Australia and Singapore enter into Comprehensive Strategic Partnership

In brief

The Australian and Singaporean governments have recently concluded discussions on a landmark agreement that will see the two countries cooperating across a range of strategic initiatives, including in the areas of trade and economics, innovation, education, people and defence. The Comprehensive Strategic Partnership builds on the already strong relations between Australia and Singapore and is expected to provide new cross-border investment opportunities through enhanced bilateral relations. Singapore-based Managing Associate, Jessica Choong, reports.

Background

In June 2015, coinciding with the commemoration of fifty years of Singapore's independence and fifty years of diplomatic relations between Australia and Singapore, the two countries signed a Joint Declaration on the Comprehensive Strategic Partnership. Since that time, the Australian and Singaporean governments have engaged in discussions to develop the details of a ten-year plan to achieve closer economic engagement between their respective countries.

On 6 May 2016, the Australian and Singaporean governments jointly announced a package of cooperation initiatives to give effect to the Comprehensive Strategic Partnership. Their work is continuing on formally implementing the agreed measures in each country.

The Comprehensive Strategic Partnership is considered to provide a major boost for Australia-Singapore relations. Indeed, its significance is suggested by Prime Minister Malcolm Turnbull's statement that the intention is to elevate Australia's relationship with Singapore 'to a level similar to the one [Australia] enjoy[s] with New Zealand'.¹

Outcomes

Some of the key initiatives arising out of the Comprehensive Strategic Partnership include the following:

• Trade and economics. Singapore is Australia's fifth-largest trading partner, with A$28.5 billion in two-way trade in 2014-15.² The Singapore Australia Free Trade Agreement (SAFTA) is a key pillar of Australia-Singapore economic relations. The SAFTA came into force in 2003 and, as part of its third review, will undergo a modernisation to recognise business needs in an increasingly competitive environment. Building on the Trans-Pacific Partnership Agreement to which Australia and Singapore are party, there will be a package of measures for goods, services and investment designed to reduce red tape and increase trade and investment flows between Australia and Singapore. One aspect of the red tape reduction is aimed at improving access for Australian and Singaporean businesses to bid for government procurements contracts in each other's country. The existing investor-state dispute settlement (ISDS) mechanism in the Investment Chapter in the SAFTA will also be updated to incorporate safeguards in relation to continued government regulation of investors and their investments in the public interest.³
• Foreign investment thresholds. Singapore is the fifth-largest foreign investor in Australia. In recent years, investment by Singaporean investors (which has increased from A$68.4 billion in 2013 to A$80.2 billion in 2014) has begun to diversify from its traditional focus on real estate investments.⁴ To further support Singaporean foreign investment into Australia, there will be higher thresholds for acquisitions that will trigger a review by Australia's Foreign Investment Review Board. In accordance with Australia's commitments to all parties (including Singapore) under the Trans-Pacific Partnership Agreement, the threshold for review for investments by non-government Singaporean investors in non-sensitive sectors will be increased from A$252 million to A$1,094 million.
• Innovation and science. Both the Australian and Singaporean governments have expressed a strong commitment to domestic policies supporting innovation, research and development. The Australian Government's National Innovation and Science Agenda will be furthered through enhanced collaboration between the national research agencies in Australia (the Commonwealth Scientific and Industrial Research Organisation (CSIRO)) and Singapore (the Agency for Science, Technology and Research (A*STAR)) and matched funding arrangements. Australia also will establish one of its five 'Landing Pads' in Singapore (the other 'Landing Pads' being in San Francisco, Berlin, Tel Aviv and Shanghai). This will provide Australian market-ready startups with direct access to innovation, entrepreneur and funding networks in Singapore, and support their development and growth through facilitating their access to expanding markets in Asia.⁵
• Agribusiness. As discussed in Allens' and Mergermarket survey, A greater yield: Attracting investment into Australian agribusiness, attracting investment into the Australian agribusiness sector is crucial to ensuring that the industry can build on its competitive advantages. There is a natural complementarity between the potential for growth in Australia's agribusiness sector and the region's objective of securing reliable supply chains for food and other agribusiness products. The package of initiatives under the Comprehensive Strategic Partnership includes the Singapore-Northern Australia Agribusiness Development Partnership. This aspect of the partnership is focused on developing Australian agribusiness through encouraging Singaporean investment into northern Australia, where is it considered that much of the potential for growth is located.
• Labour mobility. Australian businesses should benefit from measures that make it easier for Australians to live and work in Singapore. Australian independent executives, intra-corporate transferees, contractual service suppliers and installers and servicers of machinery and equipment, together with their families, will have an improved ability to enter and stay longer in Singapore. In the increasingly global business environment, allowing freer movement of people between Australia and Singapore, and allowing businesses to manage relocation of their staff more efficiently, will promote more responsive trade and investment activity and sharing of talent between the two countries.
• Education. Australia already enjoys a strong relationship with Singapore in the education sector, with Australia being a popular destination for Singaporean students studying abroad.⁵ The Australian education sector is set to further benefit from mutual recognition in Singapore of Australian tertiary and professional qualifications, with priority in the fields of law, medicine, allied health, engineering and accounting. Measures are also proposed for increased cooperation in relation to Australian and Singapore universities with campuses in each other's country. In conjunction with the labour mobility initiatives discussed above, these education initiatives will further promote sharing of knowledge and expertise between Australia and Singapore. Australia's position as an exporter of education services is strengthened and this should give rise to further investment opportunities in ancillary education services, such as student accommodation.
• Defence. Australia's and Singapore's strategic defence ties will be further strengthened by a range of cooperation initiatives, including the joint development of military training facilities in Australia. This will enhance the access of Singapore’s armed forces to existing training facilities in Australia and is expected to generate A$2.25 billion of economic activity in Queensland for the construction of those facilities and related infrastructure.⁷

Comment

The Comprehensive Strategic Partnership represents a significant development in the bilateral relations between Australia and Singapore and provides the framework for the next generation of relations between the two countries.

The entry into the partnership follows in the footsteps of Australia's entry into free trade agreements with China, Korea and Japan, and the Trans-Pacific Partnership Agreement, in recent years.⁸ Together, these agreements provide enhanced opportunities for Australian businesses in Asia. In particular, Singapore's geographical proximity to Australia has seen Singapore become a hub for Australian businesses and a gateway for Australian businesses into the broader and dynamic markets in the region.

Australian and Singaporean businesses should look forward to utilising the measures under the Comprehensive Strategic Partnership in their contribution to regional growth in the years ahead.