According to the World Bank, Singapore is ranked in the top three out of one hundred and ninety in Ease of Doing Business, Overall Rank of group, and Starting a Businesses. Moreover, in the US News Global report Singapore was ranked second in the movers sub category which represents the country’s growth in terms of an individual’s purchasing parity corresponds with the gross domestic product. In 2014, the Economist Intelligence Unit ranked Singapore, regionally and globally, as the most attractive investment location. But how did Singapore become one of the world’s leaders in business and entrepreneurship in just 54 years since it became independent from Malaysia?
The government strongly supports businesses and creates an environment where they can thrive. These business includes foreign, local, developed or start up businesses. They foster this environment with their highly appealing tax framework, their many trade agreements, and their programs that help connect companies to other local and international companies and create a sense of community.
The Singapore tax framework has denoted the country to the status of a “tax haven,” joining the ranks of countries such as Luxembourg, Switzerland and the Netherlands. Generally, the criteria for a tax haven is no or nominal tax on relevant income, a lack of effective exchange of information, a lack of transparency and no substantial activities. In Singapore specifically, the tax framework for businesses when combined with its central location in Southeast Asia makes it a desirable location for companies to establish headquarters or to make their business start. Start up businesses in particular can take advantage of Singapore tax law stating that there is a zero tax exemption on $74,000 US dollars worth of income in the first three years of a company’s running. At the end of this three year period start up businesses are eligible for a partial tax exemption if the income is around $222,000 US dollars and the exemption translates to an 8.5% corporate tax rate. The government doesn’t just support burgeoning businesses but also companies that are thriving. Companies earning more than $20.7 million US dollars can earn a total tax exemption through the Productivity and Innovation Credit.
Singapore has an open economy where people and businesses can trade goods and services with an international community with ease and few restrictions. Singapore’s open economy is supported by the country’s s myriad of Free trade Agreements. It has established over 23 implemented agreements with countries all over the world. With these agreements it allows Singapore simplified trade procedures, advance rulings on obtaining advanced information on the classification origin and valuation of their goods, expeditious release of goods from customs, fewer regulatory barriers for goods and service exports, facilitation for the 21st century economy meaning your intellectual property rights will be better protected and an avenue for recourse meaning if there is an investment related spite with your host government you can seek recourse through international arbitration. Here is a link to the Free Trade Agreement booklet published by Singapore’s Ministry of Trade and Industry.
The competition for for startup businesses is difficult and that is not just limited to Singapore but all over the world. Many businesses fail within the first few months or years but Singapore’s government has programs in place that not only support local businessmen but also attract foreign entrepreneurs. These programs are not just limited to financial support like the the tax exemptions discussed. ACE startups is a program administered by the government agency SPRING Singapore that supports first time entrepreneurs. They not only provide financial support but also mentorship, networking contacts and learning programs. Many of the programs focus on technology and innovation development but there is also plan in Singapore’s National Research Foundation called RIE2020 national R&D plan. It focuses on advancing the potential in health and biomedical sciences, advanced manufacturing and engineering, urban solutions and sustainability, and services and digital economy. It pledges 19 billion Singapore dollars from 2016-2020. There is also a program called The Global Innovation Alliance which facilitates and encourages information exchange and the co-development of ideas. This alliance creates a network that allows those based in Singapore to connect with partners and new businesses. The alliance’s hubs are in ‘innovation centers’ around the world, such as Bangkok, Tokyo, San Francisco and others. Singapore’s central location alone is not enough to to ensure international cooperation regarding idea exchange and project collaboration. Establishing a network and actively encouraging the use of the network from the government takes full advantage of Singapore’s location in the both the public and private sector.