Singapore may be renowned as Southeast Asia's busy and prosperous commercial hub, but other neighbouring nations are rapidly growing their business environments to compete with the world's leading economic centres. Among these emerging economies is the largest economy in SEA, Indonesia.
The World Bank Doing Business Report in Indonesia vs Singapore
According to the World Bank, which publishes a report on the Ease of Doing Business in 190 countries, Singapore scores an 86.2 in DB score, making it the second most-uncomplicated country to set up a business. Indonesia scored a 69.6 in 2020, ranking it 73 out of 190 economies.
The DB score is based on a number of factors, including the ease of Starting a Business, as well as the simplicity of Dealing with Construction Permits for foreign businesses. Countries are ranked according to category, where the highest ranking is 1.
Doing Business: Singapore vs Indonesia 2020
Doing Business: Indonesia vs Singapore
The World Bank ranked Singapore 2nd overall for ease of doing business, making it one of the most business-friendly nations in the world. With subsidies and tax breaks to encourage enterprises, Singapore's Accounting and Corporate Regulatory Authority (ACRA) effectively simplifies the process for entrepreneurs to launch and run firms in the country.
Indonesia has the largest economy in Southeast Asia, and ranks 10th in the world in terms of purchasing power parity. Through a 20-year development plan starting from 2005 and ending in 2025, Indonesia is expected to improve its global competitiveness, and openness to international trade and investment.
Singapore continues to be one of the world’s first-class economies, with the country renowned for the ease of doing business. The country has an open business environment, low unemployment rates, and efficient regulatory boards that oversee corporate governance.
While the World Bank ranks Indonesia 72nd overall in terms of doing business, the country’s trajectory over the years has been at an upward growth rate. Indonesia ranked 128th in 2013, 115th two years later, 73rd in 2017, until finally reaching its current rank of 72nd in 2020. This shows continuous improvement in the country’s economy.
Singapore's fast-paced climate draws thousands of global entrepreneurs each year, with around 4.72 migrants per thousand inhabitants entering the nation seeking business possibilities - the majority of them are under the age of 35. Given that two-thirds of the population works in white-collar employment, Singapore is the perfect location for recruiting young, skilled workers.
With the fourth biggest population globally, Indonesia has a large workforce, many of which are 40 years of age and under. However, youth unemployment is a major challenge in the country, and skills shortages make it difficult for most of the workforce to procure quality employment. Indonesia has an employment-ready workforce.
The main business language in Singapore is English, which is used in most formal business communications. Other languages spoken in the country include Chinese dialects, Malay, and Tamil. Depending on the company, there may be translators and interpreters as well for foreign languages like Dutch, French, and German.
Bahasa Indonesia is most-commonly used in Indonesia, and is the official language, as well as the primary business language. However, most people can also speak English and Dutch. There are also indigenous languages spoken as the country is home to around 50-70 million indigenous peoples.
Singapore’s ACRA developed BizFile+ as a way to streamline the process of incorporation into one easy to understand site. Here, entrepreneurs can apply for incorporation, and get updates on the status of their incorporation. The process takes 3-5 days at most.
Indonesia’s incorporation process takes a much longer time, at around 3-5 months. This is mainly due to the complicated incorporation process in the country, as well as inefficient administrative systems.
Through BizFile+, entrepreneurs can find all the forms and procedures they need to fire requirements. However, filing requirements may be challenging to foreign companies who are unfamiliar with the administrative systems of Singapore, and therefore often partner with a corporate services firm like WealthBridge to ease the process.
Because incorporation is a complicated process, many foreign companies looking to set up their businesses in Indonesia partner with corporate services firms for assistance in filing their requirements. Most companies will also have local directors or partners to ease the process.
For foreign businesses and specialists entering Singapore, the Ministry of Manpower (MoM) may grant an Employment Pass, EntrePass, or Overseas Networks & Expertise Pass depending on the nature of business in the country.
Indonesia has different permits for each type of visitor, such as the Temporary Stay Permit (ITAS or e-ITAS for electronic), the VITAS (visa), and Certificate of Registration for Temporary Resident (SKPPS). All these can be applied through the Ministry of Manpower in Indonesia.
With a flat tax rate of 17% and favourable tax returns and perks for businesses, Singapore boasts the most affordable corporate tax rates in Asia. Indonesia has one of the highest corporate tax rates in Southeast Asia at a standard rate of 22%.
With its 10-year Intellectual Property (IP) Hub Master Plan, Singapore has some of the strictest laws pertaining to intellectual property rights. The plan aims to strengthen Singapore’s economy by providing protection to creators and their works.
However, Indonesia faces challenges with IP rights violations, and remains on the Priority Watch List for ineffective IP rights. Piracy and counterfeiting are rampant in the country, and the lack of enforcement makes it difficult for IP holders to protect their works from unfair commercial use.
The administrative system in Singapore is typically effective, with the majority of procedures, registrations, and applications being handled in 3 to 5 working days. Meanwhile, Indonesia is known for having ineffective administrative systems, and highly-political bureaucracies. The country generally has complicated administrative procedures.
Openness to Trade
Singapore is known for its openness to trade, becoming a recognised trading hub for Southeast Asia. The country had free trade agreements with neighbouring countries, as well as an open business environment for international trade proceedings.
Indonesia is a member of the World Trade Organisation (WTO), and maintains free trade agreements with other Southeast Asian countries. The country also has a Trade and Investment Framework Agreement with the US, as well as various trade agreements with East Asian nations.
Scoring 85 out of 100 in the Global Competitiveness Report of the World Economic Forum, Singapore is ranked the world’s most competitive economy. The country’s openness to foreign investment, balanced business environment, and economic growth all contribute to Singapore’s global competitiveness.
Indonesia ranks 36th in the same global competitiveness report, and its economy has shown strong resilience despite lockdowns in 2020. Indonesia is creating plans to modernise its economy, and improve its globalisation in the country.
Singapore has a strategic location in Southeast Asia, as the country is nearing the center of the continent. The country serves as a gateway for foreign investors to enter SEA, and do business in Singapore.
Meanwhile, Indonesia’s archipelagic geography can make it difficult to travel from one point to another, especially in terms of business. The country is located at the southernmost area of SEA which, compared to Singapore, is not ideal to serve as a gateway for foreign companies to enter and do business in the continent.
Why Do Business in Singapore?
Singapore offers the ideal atmosphere for expanding firms, particularly as foreign professionals are warmly welcomed to engage in commerce and do business there. Talk to us at WealthBridge about incorporating company in Singapore to increase your business competitiveness on a global scale!