The European Union, Singapore Free Trade Agreement (EUSFTA), will bring commercial benefits for Southeast Asian manufacturing suppliers, a HSBC executive as advised.
The EUSFTA will further amplify ASEAN’s burgeoning supply chains under a concept known as ‘ASEAN cumulation’. Essentially, this means that manufacturing inputs coming into Singapore, from other Southeast Asian member states for final assembly, will be considered as “domestic content”. In other words, these inputs will come under the city-state’s zero tariff regime with Europe.
This is a key element of the FTA given a significant amount of Singapore products, particularly in areas like electronics, precision manufacturing and pharmaceuticals, have parts produced in other Southeast Asian countries.
Ajay Sharma, APAC Head of Global Trade and Receivables Finance, HSBC commented on the wider opportunity for ASEAN: “With greater connectivity between the EU and ASEAN, we expect to see increased trade and investment flows in this major corridor. The unique concept of ASEAN cumulation enables not only Singapore but also ASEAN to reap the rewards of EUSFTA. As materials sourced within ASEAN could now be accepted as originating in Singapore, EUSFTA would further knit ASEAN together, harnessing its potential as a manufacturing hub and enhancing its overall competitiveness.”
Stuart Milne, CEO, HSBC Malaysia commented on the impact of the agreement on Malaysia: “This marks a significant step for Malaysian corporates that export to Singapore as it will enable them to unlock new opportunities to further sell their goods and services. Malaysia is well integrated into Singapore’s supply chain and continues to be a key trading partner of Singapore particularly in the areas of commodities, electrical and electronics and fast moving consumer goods.”
Manufacturing remains one of Singapore’s key sectors contributing more than 21 percent of annual Gross Domestic Product. From a Europe and Singapore trade corridor perspective, total trade in goods between Singapore and the EU have increased by 30 percent since 2006.
Trade flows are dominated by electronics, pharmaceuticals; chemicals and aviation. Between January to September of this year, Malaysia’s exports to Singapore hit RM99.83 billion, comprising 13.7 percent of Malaysia’s total exports.
How to take advantage of the FTA
1. Many globally traded goods already have tariffs removed, so the first step is to understand whether that is applicable to your product. All goods lines have a product code assigned by the World Trade Organisation. This could inform whether your product is tariff free beyond the EUSFTA.
2. Determine what documentation is required such as customs declarations and certificates of origin, and how to obtain these.
3. For components that are brought in from across Southeast Asia, there are automated solutions available in the market that can determine eligibility of components across suppliers or gaps in their compliance.
4. Seek expert advice from state-supported advisory services like business federations and chambers of commerce.