with the bunker price tripling over the last three years and in recent months rising by half from just over US$400 per tonne at the end of last year to current prices of around US$600, it seems only a matter of time before it starts to drag on the bottom line.

The proportion that bunker comprises of total vessel operating costs has also risen sharply from around a fifth to about half now. Bunker cost estimates range from 40 per cent to 60 per cent, depending on the lines and their vessel mix. Maersk Asia-Pacific CEO Jesper Praestensgaard estimates the effect on the lines of each US$10 increase in oil price to be in the hundreds of millions of dollars.

The lines realise this and are taking action. ‘We have entered an operating environment we have never seen before,’ warned Neptune Orient Lines’ container line unit APL’s CEO Ron Widdows.

‘It’s not just the fact that fuel prices are higher and they contribute to a compression of margins (but) the level to which fuel prices have gone in a relatively short period of time is forcing fundamental changes to how transportation players operate, how they invest and how they design their services,’ he added.

Pacific International Lines managing director SS Teo put it more simply. ‘The high oil price affects us a lot,’ he said matter-of- factly.

There are two main counter measures against rising costs in the industry: a combination of slow steaming and route optimisation schemes, and the passing on of costs through surcharges.

Slow steaming means reducing a vessel’s travelling speed so that it burns less fuel. Industry sources estimate that slowing a vessel by an average of 0.5 knot can reduce fuel consumption by 5 per cent. Yet others like Maersk say their most modern ships can cut fuel consumption by up to 10 per cent because they are more efficient.

Route optimisation works alongside this measure. With slower speeds, lines typically need to increase the number of ships servicing a particular route to keep their schedules. In the process, low-volume ports may either be dropped or may see fewer calls; in fact, some of the regional feeder lines even cancel sailings if loads are insufficient.

The other main measure being taken is to pass on the cost to customers. All lines have extra charges to factor in the fluctuating price of fuel, much like airlines’ fuel surcharges. Usually known as the bunker adjustment factor, it comprises a formula that the lines use to input the price of fuel into their freight charges.

All the major shipping line groupings like the Far Eastern Freight Conference, which handles the Asia-Europe trades, and the two main trans-Pacific groupings now adjust these charges monthly, compared to quarterly previously.

But whichever way the deck is cut, it still comes down to trade - or, more importantly, the difference between freight rates and bunker price.

According to Ocean Intelligence director Adam Dupre: ‘The most important factor is whether freight rates will stay high enough to cover operating costs including the higher fuel costs. If world trade falters - especially in the current major drivers of China and India - then freight rates could fall.’ Singapore-based Ocean Intelligence provides commercial analysis for the marine and commodity industries.

According to Mr Praestensgaard of Maersk Asia-Pacific: ‘It all depends on the crack (or price difference) between crude oil and bunker oil.’

But there still seems to be cautious optimism in the industry. The container trade is forecast to grow between 8 and 10 per cent over the next five years and the economic climate has benefited the lines in unexpected ways. The weaker US dollar, for example, has increased American exports and the rate on the backhaul (which traditionally is the weaker sector on a mainline route) on the key trans-Pacific trade has risen some 40 per cent compared to two years ago, thus increasing overall loads.

There has also been progress on the rates front, especially on the trans-Pacific trade. ‘Our industry is doing a better job of passing the increased cost of fuel along. However, there is still some further work to do in certain trade lanes and you can anticipate that efforts to continue the shift to floating bunker surcharge terms in contracts with shippers will be high on the industry’s agenda going forward,’ said Mr Widdows of APL.

‘Carriers view this year’s contract negotiations as the first step in a multi-year process of returning the industry to economics that will generate adequate returns and enable the necessary ongoing investments in trans-Pacific capacity and resources,’ said Transpacific Stabilisation Agreement executive committee member and Hanjin Shipping CEO JS Lee.

Though nobody is talking about losses yet, caution remains. Said Mr Widdows: ‘Given the trajectory of fuel prices, the trend towards rate increases and cost recovery is not going away any time soon (and) the impact on the shipping industry is already significant.’

‘If fuel prices go higher, we’ll see even more slowing of the fleet globally, a higher degree of rationalisation between carriers’ networks and potentially even some curtailing of service in lanes that can no longer be served economically - a trend we are seeing in the airline industry as well,’ he warned.

The other main component of the shipping industry - the dry bulk sector - is not as affected by the oil price rise because the structure of its trade is different. Whether the vessels are taken on an immediate-use basis on the spot market or on longer-term charters or the various other contract types used to transport large amounts of bulk cargo, the current bunker price is always factored into the deal.

 
Source : Business Times - 09 jun 2008

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No signs of a recession, says Tharman - Singapore

No signs of a recession, says Tharman  - Singapore

But the hike in fuel prices in Malaysia will cause discomfort here
 
SINGAPORE is not heading for a recession, said Finance Minister Tharman Shanmugaratnam, although fuel price increases in Malaysia would lead to discomfort.
‘From all indications we have at this point, I don’t think we’re heading for a recession.

