Singapore - A Pro -Business Environment

Singapore has an excellent pro-business infrastructure which is favoured by many business corporations worldwide. The Swiss-based World Economic Forum (WEF) has ranked Singapore the most competitive country in the world in its new global Competitiveness Index of 49 countries. The WEF Competitiveness Index measures the prospects for economic growth over the next five to ten years, based on factors like government, finance, infrastructure, technology, labour and management.

The Republic is also rated the second most profitable country for business to invest in - now, and for the next five years -after Switzerland, according to US-based Business Environment Risk Intelligence (BERI) Services. The ranking is based on ratings in key factors like political and operations risk (which assesses the general business environment) as well as remittance and repatriation (which assesses the ease with which private foreign companies can transfer out profits and capital )

The Singapore Investment Climate Report August 1996 in particular noted that the Republic’s investment policies are “transparent, and the bureaucracy is not oppressive.” It also pointed out that Singapore is well-known for its clean, corruption-free government, and there are no taxes on capital gains or restrictions on foreign ownership of businesses.

Singapore’s appeal as a global business centre is also evident in the increasing number of international trading companies setting up their regional base in the Republic. There are more than 100 international trading companies under the Approved Oil Trader and Approved International Trader schemes administered by the Singapore Trade Development Board (TDB). These schemes have encouraged specialist traders and international oil traders to use Singapore as their regional headquarters by providing tax breaks and assistance in developing their business.

In addition, more than 5,000 multinational corporations (MNCs) have set up their operations here. MNCs as well as local companies have found that Singapore’s efficient infrastructure and strategic location effectively cater to their operational needs.

Economic Growth

The Singapore economy grew by 7 per cent in the second quarter of 1996. Employment in the Singapore economy remained strong with 26,100 jobs created in the same period. Growth for the first half of the year came to 8.9 per cent.

In the second quarter of 1996, the manufacturing sector, affected by a slowdown in the global electronics industry, grew by 6.3 per cent, down from 14 per cent a quarter ago. The financial and business services sector expanded at 6.5 per cent, benefiting from demand for headquarters and information technology services, as well commercial and office space. The transport and communications sector registered a growth of 8.4 per cent, as the sector continued to experience strong demand for air travel and communications services. The commerce sector also expanded at 5.7 per cent, while the construction sector grew strongly by 14 per cent in the quarter, boosted by a strong pipeline of projects in the last two years.

Investment commitments in the manufacturing sector remained strong, reaching a total of S$2.5 billion, most of which were in the electronics and chemicals clusters. Foreign investors accounted for almost 75 per cent of these commitments. The US took the lead with a large demand investments of S$808 million in the electronics, industrial chemicals and petroleum industries. Japanese investments amounted to S$662 million, while investments from Europe totalled S$359 million.

In the area of business services, foreign investors also accounted for more than two thirds of the commitments in the quarter, with the bulk coming from Europe. These were in projects relating to headquarters activities, communication and information services.

As Singapore moves into the 21st century, its open economy is likely to become more exposed to global changes in international trade.

To meet these challenges, the government will focus its efforts on creating wealth and grooming talent through education and training. At the same time, sound population and immigration polices will be formulated.

In addition, Singapore will seek to maintain a pro-business environment by keeping costs competitive, increasing productivity yields, deepening the technology base, and promoting regionalisation.

Business/Company Registration

Singapore’s Business Registration Act requires all businesses to be registered on-line with the Accounting and Corporate Regulatory Authority (ACRA). The registration process normally takes one working day.

The incorporation of a company is normally takes 1 to 2 working days.

Upon approval, the company name will be reserved by ACRA for two months.  The applicant will then prepare the incorporation papers and lodge them within the reservation period. Similar procedures apply to foreign companies which may either set up subsidiaries or register branch offices in Singapore. When the foreign company’s name is approved, the applicant must then lodge the relevant documents with ACRA. These include a certified copy of the Certificate of Incorporation of the company, a copy of the Memorandum and Articles of Association, and particulars of all directors of the company and at the end of which a Certificate of Registration of Foreign Company is issued.

Branches of foreign companies registered with ACRA must have two agents in Singapore. Both must be Singaporeans, permanent residents or employment pass holders. In addition, applications to station expatriate staff in Singapore are to be made separately with the Ministry of Manpower. Applicants are advised to seek professional help in preparing and submitting the documents.

Annual Requirements For Corporations

Under the Companies Act, every company must hold an annual general meeting (AGM) every calendar year, during which audited/unaudited financial statements (not more than six months’ old) and the directors’ report are presented.

The first AGM must be held within 18 months of a company’s incorporation. After that, they must be held once every calendar year, and not more than 15 months apart.

Within a month of the AGM, the company directors must lodge with ACRA an annual return and if required with the Financial Statements. Failure to do so is an offence.

Minimal Regulations And Licences

Business regulations in Singapore are established to ensure that only legitimate businesses are set up. This helps protect the interest of the general public when they come into contact with certain business operations. Hence, some businesses need to contain the relevant licences before they can start operating.

Examples of such businesses include banks, financial houses, insurance companies, stockbroking firms, commodities trading companies, and money changers. Manufacturers of cigars, cigarettes, matches, and firecrackers also require a special licence to operate. Other companies like electrical work contractors, housing developers, shipping firms with foreign interests, broadcasting newspapers and printing companies, travel agents, massage and health centres, hotels, restaurants and entertainment companies also have to apply for relevant operating licences.

Tax System

The Inland Revenue Authority of Singapore is responsible for assessing, collecting, and enforcing payment of taxes, duties and levies under the various revenue acts.

Income tax is levied on any person who derives incomes in Singapore or receives income from outside Singapore.

