SingaporeCompanyIncorporation.sg, a portal for setting up a business in Singapore, has today published a comparative report on doing business in Singapore and Indonesia. The report is designed to help companies, including those based in Indonesia, determine which country is more suitable to grow their business.
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 foreign investment friendliness, intellectual property protection, company incorporation, corporate tax rate and workforce.
Indonesia’s potential and current capabilities
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.
“From incorporating a company to paying taxes, procuring talent and attracting investments, Singapore offers a more stable and reliable business environment than Indonesia. Meanwhile Indonesian economy has been witnessing higher growth, especially in the food and retail sector. These trends underpin the fact that Indonesian consumer markets offer lucrative opportunities. However, doing business in Indonesia may be more challenging than in Singapore. Hence, it makes sense for companies to tap Indonesia’s growing consumer markets via Singapore,” explained Ms. Cheryl Lee, Operations Manager at SingaporeCompanyIncorporation.sg.
Foreign investment friendliness
The 2014 Global Enabling Trade report ranked Singapore at the top position due to its trade-friendly regulations and a business enabling environment. 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. In comparison, Indonesia stood at the 64th place.
Intellectual Property protection
Protection of Intellectual Property (IP) rights is an element that helps gain confidence of foreign investors. According to the World Economic Forum’s Global Competitiveness Report 2013-2014, 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.
In spite of its increasingly stricter labour regulations, Singapore offers a highly educated and skilled workforce and has overall good labour 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.
“After measuring both countries along these parameters, Singapore still emerges as a more suitable place to start a business today. In light of Indonesia’s promising growth by 2030, companies are in good stead to do business from Singapore. This is so that they can tap the incentives it provides and catch the impending wave when Indonesia flourishes further,” concluded Ms Lee.
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