Doing Business In Singapore: Competitive Factors And Entrepreneurial Challenges

Incorporating A Business In Singapore

Singapore is a dynamic investment destination for any aspiring business person due to its unique geographical position, easy company incorporation procedures, tax friendly policies, and robust business environment, amongst several other factors.

This multi-cultural cosmopolitan city is both an attractive junction of East and West and an ideal crossroad of international trade routes – making it the most competitive place in the Asian region and the most business-friendly city in the world.

Competitive Factors

Whether you are just setting up a company in Singapore or already heavily involved in any thriving sector, doing business in Singapore is the most feasible investment decision to make. Let’s take a look at some competitive factors to prove this.

  1. Globally Competitive Economy

When it comes to the overall efficiency of markets, Singapore ranks as the ‘best performer’ according to the Global Competitiveness Report 2015-2016. It also holds the top second spot second in the Global Competitiveness Index (GCI).

If you are just starting a company in Singapore, you will find assurance of long-term overall success as it is backed up by the study made by the Economist’s Intelligence Unit (EIU), due to its government’s strong support to foreign investments, which is considered as the biggest strength of the city-state.

  1. Efficient Tax System

According to International Enterprise Singapore (IE), its tax rates are one of the lowest in the world for individuals (maximum tax rate of 22%) and corporations (17%) alike.

Tax deductions are also available for new start-up companies. This means that during the first three consecutive Years of Assessment for individuals and businesses, there is a full exemption on the first $100,000 normal chargeable income while there is as much as 50% exemption on the next $200,000 of normal chargeable income.

Singapore’s simple and business friendly tax system also undergoes a steady downward revision to sustain business prosperity and economic growth. If there is a place where you won’t have to worry about paying double taxes, it’s Singapore.

  1. Strong Government Support

To make Singapore attractive for any type of business, its government ensures that they take a holistic and strategic approach when it comes to managing and stewarding its petrochemical, electronics, and clean energy sectors – considered as key pillars of its economy.

Its government also takes pride in prioritizing pro-business policy regardless of economic crisis or financial situations across the globe while actively practicing transparency and ensuring little bureaucracy.

Furthermore, there are different types of financing schemes, cash grants and tax incentives available for individuals venturing for the first time on to the entrepreneurial road. Even existing businesses can avail government-funded assistance for financing, access to markets as well as technology and innovation.

  1. Free Trade

Incorporating a Singapore entity is an ideal choice for anyone trying to avoid complicated tariff and non-tariff barriers but wanting greater market connectivity because the Lion City has an extensive network of free trade agreements (FTAs) in Asia such as the ASEAN Free Trade Area (AFTA), the EUSFTA (EU-Singapore), the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership, among other regional, bilateral, and multilateral agreements.

  1. Strategic Location

There is also ample opportunity to invest in Singapore for both local and foreign companies with a unique idea in any industry, which is made easier by the fact that the city-state is a transportation hub for sea and air cargo.

According to International Enterprise Singapore (IE), over 6,600 weekly flights go through Changi International Airport, bringing connectivity to 270 cities in 60 countries, while the city-state’s container ports are the busiest in the world.

Its strategic location has made it possible for 7,000 multinational corporations (MNCs) to favour Singapore as their regional headquarters.

Trade Performance

From a humble trading post during the British colonial days, Singapore arose as a nation of self-confidence, prosperity, and economic strength – a notable success story of the latter part of the 20th century. Between 1970 and 2005 alone, its Gross Domestic Product (GDP) is on a steady rise at an annual average rate of about 7.6%, thanks to its international trade and investment linkages, which has been proved to be the cornerstones of the economic success of the city state.

Because of Singapore’s great reliance on external markets and suppliers, it is a strong believer of economic openness, free market, and free trade. A large volume of Singapore’s merchandise exports are said to be involved in the extended concept of intermediary trade to Entrepôt trade, wherein a wide range of raw goods are exported and then refined within the city-state, only to be re-exported afterwards.

This can be evident in the oil refining and wafer fabrication industry as well as integrated circuits and information technology products – all of which are major source of revenue in Singapore economy.

Most in-demand Service sectors

The general economic situation reflects stability and continued progress as the government pursues its goals of improving its buildings and infrastructure from different business industries as well as aviation and maritime sectors while promoting the green environment.

