Singapore and the Netherlands now gain better access to each other’s markets

Find out how the new EU-Singapore Free Trade Agreement can strengthen the two countries’ trade relationship.

Singapore’s strong economy and lucrative business environment were partly driven by the city state opening up to foreign investment. In 2012, the Netherlands was Singapore’s third largest trading partner in the EU with total bilateral trade standing at S$18.68 billion. As such, an operational unit of the Dutch Ministry of Economic Affairs is present in Singapore - the Netherlands Foreign Investment Agency or NFIA.

The NFIA helps and advises foreign companies on the establishment, rolling out and/or expansion of their international activities in the Netherlands. For 35 years, it has supported more than 3,300 companies from nearly 60 countries in the establishment or expansion of their international activities in the Netherlands.

What the EUSFTA is all about 
The Netherlands and Singapore can now enjoy better trade relationships and access each other’s markets with the Singapore and the European Union concluding the EU-Singapore Free Trade Agreement (EUSFTA) in December 2012 after three years of negotiation. The EUSFTA is the first bilateral Free Trade Agreement concluded by the EU with an ASEAN country.

It is a comprehensive and broad-based agreement covering tariff-free access for goods, improved market access for services (including specific commitments on sectoral markets for financial, professional, legal, telecommunications and postal services), intellectual property protection, competition policy, technical barriers to trade, government procurement and sustainable development.

Under the Agreement, the EU will eliminate tariffs on all imports from Singapore over a period of five years and 80% of the tariff lines will be covered upon entry into force of the agreement. The removal of the EU’s tariffs under the EUSFTA will benefit Singapore exporters of electronics, pharmaceuticals, chemicals and processed food products. Singapore will grant immediate duty-free access for all imports from the EU. Last year, the EU was Singapore’s second largest trading partner with an 11% share of Singapore’s total trade, while Singapore was the EU’s 13th largest trading partner in 2011.

Singapore companies recognize that although the European market is not showing much growth, it is a mature and very large market with 500 million affluent consumers, where high quality products and service are in demand. A recent seminar NFIA held together with the Singapore Business Federation (SBF) showed a healthy interest in the EUSFTA and its effects.

They are also much more used to the benefits and opportunities that are created by opening up to foreign investment, whereas many other countries still view these as threats, and thus tend to focus on shielding their economy more from outside ‘competition’. This, according to Sweerman, might be one of the reasons why Singapore became the first country in Southeast Asia to clinch an FTA with the EU. She even reckons Singapore can expect extra profit from being the ‘early adopter’ for probably a few years to come.

Strengthening trade ties 
NFIA Executive Director Suzanne Sweerman believes the EUSFTA will further strengthen the ties and mutual investments between the Netherlands and Singapore. She notes that the Netherlands’ logistics infrastructure is second in the world only to Singapore and is Europe’s best, also in overall price quality ratio. This is extremely beneficial for companies who are already distributing their products into Europe.

“The Netherlands’ investment climate has already proven its attractiveness in the past years, and we believe that this agreement will give another, small but important argument to companies that plan to use or setup their base in the Netherlands and Europe,” says Sweerman, adding that Singapore and the Netherlands share a similar outlook on collaborations. Thus, in terms of tax treaty agreements, the Singapore and the Netherlands have very favorable treaties in place.

What to expect from NFIA
Following the EUSFTA, Singapore companies can expect that NFIA will intensify its efforts towards especially the four sectors that will profit directly by the agreement. NFIA will also focus on the industries that have shown excellent fit with the Netherlands already such as the maritime and offshore sectors and IT-oriented sectors. The agency will also make Singapore companies consider the Netherlands when they are looking at Europe by drawing the comparison with Singapore’s hub function that the Netherlands does better than any other country.

“We will also stress the extra advantage that the EU has, that is, you are able to do business in one currency thus reducing risk exposure and making the step from operating in one country to adding in new countries in which to offer your products easily. This is even more the case because once you have tackled the regulations in one country, the next one will require much less effort because the vast majority of regulations is now harmonized EU- ide, unlike the situation in Asia,” notes Sweerman.