World Bank Report 2007: Singapore is the easiest place to start a business!

Of course, the IMF/World Bank meeting is putting Singapore in the spotlight, for both good and bad reasons. Recently, we reported about Singapore being the 2nd easiest place to start a business. That was last year’s report. We are now formally promoted to the 1st for ease in starting a business. You can read this in the World Bank’s report “Doing Business in 2007″. Of course, one should dissect this report with some caution and skeptism. Here is what we are going to do in this short commentary.

Reading the report carefully, to establish the criteria whether a country is conducive for starting a business, they refer to the following list of factors used by everyday business and we provide some reasons to why Singapore ranked first:

1. Starting a business: The government of Singapore provide guides to how to start a business in the Enterprise One website. You need S$50 to complete the registration of a name for the company.
2. Dealing with licenses: We have a strict legal system which favours businesses. Even though Asia is known for rampant piracy, Singapore is relatively strong in enforcing licences, patents and other intellectual related property.
3. Employing workers: Low wages attract many people to set up companies in Singapore. Of course, where else can you find a place where you are allowed to pay cheaper wages to foreign workers and a government which does not adopt any form of protectionism to control the wages of the local workers. If you move to the high end or what we call “talent”, you can hire a professional (scientists and lawyers) for three quarter of the same price found in US and UK.
4. Registering property: That is relatively easy if you are planning to build skyscrappers. Most land in Singapore not permanently leased. Of course, the landscape in Singapore is constantly changing. Every year, if you are out of Singapore and you come back at the end of the year, you will notice that buildings just sprout out from nowhere.
5. Getting credit: If you have a middle-sized company with moderate number of workers and strong client base, finding money from investors is relatively easy. For Singapore, it tend not to favour startups and seed stage companies. The rationale is simple. It is culture. Most investors in Singapore are relatively cautious and risk-adverse and will not put in any money unless the company has reached a certain level of growth.
6. Protecting investors: Yes, Singapore laws tend to favour investors, but you must have the contract in black and white.
7. Paying taxes: Low taxes for entrepreneurs create the conditions for many foreigners to be based in Singapore.
8. Trading across borders: If you look at the free trade agreements which Singapore share with many countries, you will find that we are relatively at ease in getting into different major markets, for example, US and China.
9. Enforcing contracts and closing a business: If you want to liquidate a business or you need to settle issues legally in Singapore, it is relatively simple and straightforward.

However, the report does not take these factors into consideration:

1. The country’s proximity to large markets: Despite Singapore is the gateway to Southeast Asia, our access to our neighbours’ market are relatively weak. Open skies agreements and trade barriers still exist within countries in ASEAN. However, things are changing, for example, Malaysia and Singapore want to sort out the clear-skies agreement to allow more commercial planes to commute between both countries and also building up the infrastructure of Johor so that both countries can grow from access to markets. If you talk about Singapore’s access to China, Middle East and US even though these countries are further, we tend to have better return of investment from them.
2. Quality of infrastructure services (other than services related to trading across borders): Yes, service culture is not there yet. We are too efficient and productive till we sacrifice quality and ability to innovate.
3. Security of property from theft and looting: Singapore has the lowest crime rate and hence we can score well if it is taken into consideration.
4. The transparency of government procurement: Relatively transparent, except the government linked investment companies give the official reason why they do not disclose their accounts. The reason is that by releasing those information will threaten the country’s economic growth.
5. Macroeconomic conditions or the underlying strength of institutions: We have a stable government, a robust and resilient civil service and strong infrastructure. That should rule in our favour.

Editor’s Note: For practical and useful information, we refer you to this article by BL in SG Entrepreneurs: Starting a business in Singapore.

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