It seems counterintuitive that a country lacking natural resources and having a small domestic output can actually be ranked as one of the strongest economies in the world, but Singapore continues to maintain a zero foreign debt ratio and a positive surplus despite these two drawbacks.
How does it do it?
For one thing, Singapore’s location makes it an ideal Asian hub for exporting products, which is what drives the major portion of its economy. Secondly, the country’s pro-business laws and regulations encourage both domestic and foreign companies to set up shop there.
In 2017, Singapore was ranked by the Heritage Foundation’s Index of Economic Freedom as one of the globe’s most open economies and received a second place global ranking by the World Bank for maintaining a pro-business structure.
The following infographic details the current state of businesses in Singapore and gives some insight as to why businesses continue to thrive in the country.
As can be seen above, various forms of businesses operate within the country. There are over 300,000 businesses currently operating in Singapore, many of which are foreign companies – largely due to the country’s business-friendly laws and regulations. Out of all these companies, both foreign and domestic, the majority of them are sole proprietorships (135,024) and Limited Liability Partnerships (17,084).
Multiple Types of Businesses Formed (2017)
Last year, Singapore continued to increase its business growth and added over 37,000 companies in five different types of business formations, including sole-proprietorships & partnerships, limited liability partnerships, limited partnerships, and public accounting firms.
While most of the businesses formed last year in Singapore were mostly sole-proprietorships & partnerships, entrepreneurs inside and outside of the country continue to prefer to register their businesses as a private limited company whenever possible, as it can then operate as its own legal entity, continue in the event of the untimely death of a major member, produce a better image for the company, receive more tax benefits, and obtain easier transfer of ownership when needed.
Cessation of Businesses by Industry (2017)
While Singapore’s economy continued to thrive over the last year, not all businesses followed suit. Although many companies within the country’s various industries did continue to improve, almost 50,000 ceased to exist last year. Wholesale trade, transportation & storage, and scientific & technical activities were the leading industries amongst the fourteen in which businesses failed during 2017.
While the number of ceased businesses does not give an accurate overview of Singapore’s economy or business environment over the last year, it does attest once again to Singapore’s business-friendly laws, which make it easy for businesses to either liquidate or “strike off” their company and assets.
This year (2018), it so far looks as though Singapore will match its increase in businesses operating within the country with its bankruptcy filings. The latest statistics provided by Trading Economics showed that around 149 companies filed for bankruptcy between June and August 2018.
Profit Before Tax (Industry)
Singapore’s fixed corporate tax (17%) is the third lowest in the world and is one of the many reasons many foreign businesses choose to do business in the country. This rate applies both to profits that derive from Singapore itself, profits earned in another country that are then returned to Singapore.
In 2017, almost all businesses operating in Singapore recorded a before-tax profit, with the exception of transportation & storage. The three industries with the highest before-tax profits were financials & insurance, manufacturing, and wholesale & trade. Since the corporate income tax in Singapore is so low, most of the businesses operating in the fourteen major industries ultimately recorded after-tax profits as well.
Advertising & Entertainment Expenses (Industry)
Mostly known for its wholesale trade exports due to its ideal seaport location, Singapore also has a booming entertainment industry that is expected to grow by almost 5% annually over the next 3 years. This is not only good for businesses operating in the entertainment, accommodation, and service sectors, but also all industries that have to wine and dine potential clients, customers, and partners.
Last year (2017) saw some pretty impressive numbers from businesses operating in Singapore when it came to advertising and entertainment. As might be expected, accommodation services ranked relatively high, but surprisingly information & communication services lead all industries with over 3% of their expenditures going to advertising & entertainment costs. Business services also ranked quite high with a 2.68% expenditure, while the lowest was wholesale trade who only spent slightly above 0.3% for advertising and entertainment. With digital marketing costs in Singapore being much lower than traditional advertising mediums, businesses have been able to keep advertising expenses down in recent years.
From the above statistics, it is quite obvious that businesses operating in nearly every industry within Singapore are thriving and should continue to do so as long as the country continues to maintain its business-friendly environment and enforce a very low post-profit corporate tax rate.
As long as businesses operating within the country continue to do well, Singapore’s economy should also continue to improve and help the country maintain its status of having one of the most stable economies in the world.
Ice Cube Marketing is a digital marketing agency in Singapore that helps SMEs grow using digital channels