Technological innovation as well as research & development (R&D) are viewed as essential drivers for economic growth in Singapore. Thus, any company looking for business opportunities here should focus on breakthrough ideas that can be commercialised in these sectors.

On the other hand, proponents and supporters of small and medium enterprises (SMEs) are not left behind. The Singaporean government also considers them as important driving forces for the economy. This is an encouragement for any start-up companies to focus on business schemes that can contribute to increasing productivity or be made into applicable solutions for day-to-day needs of general consumers.

However, competition is tough; strategic alliances with industry leaders as well as possession of cutting-edge technology can definitely help in moving any business idea into realization, viability in the target market, and long-term success. For example, there are revolutionary technologies and serious automation solutions already available in industries such as video gaming, food manufacturing, and water treatment sector.

Exclusive benefits for Singapore businesses

As a strong advocate of free trade, any Singapore-based or foreign exporters and investors can easily access privileges such as faster entry into markets, preferential access to certain sectors, investment and Intellectual Property (IP) protection, and tariff concessions.

Key benefits of Incorporating a company in Singapore:

  • No discriminatory regulations or preferential policies for both export and import goods
  • No pressure to purchase from local sources
  • No obligation to specify a percentage of output for export
  • No requirement for local equity ownership in the investment
  • No need for any technology transfer
  • No duty for equity reduction after a certain time period
  • No limit for as the source of necessary financing for business

Challenges for foreign companies to establish Singapore office

The main challenges to foreign companies who are seeking to register a new business in Singapore include the following:

  1. Time Difference

Managing a global workforce when team members live and work in a different time zone can be quite challenging. As a business entity, you must have strategies and communication tools in place to keep all your staff and employees on the same page, all pursuant of the main goal towards growth, development, and long-term success.

  1. Singaporean Culture

Chinese values as well as ethnicity difference is a strong social identifier in Singaporean culture. This creates a racial divide which leads to presumptions wherein people of certain countries or ethnic groups are viewed as the more business-savvy, profit-oriented, economically competitive individuals when it comes to doing and managing businesses.

Chinese influences resulted to a largely hierarchical culture, putting emphasis on defined roles between individuals (such as in the relationship of superiors and leaders to those subordinate to them) to ensure healthy human interactions. This natural inequality is believed to create more harmonious, stable relations within the workplace, and in society as a whole.

The concept of ‘face’ refers to a person’s dignity, honour, and reputation. People within the workforce are expected to act deliberately and with restraint to give them face, earn positive peer perception, and protect their self-worth.

  1. Very Open Economy

Singapore is a very strong supporter of the free market and free trade, resulting to limitless growth opportunities for any type of business entity venturing into existing and new markets. However, this can pose a threat to the very survival and long-term feasibility of SMEs as foreign entrants and global conglomerates choose to be involved in the same industries.

To propel their business forward and go toe to toe with larger companies, the government made initiatives to enable smaller-sized ventures to implement innovative technologies, upgrade skills, as well as invest in land and manpower.

  1. Asset Bubble

Asset bubble occurs when investors and capitalists inflate the demand and price of goods, properties, or assets due to a presumed estimation of future appreciation in the shortest time period. But as the market demand is exhausted or becomes stagnant, this would result to a sharp decrease of actual asset prices and a big surplus in asset supply.

Low Federal Reserve interest rates and widespread subprime lending are some causal factors that can trigger asset bubbles which can make any business market an unsafe environment for both local and foreign investors.

Thankfully, a series of macro-prudential measures and policies were implemented by the government since 2009 not only to ensure stability in the property market and to encourage financial investments in various types of businesses but also to reduce the systemic risk both in the nation’s real estate market and financial system as a whole.

  1. Cyber Attacks

The most feared risk to forming a new company in Singapore is the prevalence of cyber-attacks, according to the World Economic Forum’s Global Risks Report 2016. It makes the city-state vulnerable to this risk given its position as the forefront of technological innovations as well as a regional financial hub in Asia.

Company Incorporation made easy

Singapore is undoubtedly one of the world’s preferred international business destinations for foreign investors. If you need help on how to register a new business name or you want someone who can handle all the company incorporation procedures, you can count on Corporate Services Singapore to make it happen.

As a client, you can get customised and top notch services – from company incorporation process and completion of necessary support services up to your financial advisory and business expansion needs. Let Corporate Services Singapore assist you with its professionalism, expertise and reliability for all your company registration requirements.

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