Overseas success of S’pore Incorporated vital

Think about Singapore and descriptions such as “successful”, “efficient” and “competitive” spring to mind immediately. However, Singapore Incorporated does not enjoy the same renown as Singapore the country. This is a pity because the Singapore brand built over the past 50 years would not have been possible without the contributions of its homegrown enterprises.

In a recent annual list of the world’s top 500 brands last year, published by brand valuation consultancy Brand Finance, Singapore Airlines and DBS were the only two Singapore brands to make the cut. In comparison, India has six, South Korea 12 and Japan an impressive 40 brands on the same list.

For the Singapore national brand to flourish in this increasingly competitive and globalised world, more effort must be made to help our local brands innovate and shine.

Having an instantly identifiable brand has become extremely important for Singapore businesses.

In the past, they might have been able to get away with not focusing on branding because the country was enjoying very rapid rates of growth. An influx of multinational companies to Singapore also created opportunities, in the form of complementary products or ancillary services, for local enterprises.

It is a different story now. The advent of technology, lower geographical and trade barriers, as well as stiff competition from emerging markets mean that MNCs have more options besides Singapore. This situation is compounded by the rising costs of doing business here and the challenge of securing labour for service sectors.

Against this backdrop, sustainable growth for Singapore can only be a reality if Singapore businesses thrive not only here, but beyond our shores.

Findings from a recent KPMG poll of 141 Singapore companies indicate that they already recognise the importance of taking their products and services overseas. More than 40 per cent of respondents said they want to enlarge their regional presence. For them to do so, branding is crucial.

BUILDING A BRAND

To develop a good brand, companies must become comfortable with investing in intangible assets. They must also consider areas such as design, research and development, and, of course, innovation.

Innovation, in particular, is a trademark of truly strong brands. These brands offer novel products and services that are reliable and provide a positive customer experience.

What they sell is also usually instantaneously recognisable as part of their company’s narrative.

Apple products, for example, are known for their clear, distinctive design and user-friendly interface. Uniqlos all over the world are instantly associated with comfortable style.

But Singapore businesses are displaying a stronger desire to innovate. The same KPMG poll showed that about 54 per cent of the Singapore businesses surveyed said they want greater access to existing innovation schemes provided by the Government.

But innovation schemes such as the R&D tax incentive currently define innovation at thresholds that are too high for most local small and medium enterprises (SMEs). Based on the Inland Revenue Authority of Singapore’s latest guidelines, innovation comprises a “revolutionary” or “breakthrough” scientific or technological discovery. Such high-end innovation activities may be within the reach of MNCs, but not smaller Singapore business outfits.

We propose creating a sub-category of innovation that caters to the innovative efforts of SMEs so they, too, can enjoy incentives for their research efforts. For example, novel ways to better serve customers can be recognised as innovation, too. In that way, innovation is no longer only about technology, but also about new strategies to improve business management and operations.

In addition, we propose a 10 per cent concessionary tax rate for intellectual property-related income. The incentive will tax the revenue generated from intellectual property rights — brands, for example — at a reduced rate of 10 per cent, compared with the normal corporate tax rate of 17 per cent. In this way, SMEs can be encouraged to develop Singapore brands, patents and other intellectual property rights.

REWARDING THE PIONEER BUSINESSES

While brand-building is ultimately a company’s responsibility, the Government can play a role in helping to promote existing Singapore businesses and nurture a new generation of local enterprises.

A Singapore Pioneer Business Package can be developed to honour successful local brands. Certain criteria can be set for companies to qualify. For instance, Singapore-owned businesses must have operated for at least 10 years and have more than 25 employees. These companies can then enjoy new tax rebates or enjoy tax allowances for building valuable brands.

Currently, tax benefits are calculated based on expenditure incurred. If a company buys an established brand, they get to enjoy tax benefits based on the value of the purchase over a five-year period.

However, there are no tax incentives for local enterprises that develop their brands. This is rather unfair — if a company purchasing an established brand is eligible for a tax benefit, it makes sense to extend the same benefit to the company that developed the brand.

To encourage more homegrown brands as opposed to companies simply snapping up successful overseas brands, companies should be allowed to claim tax benefits based on the value of their brands or trademarks.

This value can be determined by an independent valuer.

Doing so would also close the gap between brand purchasers and developers. Brand owners might have less incentive to sell their brands, losing the Singapore identity of their products and services in the process.

The United States is linked to its Silicon Valley giants such as Apple and Amazon. Italy has its luxury car models Ferrari and Lamborghini.

Singapore, too, needs to be known immediately by its industries and companies.

ABOUT THE AUTHOR:

Tay Hong Beng is head of Tax at KPMG in Singapore. The views expressed are his own.