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Business trends

Dyson's HQ move boosts Singapore ambitions to be Asian hub

Experts see ripple effects reinforcing city-state's status

James Dyson is moving his eponymous vacuum company from the U.K. to Singapore in order to be closer to the majority of his customers. (Photo by Maho Obata)

SINGAPORE -- British luxury home appliance maker Dyson said there was a simple reason behind its recent decision to move to Singapore: the "increasing importance of Asia" for its business.

There are skeptics who believe the relocation has more to do with government incentives, such as tax breaks. Others point to Brexit, even though founder James Dyson has been an outspoken advocate for leaving the European Union.

Whatever Dyson's motivations may be, the move signals Singapore's growing importance as a regional hub for global companies, including manufacturers.

The city-state has attracted scores of multinationals in recent years. Its Economic Development Board estimates that 80 of the world's top 100 tech companies have a presence. Facebook opened a sprawling new regional headquarters there last October. Google and Microsoft have made it the center of their Asia-Pacific operations.

Dyson is not the first British manufacturer to move in. Rolls-Royce, the engineering company, chose tiny Singapore as its regional center for civil and defense aerospace, marine and power systems, among other functions. Its state-of-the-art factory turns out hundreds of engines a year and employs thousands of workers.

Asian companies, too, are using Singapore as their base for reaching the rest of the region. Ride-hailer Grab moved from Malaysia in 2014 and now employs 1,000 engineers in the city-state. Ocean Network Express, a shipping company established in 2017 through an integration of three Japanese container lines, set up its corporate headquarters there.

Now, experts say Dyson's relocation could encourage still more companies to set up shop.

Prakash Sakpal, economist for Asia at ING, said Dyson's move reinforces that Singapore is "still an attractive destination for regional and probably global [companies] considering moving their bases, thanks to [the city-state's] forward-looking strategy with a constant drive to upgrade."

"Coming at a time of intensified global risks, more such moves [like Dyson's] will be positive not only for Singapore's manufacturing but also the service sector," Sakpal said.

Dyson has been focusing on Asia for years. The privately owned vacuum maker rings up more than half its profit in the region and, even before the headquarters move, employs over 1,000 people in Singapore. The company last week said the relocation would allow executives to "make the right decisions for Dyson in a quick and efficient way." Earlier, it had revealed a plan to produce electric vehicles in the city-state.

"We believe that Singapore's advantages are a good fit with Dyson's requirements," said Kiren Kumar, assistant managing director at the development board, a government agency that works to attract foreign direct investment.

"Singapore's manufacturing sector has been steadily transforming into one that competes based on the deep skills of our workforce, the use of advanced technologies such as robotics and automation, and a strong ecosystem of suppliers locally and in the region," Kumar said.

The World Bank's ease of doing business ranking underscores Singapore's appeal. It ranked second in 2018, behind only New Zealand. Advantages include a low corporate tax rate of 17%, modern infrastructure and a strategically favorable location in Southeast Asia.

Nitin Pangarkar, an associate professor at the National University of Singapore Business School, said he thinks Dyson is "getting some incentives [such as] tax breaks," even though the company has said taxes were not a factor in its decision. Either way, the real prize, according to Pangarkar, might be Singapore's free trade agreements with Asian countries, including the Association of Southeast Asian Nations bloc and China.

"That means Dyson products will have few problems reaching other markets," he said.

Yet Singapore's trade-reliant economy is not immune to global uncertainty. The city-state's growth is expected to slow to 2.6% this year, down from 3.3% last year, according to a Monetary Authority of Singapore survey of economists in December.

Recent government statistics showed that manufacturing output growth slumped to 2.7% in December, from 7.6% in November. The electronics sector fell to minus 6.8% -- a dive blamed on spillover effects from the U.S.-China trade tensions and a global tech slowdown.

Those are not the sort of numbers Singapore wants to see as it promotes high-end manufacturing and research, aiming to increase productivity and add value to the economy. Currently, manufacturing accounts for about 20% of gross domestic product, including electronics and precision engineering.

Even with that enviable ease of doing business ranking, global changes can still threaten Singapore's status as the Asian hub of choice. Semiconductor maker Broadcom last year moved its legal headquarters from Singapore back to the U.S. in response to President Donald Trump's corporate tax cuts.

Hosting Dyson's headquarters promises to generate new momentum in the right direction, according to Selena Ling, head of treasury research and strategy at Singapore's Oversea-Chinese Banking Corp.

"A headquarters would usually generate other spinoff activities including finance, talent attraction, research and development," Ling said.

Pangarkar of NUS Business School, meanwhile, suggested Dyson could serve as a beacon of sorts for businesses.

"Other companies that are similar to Dyson may be influenced."

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