SINGAPORE – A growing number of Japanese companies have moved some of their headquarters or key functions to Singapore, viewing the city-state as a strategic location where they can oversee a new wave of investment in Southeast Asia.
Panasonic Corp. and Mitsui Chemicals Inc. recently moved some key functions from Japan to Singapore, while Hoya Surgical Optics Inc. not only established its headquarters in Singapore, but had Chief Executive Officer Hiroshi Suzuki transfer in to oversee the company’s global operations.
With the rise of Asia, companies have “increasingly relocated their senior decision makers to Singapore, to enable nimble decision making from the heart of Asia,” Singapore’s Economic Development Board said in an email.
“We have seen more companies undertaking their strategic functions out of Singapore, such as headquarters, strategic business development, research and development, supply chain control and talent development,” the board said.
According to a survey by the Japan External Trade Organization released earlier this year, 36 percent of the 213 Japanese companies in Singapore that responded to its survey said they are involved in regional headquarters functions, while another 27 percent said they were considering moving more of their headquarters functions to Singapore.
Observers say the trend accelerated after the devastating earthquake and tsunami that hit Japan in March last year and awakened Japanese companies to the need to diversify their operations to reduce future risks.
Toru Yoshikawa, associate professor of strategic management at Singapore Management University, says the trend reflects that Japanese companies are now turning their attention to the fast-growing markets of Southeast Asia now that China’s red-hot economy has begun to lose steam.
“While the growth of the Chinese market is slowing, on the contrary some Asian countries such as Indonesia or Myanmar are growing, and Singapore is an ideal hub to enter these neighboring markets,” Yoshikawa said.
JETRO President Hidehiro Yokoo said at a forum in Singapore recently that Japanese foreign direct investment in Southeast Asia has exceeded Japanese investment in China in recent years.
“We can see the new trend of Japanese FDI to ASEAN,” he said, citing increased Japanese corporate interest in countries in regional emerging countries, more investment into the service industry, such as restaurants and retailing, and also into higher value-added manufacturing industries and growing interest from small and midsize enterprises to look for opportunities outside Japan.
Yoshikawa said Singapore offers some advantages that may be lacking back home.
“Japanese companies want to globalize their operations by hiring staff with diverse cultural backgrounds, and while Japan may have highly competent engineers and managers, they don’t have much experience operating in multicultural environments, so Singapore is an ideal location because they can hire English-speaking staff,” Yoshikawa said.
The advantages often cited in Singapore are its strategic geographical location, an efficient infrastructure such as Internet connectivity, and one of the world’s busiest seaports.
Another factor is the government’s probusiness policies, such as competitive taxes.
Singapore has been slashing its corporate tax rate in recent years and at 17 percent has one of the lowest in Asia. Japan’s corporate tax rate is 30 percent.
It also has a flexible immigration policy that makes it easier for companies to recruit staff from all over the world, while a bilingual education policy has ensured a workforce that can speak not only English but also Chinese and other local languages.
Japan’s small and midsize enterprises are also moving their headquarters from Japan to Singapore.
Shunsuke Sato, the chief executive officer of Satisfaction Guaranteed, a company that markets quality Japanese fashion brands online, decided to move SG’s headquarters from Japan to Singapore in November last year because he finds the business environment here more vibrant and conducive for smaller companies like his.
Singapore is a more attractive base to reach out to the company’s fans, which the company says are mostly in Asia.
Sato said he chose Singapore because he prefers to hire workers of different nationalities who will have a more in-depth knowledge of local markets.
There are also more business opportunities here because firms are less constrained by Japanese-style seniority-based decision making and more open to offering partnerships or collaboration with smaller firms.
Panasonic has been relocating its global procurement and logistics headquarters from its head office in Osaka to Singapore this year, the first time the company has shifted headquarters functions outside of Japan.
Masaaki Hieda, managing director of Panasonic System Communication Asia Pacific Singapore, which was established in Singapore in January this year, said that while key its operations were largely confined to Japan, Panasonic plans to do more test marketing and develop new models in Singapore.
He said that he has been impressed by the faster decision making and the vibrant business atmosphere in Singapore.
In May this year, Panasonic reported its largest-ever group net loss of ¥772.17 billion for the year to March. This condition could prompt the company accelerate its shift of focus to Asia.