The two most important factors that must be considered when forming a business are its legal business structure and business jurisdiction. In today’s business environment, location can affect a business’s efficiency, effectiveness and sustainability.
Given that entrepreneurship is largely associated with the US, many businessmen have a perception that it is the most suitable country for establishing and operating a successful business. But in today’s competitive business environment, the advantages that once existed for forming a business in the US are less significant than in previous years. To be competitive, countries such as Singapore that have created business-friendly policies offer much better opportunities for entrepreneurs.
Singapore’s emergence and dominance as a favorable business location are further enhanced by its exceptional performance in recent business surveys and economic indicators. The results provided by a comparative analysis of international rankings illustrate the significant differences in doing business in Singapore and the US.
- Singapore receiving the #2nd position in the World Bank’s ‘2020 Ease of Doing Business Report’ signifies that it has the most productive regulatory environment for doing business among 190 economies worldwide. The US ranked 6th, pointing out that higher challenges are expected when doing business in the country. For example, company incorporation in Singapore requires just three procedures and can be completed within 24 hours. On the other hand, company incorporation in the US involves six procedures over six days. The most glaring differences were seen in the areas of taxes and trading across borders. Singapore’s rank is #7 for paying taxes while the US’s rank is #25. Singapore was rated as #1 for ease of enforcing contracts while the US was ranked #21.
- The highly reputable Forbes magazine ranked Singapore #8 in its ‘2018 Best Countries to Do Business’ list, but the US came in ranked as #17. Singapore led the US in most areas including trading without many restrictions, monetary policies, property rights, advanced technology, red tape interference, the protection of investors, the least amount of corruption, and not having to deal with frustrating tax burdens.
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- The US has a reputation for having one of the harshest tax systems in the world, presenting difficulties for business start-ups. In sharp contrast, Singapore’s tax system and favorable tax rates encourage the spirit of business development and entrepreneurship.
- Forbes’ ‘2018 Tax Misery & Reform Index’ ranked Singapore #11 in the world, demonstrating its low tax burden. The US was ranked #22.
- The widening gap with regards to the tax environments of both countries is also highlighted in Forbes’ ‘2018 Best Countries for Business’ list where Singapore’s tax burden was ranked highly at #4 while the US’ tax burden was ranked at a low #42.
- The World Economic Forum’s (WEF) ‘2018 Global Competitiveness Report’ ranked Singapore as #10 worldwide for its total tax rate while the US was ranked significantly lower at #95.
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Intellectual Property Protection
- Singapore has positioned itself as the one-stop center for businesses to manage their intellectual property assets due to its strong intellectual property protection system. Forbes magazine ranked Singapore #7 for property rights in its ‘2018 Best Countries for Business’ list while the US was far behind in the fifteenth spot.
- The WEF’s ‘2019 Global Competitiveness Report’ ranked Singapore’s intellectual property protection system as #2 in the world while US’s intellectual property protection system lagged behind at #13.
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Competitiveness on a Global Scale
- Singapore’s economy was ranked as the most competitive in the world by the WEF in its ‘2019 Global Competitiveness Report’. Singapore’s educational institutions were ranked as the world’s best and the country also received top recognition for its lack of corruption and government efficiency. Singapore was recognized as second and first respectively, for the efficiency of its goods and labor markets, second for its financial market performance, while its infrastructure is ranked as the best in the world. The US was only one step behind Singapore, ranking #2 for overall competitiveness. Factors that weakened the US’s position were the wasteful government spending, goods and market inefficiency and technology preparation.
- The Heritage Foundation’s ‘2020 Index of Economic Freedom’ ranked Singapore in the first spot, ahead of the US, which was given the 17th rank. Singapore was ahead of the US in almost all areas including the ease of ability to start, operate and close a business; the ease of ability to trade across borders; the staunch protection of property rights and freedom from corruption. Taxation and government spending were two areas where the US ranked considerably poorly as compared to Singapore. Singapore’s top corporate income tax of 17% significantly lowers the US’s top corporate tax rate of 35%. Government spending contributed to 10.8% of Singapore’s GDP in 2017, while in the US it accounted for 36% of its GDP.
- Singapore claimed the top position in the IMD’s ‘2020 World Competitiveness Yearbook’ claiming the position as the world’s most competitive economy. US dipped to the 10th rank in 2020 from being 1st in 2018.