The corporate tax rate in Singapore has been progressively reduced and stands at 20 per cent. Resident individuals, including foreigners who are either physically present or employed in Singapore for 183 days or more in a calendar year, are taxed on a graduating scale ranging from 3.75 per cent to 21 per cent. Non -resident employees are taxed at a flat rate of 15% or resident rates, whichever gives rise to higher tax. However, non-resident employees(except director and entertainers) who work in Singapore for not more than 60 days in a year are exempt from tax.

Capital allowances are available to companies for their industrial buildings, plant, machinery and the expenditure incurred in acquiring approved know-how or patent rights.

Singapore has double taxation agreements with 34 countries providing for the avoidance of double taxation on a bilateral basis. Under these agreements, unilateral tax credit provisions are available for income received in and from outside Singapore, including service income from specified territories, dividends employment income and branch profits.

Investment Incentives

Several tax incentives are available to encourage foreign companies to make Singapore their regional manufacturing, servicing or financial base. These incentives are also offered to industries which require skilled labour, new and sophisticated technology and equipment.

Subject to a company satisfying specific criteria, tax breaks are also available to a range of businesses . These include the financial services industry, venture capital companies incorporated and operating in Singapore.

Employment And Labour Laws

Democratic and responsible trade unionism is promoted in Singapore. This helps maintain harmonious industrial relations and create a conducive working environment that greatly encourages investments and industrial growth for the country.

The Employment Act stipulates terms and conditions of employment as well as the rights and obligations of employers and employees. Trade disputes in unionised establishment, which cannot be resolved through conciliation, can be referred to the Industrial Arbitration Court for resolution.

Where health and safety of workers are concerned, compensation is provided under the Workmen’s Compensation Act for workers who are hurt in accidents or contract a disease as a result of their work. Such incidents are reportable under the Act. Furthermore, serious and fatal accidents in factories must be reported in accordance with the Factories Act. The Ministry of labour has inspectors who carry out regular factory inspections to ensure that adequate safety measures are adequately taken to protect employees.

The Central Provident Fund (CPF), a comprehensive social security scheme, provides for old age, housing and medical needs of workers. Both employers and employees are required to contribute to CPF. The current contribution rates, as a percentage of salary, are 20 per cent for both employers and employees. Since August 1, 1995, new foreign employees and their employers are not required to make CPF contributions.

In line with Singapore’s emphasis on skills training, employers are also required to contribute to the Skills Development Fund (SDF), another employee related fund which is administered by the Singapore Productivity and Standards Board.

The government has a selective policy regarding the employment of foreign nationals, welcoming suitably qualified executives and technically skilled workers. To work in Singapore, they have to apply for an employment pass issued by the Singapore Ministry of Manpower. 

International Arbitration

Supported by the TDB and the Economic Development Board (EDB), the Singapore International Arbitration Centre (SIAC) provides facilities and services for the conduct of conciliation and arbitration of international and domestic commercial disputes.

The chairman of the SIAC has the authority to appoint arbitrators and conciliators when the parties in dispute or the parties fail to do so. The centre offers hearing and meeting rooms, administrative and transcription services, audio and video recording, and other amenities for these proceedings

Exchange Controls

Foreign exchange controls in Singapore reflect the government’s pro-business stance. With full liberalization in mid-1978, capital and profits can be brought in and repatriated freely. This is a prime incentive for foreign corporations to put their investment dollars in Singapore.

Trade Documentations

Singapore is a free trade economy, where most goods can be imported without a licence or quota restrictions, although an import permit must be obtained. Certain categories of goods, like firearms, firecrackers, lighters in the shape of guns, toy currency notes and coins, are not allowed entry. A 3 per cent Goods and Services Tax (GST) is also levied on all imports.

In terms of trade documentation, Singapore has a highly efficient computerized system in Trade Net, the world’s first nation wide electronic data interchange (EDI). Implemented by TDB, Trade Net links the trading community with relevant government authorities and operates virtually round-the-clock, seven days a week. About 20 controlling agencies involved in trade documentation are accessible through Trade Net.

Trade Net is being extended by links with international EDI networks. This will enable Singapore traders to be part of the global trading network and to exchange business documents and information electronically worldwide.

The TDB is also developing a total electronic trade documentation system, Trade Net Plus, which will computerize the entire chain of trade procedures including financial and shipping documentation. In this way, the TDB can further enhance its efficiency and service standards for the business community.

Protection of Intellectual Property

Singapore's Copyright laws protect the original literary, dramatic, musical and artistic works of Singapore residents and citizens, and those belonging to nationals of WTO countries. Protection is given, for a limited period, against copying, reproducing, publishing, broadcasting, adaptation, and public performances of such works.

Any disputes between copyright owners and users of copyright materials are dealt with expeditiously by the courts. In some instances, disputes may be referred to the Copyright Tribunal, comprising a president and three members appointed by the Minister for Law.

Protection for patents, trademarks, industrial designs and trade secrets are also available.

A Global Business Hub

Singapore’s world-class transport and telecommunication links, its intensive use of information technology, low political risk and pro-business environment helps the Republic to shine as an international business hub. In 1995, US-based Fortune magazine ranked Singapore as the number one location for doing business in the world.

Singapore has also consistently come out tops international competitiveness rankings, based on a wide range of criteria covering economic strength, infrastructure and government, to management, finance and the quality of its workforce.

Strategically located at the cross-roads of major trade and shipping routes in Asia, Singapore is also well-positioned to tap the growth opportunities prevalent in the booming regional markets. Given these advantages, Singapore has been and continues to be an ideal choice for companies wishing to set up base in Asia.