Why It Matters

Risky business for S'pore Inc

The Brazilian predicament that Keppel Corp's oil-rig unit finds itself in is a stark reminder of the challenges Singapore companies sometimes face when doing business overseas. Despite the best-laid plans and intentions, companies can get mired in volatile local politics - as unit Keppel Fels Brasil has.

The oil-rig builder said last week that it may face an investigation into deals with Brazilian state-run oil company Petrobras and its subsidiary, Sete Brasil. Petrobras is in the midst of a massive probe in the wake of a procurement corruption scandal that is partly behind moves to impeach Brazilian President Dilma Rousseff. Sembcorp Marine's Jurong Shipyard is also believed to be another Singapore company facing investigation.

As a country with a small market but world-class companies, Singapore has, since the 1990s, encouraged its firms to venture abroad. Not only would they reap greater profits this way, but they would also spread the Singapore brand far and wide.

Keppel is at the forefront of this movement, with a footprint in 30 countries across the globe, from Australia to South America. No doubt a key factor that has helped it to grow so successfully in so many economies over the years is learning how to adapt to different markets and playing by local rules.

But it is not always easy to get things done. Quite often, domestic expertise is needed.

In the case of Keppel Fels Brasil, it works with local agent Eagle do Brasil, which also services other reputable multinational companies.

Mr Zwi Skornicki, an employee of Eagle, had been earlier accused of paying off Petrobras officials by Brazilian news magazine Veja. In response, the Keppel unit said its agreement with Eagle and Mr Skornicki categorically prohibits them from making any improper payments.

While it remains important for Singapore Inc to spread its wings abroad, this incident is a salutary reminder of the perils that can lie ahead - and the need for companies to stay vigilant.

A version of this article appeared in the print edition of The Straits Times on October 26, 2015, with the headline 'Risky business for S'pore Inc'. Print Edition | Subscribe