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Ease of Trade
- The WEF’s ‘Global Enabling Trade Report 2016’ ranks Singapore #1 for ease of trade while the US was ranked #22. Singapore’s open trade policy provides very few restrictions for traders. The country’s strengths are its simple tariff structure, exceptional border administration, high quality of transport infrastructure and superior customs services.
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- The ‘2019 Global Innovation Index’ released by INSEAD and the Confederation of Indian Industry identified Singapore as the world’s eighth most innovative economy while the US is at 3rd place. Singapore’s strengths that provide for its ability to succeed in innovation were its free-market fundamentals and corrupt-free environment. The US relinquished its previously held #1 position due to its political and regulatory environment, technological infrastructure and human capital.
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- Singapore’s efficient government enhances its attractiveness as an investment destination. According to the WEF, Singapore has the highest public trust in politicians, least burden of government regulation, and highest transparency of government policymaking. The US ranking lagged far behind at #54, #49, and #41 on the same indicators.
- Singapore’s score in Transparency International’s ‘2019 Corruption Perceptions Index’ was #4 while the US’ score was #23.
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- Singapore is reported to have topped BERI’s ‘Labor Force Evaluation Measure’ for 31 years, illustrating that its human capital is the world’s best. The US is ranked as the second best in the world in this year’s survey.
- According to the WEF, Singapore is reported to have the 2nd best labor-employer relations and the most productive workforce in the world. The US ranked #33 and #6 on both these parameters.
- According to the IMD’s ‘World Competitiveness Yearbook 2017’, Singapore ranks #2 for favorable business labor regulations while the US ranked #12.
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Quality of Life
- In recent times, Singapore has topped several polls measuring the quality of life, positioning itself as Asia’s top destination for expats.
- Singapore is the ‘Best Place to Live’ for Asian expats according to ECA International’s ‘2019 Location Ratings System’.
- Gallup’s ‘2016 Potential Net Migration Index’ identified the city-state as the most attractive country for immigrants.
- The ‘2018 Quality of Living Survey’ by Mercer Human Resource Consulting regarded Singapore as providing ‘The best Quality of Life in Asia.’
- According to the ‘2018 IMD World Competitiveness Yearbook’, foreign talent ranked Singapore as the world’s 3rd best country to work in.
- HSBC’s ‘Expat Explorer Survey 2018‘ placed Singapore in the 1nd spot and downgraded the US to the 23rd position.
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At a glance Country Rankings: Singapore vs. the United States
|Year||Category||Singapore’s Rank||US’ Rank||Source|
|2020||World’s Freest Economy||1||13||Heritage Foundation’s Index of Economic Freedom|
|2020||World’s Most Competitive Economy||1||10||IMD, World Competitiveness Yearbook|
|2020||Ease of Doing Business||2||6||World Bank, Ease of Doing Business Report|
|2020||Paying Taxes||7||25||PwC, Paying Taxes Report 2020|
|2019||Most Competitive Economy in the World||1||2||World Economic Forum, Global Competitiveness Report|
|2019||Intellectual Property Protection System||2||13||World Economic Forum, Global Competitiveness Report|
|2018||World’s Most Competitive Economy||3||1||IMD, World Competitiveness Yearbook|
|2016||Country Most Open to Trade||1||22||World Economic Forum, Global Enabling Trade Report|
|2018||World’s Most Innovative Economy||5||6||INSEAD and the Confederation of Indian Industry’s Global Innovation Index|
|2018||World’s Most Economically Globalized Country||24||25||KOF Index of Globalization|
|2018||World’s Best Labor Force||1||2||BERI’s Labor Force Evaluation Measure|
|2018||Country with Lowest Tax Misery||123||105||Forbes Tax Misery and Reform Index|
The information provided by the comparative analysis above indicates that Singapore has a better business environment for both large multi-national companies and small start-ups in comparison to the US.
Moving forward, Singapore is prepared to introduce more initiatives that will continue its dominance as a preferred location to do business. The country is more than willing to invest heavily in the continued success of its business infrastructure.
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Eric comes from banking background. He provides consultancy to local and foreign entities on the ideal market-entry strategies for setting up or expanding operations in Southeast Asia.
Eric also provides advisory to fund managers and family offices on structuring as well as applicable tax incentives. He has also set up many VCC structures for licensed fund managers.