Though other nearby nations are quickly developing their business environments to compete with the most important economic hubs worldwide, Singapore is still recognised as Southeast Asia's bustling and growing business hub. However, Malaysia is becoming an emerging market.
The World Bank Doing Business Report in Malaysia vs Singapore
The World Bank releases an annual report on the Ease of Doing Business in over a hundred economies. The report serves as a guide to gauge the acceptance of these economies for foreign investments, and whether the business environment nurtures economic growth.
Countries are ranked according to a number of factors, where 1 is the highest ranking a country can achieve in each category. These categories contribute to the simplicity of doing business in each country, and Singapore currently tops the ranks in Southeast Asia.
Doing Business: Singapore vs Malaysia 2020
World Bank
Doing Business: Malaysia vs Singapore
Economic Overview
Singapore is renowned for being one of the most business-friendly nations in the world, coming in 2nd place overall in the World Bank's Ease of Doing Business rankings. The Accounting and Corporate Regulatory Authority (ACRA), which offers grants and tax breaks to entice enterprises, makes it simple for foreign business owners to establish and run operations there.
With a trade to GDP ratio that has averaged over 130% since 2010, Malaysia is among the nations with the most open economies in the world. Since 2010, Malaysia's economy has been growing at an average rate of 5.4%, and by 2024, it is anticipated that it will have made the transition from an upper middle-income economy to a high-income economy.
Business Environment
Singapore is highly preferred by foreign companies as an entry point for Asia or Southeast Asia as the country is a known tax haven, is very welcoming to international companies, and provides incentives for setting up businesses, such as tax exemptions and grants.
Malaysia is regarded as one of the most developed developing nations in the world. It belongs to the upper-middle income group; Mexico, Turkey, and Brazil are more nations in this group. Malaysians tend to prefer doing business with trusted contacts, so establishing rapport with business partners is a must, especially for foreign investors.
Workforce
Most of Singapore’s workforce are under 35 years of age, making the country’s employment base relatively young. Many of these workers hail from different countries, flying into Singapore for business opportunities, or to work in the multinational companies set up in the country. Singapore has a highly-skilled workforce, and two-thirds of workers are in white-collar jobs.
With more than half the country’s workforce in the tertiary and service sector, Malaysia has a growing employment base for exports. Around 40% of workers in Malaysia are employed in export or export-related industries.
Business Language
Singapore’s main business language is English, which is often used in formal business communications, forms, and documents. However, Singaporeans may also speak various Chinese dialects, Malay, and Tamil. Malaysia mainly speaks Malay, but much of the population can also communicate in English or Chinese.
Incorporation Process
The incorporation process in Singapore can be done in as fast as 1-3 business days, and entrepreneurs can find all the necessary documents, forms, and application procedures through BizFile+. However, the process can be confusing for foreigners, so most international companies prefer to get corporate services to streamline the process.
Foreign companies entering Malaysia, on the other hand, will need to submit requirements to the Companies Commission of Malaysia, or more commonly abbreviated as the SSM. From application to approvals, incorporation may take between 5 to 10 business days.
Filing Requirements
Through BizFile+, you can submit any Singaporean requirements, and ACRA examines the applications to grant permissions. WealthBridge makes submitting applications straightforward with corporate services assistance for foreign businesses looking to enter Singapore.
In Malaysia, all requirements for incorporation can be submitted to the Suruhanjaya Syarikat Malaysia (SSM), which is the Companies Commission of Malaysia. Requirements are similar to Singapore incorporation requirements, such as having one corporate secretary, and at least one local director/shareholder in the foreign company.
Immigration Requirements
For international business workers and experts entering Singapore, the Ministry of Manpower (MoM) issues an Employment Pass, EntrePass, or Overseas Networks & Expertise Pass. Malaysia has similar work permits, with the country granting an Employment Pass (EP) for overseas workers coming into the country.
Taxes
Singapore, a known tax-haven, is highly preferred for foreign companies to set up as the country charges a corporate tax rate of 17%, exclusive of tax benefits and incentives. In Malaysia, the standard corporate tax rate is 24% for non-resident companies, which is one of the highest in Southeast Asia.
IP Protection
The Intellectual Property (IP) Hub Master Plan of Singapore aims to provide full protection of IP rights for all creators, and is set to go in motion by 2030. Malaysia has the Intellectual Property Corporation of Malaysia (MyIPO), which oversees the intellectual property rights of creators, and encourages them to register their intellectual property.
Bureaucracy
While Singapore and Malaysia are geographically connected, their bureaucracies operate differently. Singapore has one of the most efficient bureaucracies in the world, and is known for swift procedures, minimal red tape, and streamlined processes.
However, Malaysia bureaucracy tends to be outdated. Despite reforms aiming to modernise its systems, Malaysia is still far behind Singapore in terms of starting a business. With incorporation taking as much as 10 business days, foreign companies may find it difficult to set up a business in the country.
Openness to Trade
Both Singapore and Malaysia are fairly open to foreign trade and investment. Singapore increased its trade openness by 6.6% in 2021 as the country kept its trade borders open for international business despite lockdowns in 2020. In Malaysia, trade openness increased from 37% in 2016 to 39% (2% increase) in 2017 (World Development Indicator).
Global Competitiveness
According to the Global Competitiveness Report of the World Economic Forum, Singapore is the most globally competitive economy in the world, scoring a total of 84.8 in rankings. The country’s openness to foreign trade, and strong economic growth are just some of the factors that contribute to Singapore’s competitiveness index.
In the same study, Malaysia ranks 27th on the same Global Competitiveness Report, scoring a total of 74.6. However, Malaysia is the second most globally competitive country in Southeast Asia, overtaking neighbouring nations like Vietnam and the Philippines.
Location
While both Singapore and Malaysia share a border, the two countries have different business environments. Singapore is a known trading port and business hub for international companies, and most foreign entrepreneurs prefer to do business in Singapore for its welcoming business environment and its strategic geographical location.
Why Do Business in Singapore?
Singapore provides the perfect environment for growing businesses, especially as foreign entrepreneurs are given a warm welcome to conduct trade and do business in the country. Make your company globally competitive, and talk to us at WealthBridge about incorporating your business in Singapore!