In this comparative report, we look at the differences between doing business in Singapore and in Indonesia.
This report refers to data from the World Bank’s 2020 ‘Ease of Doing Business’ report and the World Economic Forum’s Global Competitiveness 2020, as well as Global Enabling Trade, reports. It measures five indicators, namely company incorporation, corporate tax rate, foreign investment friendliness, intellectual property protection and workforce.
Overview
According to the IE Singapore Insights on Indonesia’s Consumer Sector, rapid urbanization, rising income levels, favorable demographic patterns and changing lifestyle trends are reasons to invest in Indonesia’s consumer sector.
The report explained that Indonesia’s consumer sector will be worth some S$1.38 trillion by 2030 as Indonesia’s consuming class triples to 135 million, making it the world’s largest middle class after China and India. The share of private consumption is expected to rise from 56% in 2012 to 65% in 2030. Furthermore, while Jakarta continues to be a key hub, cities such as Surabaya, Bandung, and Medan are expected to see faster growth.
In spite of this potential, Singapore is currently a more suitable place to do and grow a business. This is because the country scores much higher on almost all parameters compared to Indonesia.
| World Bank’s Doing Business (DB) 2020 Singapore vs. Indonesia |
||
| Rank | ||
| Measure | Singapore | Indonesia |
| Overall ranking | 2 | 73 |
| Starting a business | 4 | 140 |
| Dealing with construction permits | 5 | 110 |
| Getting electricity | 19 | 233 |
| Registering property | 21 | 33 |
| Getting credit | 37 | 48 |
| Protecting investors | 3 | 37 |
| Paying taxes | 7 | 81 |
| Trading across borders | 47 | 116 |
| Enforcing contracts | 1 | 139 |
| Resolving insolvency | 27 | 38 |
Company Incorporation
According to World Bank’s ‘Doing Business’ report, Singapore is the easiest place to do business in the world. Indonesia was ranked at 73rd place.
In terms of starting a business, Singapore was ranked 4nd, while Indonesia was ranked 73rd. Starting a business in Singapore takes just 1 day with 3 procedures. On the other hand, starting a business in Indonesia requires 10 procedures and a period of about 48 days.
Getting a construction permit is also easier and faster in Singapore. According to the World Bank, it takes only 11 procedures over 26 days to obtain a construction permit in Singapore. In Indonesia, it takes 13 procedures over 158 days. As a result, Singapore ranks 5th while Indonesia ranks at the 110th position for this category.
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Corporate taxation
The marginal corporate tax rate in Indonesia is 25%, while it is capped at 17% in Singapore. According to the ‘Doing Business 2020’ report, Singapore was ranked 7th worldwide for its attractive tax rates and online tax filing procedures. Indonesia was instead ranked 81th for the same parameter.
The World Bank report also found that businesses in Indonesia make 52 tax payments a year and spend 259 hours a year filing, preparing and paying taxes. In contrast, Singapore businesses make five tax payments a year and spend 82 hours a year filing, preparing and paying taxes.
For more details on tax rates in Singapore, please visit our page on Singapore taxation.
Foreign investment friendliness
The Singapore government offers numerous incentives for foreign businesses to set the business in Singapore. Singapore supports an open trade policy and has few barriers to external trade transactions. The 2016 Global Enabling Trade report ranked Singapore at the top position due to its trade-friendly regulations and a business enabling environment. In comparison, Indonesia stood at the 65th place.
In addition, Singapore is moving forward with a greater focus on compliance and transparency. This is reflected in the higher financial reporting standards and compliance with FATCA and BASEL III. Altogether, these measures are expected to safeguard the interests of genuine investors and enable them to make longer-term investments in Singapore.
Intellectual property protection
Protection of Intellectual Property (IP) rights is an element that helps gain confidence in foreign investors. According to the World Economic Forum’s Global Competitiveness Report 2019, Singapore stands as second best in the world and first in Asia for IP protection.
In addition, the Political & Economic Risk Consultancy Report 2011 and the International Property Rights Index 2012 have ranked Singapore as the top country in Asia for intellectual property protection. The Global Competitiveness Index (GCI) ranks Indonesia at the 55th position.
| WEF’s Global Competitiveness Index 2019 Singapore vs. Indonesia |
||
| Rank | ||
| Measure | Singapore | Indonesia |
| Overall ranking | 2 | 50 |
| Basic Requirements (60%) | 1 | 45 |
| Institutions | 3 | 67 |
| Infrastructure | 2 | 61 |
| Macroeconomic environment | 18 | 26 |
| Health and primary education | 2 | 72 |
| Efficiency Enhancers (35%) | 2 | 52 |
| Higher education and training | 2 | 64 |
| Goods market efficiency | 1 | 50 |
| Labor market efficiency | 1 | 103 |
| Financial market development | 2 | 60 |
| Technological readiness | 7 | 75 |
| Market size | 34 | 15 |
| Innovation and sophistication factors (5%) | 13 | 33 |
| Business sophistication | 7 | 37 |
| Innovation | 9 | 33 |
Workforce
In spite of its increasingly stricter labour regulations, Singapore offers a highly educated and skilled workforce and has overall good labor market efficiency, scoring high in 9 out of 10 indicators. According to the GCI, Singapore is at the top position for ‘Labour Market Efficiency’. GCI ranked Indonesia at 103rd for the same measure. The country ranked fairly well in 4 out of 10 indicators, but did not do as well in 3 other indicators.
In a Nutshell
The above analysis confirms that Indonesia with its growing middle class, which is now the third-largest in the world, also provides other advantages such as favorable demographic patterns, rapid urbanisation, rising disposable income and educated workforce. In spite of all this, Singapore still remains a better place to invest due to ease of company incorporation, low corporate tax rates, foreign investment friendliness, intellectual property protection, and corruption-free bureaucracy.
Read More » Doing Business in Indonesia or Singapore
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