‘But there will be discomfort on the ground,’ he said, speaking to Channel NewsAsia at the Entrepreneur-in-You Carnival at Republic Polytechnic.

At the event, about 7,000 people turned up to pick up tips on starting their own business.

‘Unfortunately, the fuel price increase in Malaysia does mean that vegetable, poultry and some other prices will go up. We can’t avoid that,’ he said.

Malaysia’s decision to trim subsidies for petrol and diesel and raise pump prices has meant that overnight, there has been a 41 per cent increase in petrol prices, from 80 Singapore cents to $1.13 per litre, while diesel prices rose 63 per cent, from 66 cents to $1.08 per litre.

Prices of a range of goods are set to go up as the cost of trucking them in rises, and fresh food tops the list.

But practically everything imported from Malaysia, including building materials, will also cost more soon.

He added that it was fortunate that rice prices globally were going down.

‘But overall, we’re in a situation which isn’t temporary - this will be with us for a while.

‘Commodity prices are much higher than what they used to be,’ he said.

This was being tackled through government measures such as Growth Dividends, goods and services tax (GST) credits, as well community initiatives on the ground, he said.

 
Source : Straits Times - 09 jun 2008

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Rising petrol prices prompt switch to ‘green’ transport

Rising petrol prices prompt switch to ‘green’ transport 
By Tan Dawn Wei 

 
With pump prices heading north, motorists here are switching to cheaper alternatives.
Some have given up their cars and moved to public transport. Others have downgraded to smaller cars or two-wheelers. A growing number have opted for hybrid-engine cars.

There’s even a six-month waiting time for those who are keen to kit their cars out to run on compressed natural gas (CNG) because of a sudden surge in demand, according to motor workshops.

There were 248 CNG cars on the roads last year, but this has more than doubled to 538 in April this year.

Hybrid cars, or those that switch between petrol and electricity, also shot up in the same period, going by the Land Transport Authority’s numbers. Another 289 have joined their ranks, bringing the total to 1,346.

Another popular ‘green’ choice is public transport. Singapore’s total bus and train ridership hit a record 4.78 million rides a day in the first three months of this year.
The number of bids for certificates of entitlement (COEs) every month has also fallen since the beginning of this year, one more indicator that consumers are staying away from buying new cars.

COE bids for cars up to 1,600cc, for instance, fell from 3,005 bids in February to 2,500 this month.

‘People are very cautious about buying big-ticket items now, with oil and food prices going up and property prices and shares moving down. They’re adopting a wait-and-see approach,’ said Tan Chong Motors’ marketing director A.C. Neo.

If they do buy, says the Nissan distributor, small is in.

Borneo Motors, which sells Toyota cars, has also been selling more of its smaller capacity cars than its larger ones, said customer relations general manager Angeline Tan.

Another popular choice now is off-peak cars with the distinctive red plates. They can be driven from 7pm to 7am on weekdays, after 3pm on Saturdays and all day on Sundays and public holidays.

There are about 34,000 of them on the road now, compared to 2,644 just five years ago.

Mr Henry Ang, manager of car dealership Koh Brothers Automobile, said that he has seen a 20 per cent increase in the number of motorists who have switched from regular cars to off-peak cars to save money.

Petrol prices last went up two weeks ago, the 12th consecutive hike since last July. This brings pump prices here to between $2.153 and $2.386.

If you drive a 1,600cc car, that means you pay about $320 a month for petrol, going by the average distance covered. This is $70 more than the $250 you would have paid this time last year.

That bill is likely to go up as analysts expect petrol prices to hit $3 a litre here if oil prices reach US$200 (S$273) a barrel.

But energy consultant Ong Eng Tong of Mabanaft International said that he expects pump prices to end the year closer to $2.50 instead, which is about US$150 per barrel.

‘Drivers will pay maybe $50 to $100 extra a month and this is discretionary income,’ he said.

 
No cut in petrol duties to cushion fuel hikes
The Government is not about to reduce duty on petrol to help cushion rising pump prices.
The duty - 41 cents for every litre of standard grade petrol and 44 cents for the high-end stuff - is meant to promote public transport and curb excessive use of cars.

These objectives remain relevant, a Ministry of Finance spokesman told The Sunday Times when explaining why the ministry would not lower petrol duties.

Singapore’s stand is in line with European finance ministers who last week rejected a French proposal to cut oil taxes to help consumers hit by high fuel prices.

The British charge the highest duty in Europe: For every litre of unleaded fuel, which currently retails in London for roughly S$3.20, no less than S$1.82 goes to the government in various taxes. Elsewhere in Europe, taxes invariably amount to half the price of fuel.

In Singapore, since February 2003, petrol duties have been levied on the volume of fuel purchased.

This means that rising pump prices do not increase the amount of petrol duty collected by the Government.
Yang Huiwen

Source : Straits Times - 08 jun 2008

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