Doing Business in Australia and Singapore

SingaporeCompanyIncorporation.sg, a portal for company formation services, has today published a comparative report on doing business in Singapore and Australia. The report aims to help companies, including those based in Australia, determine which country offers a better business ecosystem for growth.

The report referred to data from World Bank’s 2014 ‘Ease of Doing Business’ report and World Economic Forum’s Global Competitiveness 2013 – 2014 as well as 2014 Global Enabling Trade reports. It measures five indicators, namely workforce, intellectual property protection, foreign investment friendliness, corporate tax rate, and company incorporation. The findings are outlined below.

Foreign investment friendliness

In order to encourage investors to inject capital into businesses, countries must have regulations to protect them. In the Doing Business report, the Strength of Investor Protection Index measures the transparency of transactions, the shareholders’ ability to sue officers and directors for misconduct and liability for self-dealing. Singapore scored 9.3 out of 10 while Australia scored 5.7, partly due to a low score in the director liability sub-index. This places Singapore in the 2nd position and Australia 68th in the category of protecting investors.

In addition, cross-border investments are supported by sound trade policies and inter-regional trade agreements. According to the 2014 Global Enabling Trade report, Singapore was ranked the top position due to its high scores in terms of border administration, infrastructure, operating environment and market accessibility. Australia was ranked at the 23rd place.

Furthermore, Singapore is placing greater focus on higher standards of financial reporting and investor protection to avoid tax evasion and financial crimes. An emphasis on compliance with regulations like FATCA and BASEL III will continue to ensure wealth protection for genuine investors.

Intellectual property protection

Other than foreign investment friendliness, protection of Intellectual Property (IP) rights helps boost investor confidence. According to the Global Competitiveness Report (GCR), Singapore stands second in the world and first in Asia for having the best IP protection. The Political & Economic Risk Consultancy Report 2011 and the International Property Rights Index 2012 have formerly ranked Singapore top in Asia for IP protection. Australia came in at the 21st position in the GCR.

In Singapore, the costs related to the acquisition and in-licensing of IP rights are eligible for tax incentives under the PIC (Productivity and Innovation Credit) scheme. Businesses can get 400% corporate tax rebates or a cash payout worth 60% of the costs when they do so in Singapore.

Workforce

Restrictive labor regulations were cited as the most problematic factor for doing business in both Singapore and Australia in the GCR. However, it ranked Singapore at the top position for ‘Labour Market Efficiency’. The category saw Singapore scoring very well in 9 out of 10 indicators.

The GCR ranked Australia 54th for labour market efficiency. It scored well for 2 indicators but not as well for 4 areas namely, cooperation in labor-employer relations, flexibility of wage determination, hiring and firing practices and pay & productivity.

However, Australia superceded Singapore in terms of the level of women’s participation in the workforce. For this indicator, Australia was ranked 60th while Singapore was ranked 84th.

Challenges and opportunities of doing business in Australia

According to an article in Australia’s Business Spectator this week, titled “Is Australia now the most boring place to do business,” 42.2% of the country’s 770,000 businesses are engaging in some form of innovative activity.

However, the proportion of firms innovating has stagnated when compared to the rate of business growth. The report added that the OECD saw Australia as having ingredients for innovation namely strong capital market and market competition, a vibrant research culture and workforce. However, it lacked seed capital for start-ups and collaboration between key players.

This is in addition to the other factors cited as most problematic for doing business in Australia in the GCR. They include inefficient government bureaucracy, tax rates and tax regulations.

Commenting further, Ms. Cheryl Lee, Operations Manager at SingaporeCompanyIncorporation.sg said, “Both Singapore and Australia are among the best places in the world to do business. However, there are some challenges to doing business from Australia, partly due to these issues and its geographic isolation. Singapore is strategically located in the heart of South East Asia and is in close proximity to other business hubs in Asia such as Kuala Lumpur, Shanghai, Hong Kong, Taipei and Manila by a 6 hour flight radius.”

“Furthermore, as Singapore increasingly focuses on innovation, R&D and higher value added industries to transform its economy, tech startups are welcome,” affirmed Ms. Lee.

To see the full report, please visit https://www.singaporecompanyincorporation.sg/reports/doing-business-in-singapore-vs-australia/

Related Reading » Doing Business in Australia or Singapore

Suggested Readings